Investments

Lehman Brothers suing over crisis-era toxic mortgages

Asks judge to cancel claims by Syncora Holdings and U.S. Bancorp

Lehman Brothers Holdings filed suit against Syncora Holdings, U.S. Bancorp (USB) and GreenPoint Mortgage Funding in an effort to try to get “duplicate” claims filed by those three companies against Lehman Brothers thrown out because Lehman Brothers is ready to settle and move on.

According to a report from the Wall St. Journal, Lehman Brothers bought crisis-era mortgage loans from GreenPoint Mortgage, which is now owned by Capital One Financial (COF). Many of the loans went into default and then set off a now-familiar series of events of suits and countersuits with each party trying to get their money back.

From the WSJ:

At issue is a structured-finance transaction where Lehman bought mortgage loans made by GreenPoint, and through a process of financial engineering, transferred the loans to a trust which then issued notes backed by the loans.

Syncora, the monoline insurance subsidiary of Syncora Holdings, sold insurance to the trust, GreenPoint Mortgage Funding Trust 2006-HE1, that guaranteed payments of principal and interest to investors. U.S. Bank is the trustee for those trusts.

Many of the mortgage loans, made at the tail-end of the housing bubble, went into default, putting Syncora on the hook for the shortfall in payments to investors.

According the WSJ report, Lehman has set aside more than $600 million to pay out the initial claims.

“These claims, which Lehman has been trying to resolve over the past two years, continue to impede the administration of the plan and the orderly distribution of assets,” Lehman said in the filing, as reported by the WSJ.

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