Lehman Brothers Holdings Inc Plan Trust (OTCMKTS:LEHMQ) reached a $767 million deal with Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) that would help Lehman to release millions of dollars more to customers.

Freddie Mac’s claim against Lehman

Before its collapse, Lehman Brothers purchased mortgages from originators, securitized them – creating now-famous mortgage-backed securities – and sold them upstream to purchasers including Freddie Mac. The mortgage originators allegedly gave representations to Lehman Brothers about the quality of the mortgages that eventually proved false.

Freddie Mac

Lehman Brothers Holdings Inc Plan Trust (OTCMKTS:LEHMQ)’s deal with Freddie relates to settling a $1.2 billion claim that stems from two loans Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) made to Lehman Brothers before its 2008 collapse. Both loans were due on September 15, 2008, the day Lehman filed for bankruptcy and were the last in a series that Freddie extended to Lehman during 2008.

Freddie Mac’s general unsecured claim

Though Lehman had set aside $1.2 billion to cover Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s claim as a general unsecured claim, Freddie Mac argued that the claim should get priority status. Such a priority claim would have allowed Freddie to be paid ahead of several other creditors.

Lehman emerged from Chapter 11 in March 2012 under a plan that could eventually return $65 billion to creditors. The company is winding down, a process expected to take a few years.

Lehman’s settlement

On Wednesday, Lehman agreed to pay $767 million to settle Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s claim, thereby freeing up the $1.2 billion cash reserve that was set aside for the government enterprise so it can now be distributed to creditors. Lehman filed court papers in bankruptcy court Wednesday afternoon seeking approval of the settlement, which will make hundreds of millions of dollars available for distribution.

Spate of mortgage related suits / settlements

In the recent past, several mortgage related settlements have been announced by major banks.

Last month, Bank of America Corp (NYSE:BAC) received court approval for its $8.5 billion agreement to settle the majority of the complaints filed by almost two dozen mortgage securities investors.

In November, JPMorgan Chase & Co. (NYSE:JPM) too arrived at a settlement to pay $13 billion for the resolution of all the actual and probable civil claims related to the sale of residential mortgage-backed securities.