Lehman Brothers to pay $2.4 bn to settle mortgage claims from pre-2008 era

Following Lehman's 2008 bankruptcy, trustees representing hedge funds and institutional investors brought a claim, saying Lehman breached its contract

Lehman Brothers Holdings Inc.’s bankruptcy estate will pay $2.38 billion to compensate for its role in the previous decade’s mortgage crisis, a federal judge decided, far less than the $11.4 billion some hedge funds had sought.

U.S. Bankruptcy Judge Shelley Chapman ruled in Manhattan Thursday after a 22-day trial to resolve the long-running dispute over Lehman’s flawed residential mortgage-backed securities. Her decision puts a final tally on what buyers of the securities, known as RMBS, can recover for breaches by the investment bank when it pooled individual home loans and sold them off as bonds during the housing bubble.

A settlement of