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RMBS trustees accept $2.4 billion toxic mortgage settlement from Lehman Brothers

BlackRock, Goldman Sachs among institutional investors in settlement

The trustees in a series of residential mortgage-backed securities trusts reached a settlement with the remains of Lehman Brothers Holdings that could be worth more than $2.4 billion over claims that the RMBS deals contained toxic mortgages.

Robert Madden, an attorney with Gibbs & Bruns, which represented the institutional investors, said that that the settlement is “an important step in finally resolving the Lehman RMBS claims, and obtaining value for certificateholders in the trusts.”

All in all, the trustees for 238 RMBS trusts accepted a settlement that establishes a minimum payout of $2.4 billion.

The trustees involved in the settlement are Deutsche Bank National Trust Company, TMI Trust Company, U.S. Bank National Association, and
Wilmington Trust Company.

Also included in the settlement are 14 institutional investors, including: AEGON USA Investment Management, BlackRock Financial Management, Cascade Investment, the Federal Home Loan Bank of Atlanta, Goldman Sachs Asset Management, Invesco Advisers, Kore Advisors, Metropolitan Life Insurance Company, Pacific Investment Management Company, Sealink Designated Activity Company, The TCW Group, Thrivent Financial for Lutherans, Voya Investment Management, and Western Asset Management Company.

As the Wall Street Journal notes:

Before its collapse, Lehman purchased and funneled millions of residential mortgages to its securitization subsidiary, which then bundled the loans into marketable financial products. The subsidiary, known as Structured Asset Securities Corp or SASCO, established hundreds of trusts and special-purpose vehicles that in turn issued the securities to pension funds, insurance companies and other institutional buyers.

And this settlement covers investors that bought into the SASCO trusts and others, which, in some cases, included mortgages with faulty underwriting.

Now, the settlement waits for approval by the judge overseeing the liquidation of Lehman.


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