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Former Lehman Unit Fined for Fraud

Aurora Loan Services LLC will pay a $41 million fine for what the U.S. Attorney says were fraudulent loans from 2004 to 2008 under an agreement with the government announced Thursday.

The mortgage company that was headquartered in Littleton, Colorado, now has minimal assets and no employees, according to a news release from the U.S. Attorney District of Colorado’s office.

During the four-year period in question, the company, a subsidiary of Lehman Brothers Holdings Inc., sold loans that it said had gone through a “pre-funding fraud detection” review when, in fact, they hadn’t, according to the release.

In 2006, some of those loans began defaulting at higher rates, causing investors who had purchased mortgage-backed securities containing those loans to lose money.

Thursday’s agreement was a settlement under the Financial Institutions Reform, Recovery and Enforcement Act. The $41 million settlement was not an admission of liability by Aurora Loan Services, the news release said.

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