The year 2021 offered some new, long-awaited exit ramps from the long and winding road of business versus corporate residential mortgage lawsuits stemming from the 2007-2008 financial crisis. A large number of recent settlements have left this road far less crowded than at any time in the past decade. Whether it will be completely abandoned soon or repaint and travel heavily again is not yet certain.
At the beginning of last year, there was still a large number of active lawsuits, most of which date back to 2016, between Lehman Brothers Holdings Inc. (LBHI) and individual mortgage originators (correspondent lenders). In March 2021, LBHI added dozens of new cases to the total, as it filed lawsuits against mortgage brokers and other small players. Whether they were sued for the first time in their company’s history or have already gone past several “re-mortgage” and contractual compensation lawsuits, defendants in all of these LBHI cases had reason to fear that their cases would not be resolved for another two three years.
A combination of factors—most notably, demonstrations by defendants of their abilities to mount robust factual and legal defenses and the business-minded approach taken by LBHI to settlement discussions—led all but a few of these cases to be resolved by the end of 2021. Our team at Bilzin Sumberg has negotiated decisions for nearly 30 clients sued by LBHI over the past few years, with about 20 case dismissals between the fourth quarter of 2020 and the end of 2021. Although the terms of the decisions negotiated Confidential, one outcome of the settlements is that there is no prospect of future litigation between LBHI (or its affiliates) and mortgage companies (or its affiliates) with respect to anything that occurred prior to the settlement date.
Following the decisions of previous lawsuits brought by ResCap, CitiMortgage, Aurora and other mortgage aggregators, the termination of the vast majority of LBHI cases may herald the end of litigation over residential mortgages created and previously sold through 2008. However, there is still Some uncertainty about it. JPMorgan Chase (mostly on behalf of EMC Mortgage) and the Federal Insurance Corporation (FDIC) as the recipient of Washington Mutual have submitted payment requests in recent years to several reporters but to date have not filed any lawsuits that we are aware of related to those pending requests. (We defended and resolved, in 2020, the cases brought by Chase/EMC against our clients, but have been aware of no similar claims filed since.)
Reporters and brokers have earned the right to forever be rid of lawsuits pointing the finger at them – with more than a little revisionist history – over loans that arose many years ago. Let us hope that their present peace remains undisturbed.