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Lehman Bros. sues Irvine mortgage company it blames for failed loans

November 16, 2010 | 11:56 am

Lehman Bros., the storied investment bank that failed in 2008 while holding piles of bad real estate loans, has filed suit against an Irvine mortgage company for allegedly misrepresenting the strength of loans it sold to the Wall Street firm.

The lawsuit, filed Monday in federal court in Los Angeles, alleges that Nationsfirst Lending Inc. misrepresented the identities of borrowers, the value and condition of property securing the loans and the validity of loan documents.

Officials with Nationsfirst, listed as a suspended corporation on the California secretary of state’s website, could not be reached for comment. The company sold Lehman Bros. an unspecified number of loans between 2004 and 2007, the lawsuit said.

Lehman Brothers Holdings Inc., operating under the leadership of an outside firm trying to recoup assets on behalf of creditors, is in the midst of the largest corporate bankruptcy in U.S. history. The lawsuit against Nationsfirst is one in a series of suits that Lehman Bros. has filed against mortgage companies for allegedly misstating the strength of loans and creditworthiness of borrowers. 

Lehman Bros. alleges that “straw buyers,” who never intended to occupy the homes, were used in two of the Nationsfirst loans and that a loan officer received a “kickback” for making the loans.

Lehman, once the country's fourth-largest investment bank with more than $600 billion in assets, filed for bankruptcy Sept. 15, 2008, a significant trigger in the worldwide meltdown of the financial markets.

--Stuart Pfeifer