Banking & Capital Markets

Freddie to Lehman: Where’s Our $1.2 Billion?

The sunk investment bank didn't make scheduled September 15 payments related to unsecured lending transactions.
Stephen TaubSeptember 19, 2008

Embattled mortgage lender Freddie Mac can hardly afford to lose $1.2 billion in payments owed to it by a counterparty in unsecured lending transactions. The problem is, that party is an even more embattled one: Lehman Brothers.

Freddie, which is being taken over by the U.S. government, said in a regulatory filing that the transactions were due to mature on September 15. On that day, Lehman was to make principal payments to Freddie totaling $1.2 billion plus accrued interest. “Freddie Mac has not received these payments,” it said.

Freddie noted that Lehman also services single-family loans for the mortgage company. The company’s potential exposure to Lehman for servicing-related obligations due to Freddie Mac, including repurchase obligations, is estimated at $400 million.

“The company does not know whether and to what extent it will sustain a loss relating to the transactions,” Freddie said in the filing.

It also stated it is evaluating its exposures to Lehman and the bank’s affiliates arising under other business relationships. Until this evaluation is complete, the company said, it cannot provide assurances as to the potential materiality of the exposures.