Lehman and Aurora lose reconsideration bid in indemnification dispute

By Caroline Salls

Pittsburgh, Jan. 5 – Lehman Bank and Aurora Loan Services LLC’s motion for reconsideration of an order favoring SecurityNational Mortgage Co. in connection with indemnification agreement disputes was denied last month by the U.S. District Court for the District of Utah, and prejudgment interest was awarded, according to an 8-K filed Monday by SecurityNational Financial Corp.

Under an order entered on Dec. 24, the amount of monies previously paid by SecurityNational Mortgage that were applied by Lehman Bank to losses on loans actually owed by Lehman Brothers Holdings was set at $3.89 million, the 8-K said.

The order also provided for prejudgment interest at 9%. SecurityNational said the total amount of prejudgment interest awarded was $1.67 million through May 31, 2014, with a per diem of $960 for each day after May 31, 2014 until judgment.

The parties were ordered to meet by Jan. 16 and file a scheduling motion for resolution of remaining issues.

Indemnification agreement issues

On May 11, 2011, SecurityNational Mortgage filed a complaint against Aurora Bank FSB, formerly known as Lehman Bank, and Aurora Loan Services in an effort to resolve issues related to an indemnification agreement.

SecurityNational claimed neither Lehman Bank nor Aurora Loan Services owned the mortgage loans that SecurityNational Mortgage sold so as to justify the amount of payments demanded from, and made by, SecurityNational Mortgage.

As a result, SecurityNational Mortgage claimed it was entitled to a $4 million judgment against Lehman Bank and Aurora.

The complaint also alleges a second claim for material breach of a section of the indemnification agreement that contains an alleged “sunset” provision and that the amount of the requested payments made was not justified under that provision.

Lehman complaint

On June 8, 2011, Lehman Brothers Holdings Inc. filed a complaint against SecurityNational. SecurityNational said a subsidiary of Lehman Brothers Holdings owns Lehman Bank.

The complaint alleged that SecurityNational Mortgage sold loans to Lehman Bank, which were then sold to Lehman Holdings, and that Lehman Bank and Aurora Loan Services assigned their rights under the loan purchase agreement and the indemnification agreement to Lehman Brothers Holdings.

According to the 8-K, Lehman Brothers Holdings declared on June 2, 2011 that the indemnification agreement was null and void except in connection with losses previously released and discharged, which is disputed by SecurityNational Mortgage.

SecurityNational said Lehman Brothers Holdings’ claims are for damages for breach of contract and breach of warranty under a loan purchase agreement and seller’s guide.

Based on its claims that the indemnification agreement is null and void, Lehman Brothers Holdings initially claimed damages in excess of $5 million. Before declaring the agreement null and void, SecurityNational said Lehman Brothers Holdings claimed that SecurityNational Mortgage owed $3.75 million for mortgage loan losses under the indemnification agreement.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company emerged from bankruptcy on March 6, 2012.

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