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back. Now the taxpayers are holding the bag. Its not
right. Its why the economy is in the mess its in. We will
make certain that the creditors of First Magnus, including
the thousands of employees left unpaid, recover every
last penny they are owed from these defendants.
The lawsuit says more than 70 percent of the loans
originated by First Magnus from January 2005 through
Aug. 21, 2007, when it filed for bankruptcy protection,
were purchased by Lehman Brothers and Countrywide
Financial. Lehman filed for bankruptcy in September
2008 and was subsequently liquidated. Countrywide was
acquired by Bank of American in July 2008.
The purchases by Lehman and Countrywide from First
Magnus contained financial covenants and provisions
which, if triggered, would have required First Magnus to
repurchase the loans. The triggers included such as
things as a home-owner missing the first or second
months partments or if a loan were paid off within the
first 90 days. But First Magnus kept only $400,000 for
repurchases on about $2 billion in loans.
During bankruptcy proceedings, Lehman Brothers said
First Magnus owed it more than $395 million and
Countrywide said it was owed more $100 million in
obligations for loan repurchases.
Despite what First Magnus officials publicly maintained,
the lawsuit claims the company was a big player in
selling riskier mortgages. Leading up to its bankruptcy
filing, at least half of all the mortgages handled by First
Magnus were either Alt-A riskier than prime but not
as risky as subprime or below. The company was the
eighth
largest
originator
of
Alt-A
mortgages,
representing almost 2.4 percent of all such loans sold in
the United States.