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Judge approves settlement for Fannie to recover $537M for bad mortgages claim against Lehman

WASHINGTON - A federal bankruptcy judge has approved Lehman Brothers Holdings Inc.'s settlement with Fannie Mae, allowing the mortgage finance giant to recover about $537 million for its claim against the estate of the failed Wall Street bank over soured mortgage securities.

Judge James Peck made the ruling Wednesday. The settlement values at about $2.15 billion Fannie's claim over home loans and mortgage securities it bought from Lehman before the financial crisis. Under rules of Lehman's bankruptcy proceeding, Washington-based Fannie will receive about 25 per cent of that.

Fannie and sibling Freddie Mac were rescued by the government in a $187 billion bailout in 2008 after they were hit by massive losses on high-risk mortgages.

Lehman's bankruptcy in September 2008 was the biggest in U.S. history and helped set off the financial crisis.

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