No. 11 of The Subprime 25: BNC Mortgage Inc./Lehman Brothers

Introduction

Total high-interest loans 2005-2007:

At least $47.6 billion ***

Federal bailout money received:

None

Company overview

• Status: CLOSED. Aurora is still active, however.
• History: Lehman Brothers took an ownership stake in BNC in 2000 and acquired the lender in 2003. Founded in 1995, BNC Mortgage had its initial public offering in 1998. Two years later, BNCM Acquisition, a group including the company’s top managers, took the company private. In 2004, one of its partial owners, Lehman Brothers, bought it. In addition to owning subprime lenders, Lehman was also a top underwriter of subprime mortgages for other businesses. In August 2007, Lehman announced it was closing BNC Mortgage, though it would continue to make loans via its subsidiary Aurora Loan Services LLC, which is not part of the company’s September 15, 2008 bankruptcy filing. Lehman CEO Richard Fuld, in congressional testimony following Lehman’s collapse, did not mention the firm’s huge investment in subprime lending and said the bank was a “casualty of the crisis of confidence” in the banking system.
• Parent/subsidiary companies: BNC Mortgage Inc. was the primary subprime lending subsidiary for Lehman. Others included Finance America LLC (which merged with BNC in 2005) and Aurora Loan Services LLC (acquired in 1997).
• CEO: CEO: Richard Fuld (CEO of Lehman Brothers since 1994). Steven Skolnik replaced Kelly Monahan as CEO of BNC Mortgage in December 2006.
  • Most recent salary: Richard Fuld: 2007 salary, $750,000; total compensation $34,382,036.
• Location: Irvine, California
• Year founded: 1995
• Backers: Lehman brought its considerable assets to bear in originating subprime mortgages through its subsidiaries as well as underwriting loans for other companies. According to Inside Mortgage Finance, Lehman sunk $221 billion into subprime lenders between 2000 and 2007.

Lobbying overview

• Lobbying: Lehman reported $5,930,000 in lobbying expenditures since 1999. **
• Total Contributions: At least $8,026,228 *
• Top Recipients:
  1. Democratic National Committee $756,550
  2. Republican National Committee $510,212
  3. Democratic Senatorial Campaign Committee $444,160
  4. Senator Hillary Clinton, D-New York $343,050
  5. Barack Obama $338,816

Investigations

• Settlements:
  • In 2003, Lehman Brothers was ordered by a jury to pay $5.1 million in civil damages to about 4,500 borrowers who used mortgage lender First Alliance. The company was accused of distributing deceptive, high-fee subprime mortgage loans, which Lehman was funding. The $5.1 million was 10 percent of a $51 million verdict. A $2 million settlement was reached.

** Lobbying totals calculated by the Center for Public Integrity using data from the Senate Office of Public Records.

* Contribution grand total includes employee and soft money contributions from the lender and its subsidiaries. Top recipient totals include employee and political action committee contributions. Data provided by CQ Money Line, analysis by the Center for Public Integrity.