American Home may not pay customers taxes/insurance from escrow accounts

[CallMeJo]

http://online.wsj.com/article/SB1189555409...=googlenews_wsj

 

Mortgage Lender's Bankruptcy

May Threaten Thousands of Homeowners

By PEG BRICKLEY

September 12, 2007; Page A15

 

Thousands of homeowners face an "imminent risk" of losing their homes because of clashes between American Home Mortgage Investment Corp. and its former financial backers, according to Freddie Mac, a government-chartered housing financier.

 

In documents filed with the U.S. Bankruptcy Court in Wilmington, Del., Freddie Mac said it seized $7 million that homeowners sent to American Home to cover principal and interest payments, property taxes and insurance just before the company's Aug. 6 collapse. American Home quit making payments to tax authorities and insurance companies Aug. 24.

 

Freddie Mac said 4,547 loans valued at nearly $797 million are at stake. It said it doesn't have the loan files necessary to pay insurance premiums and property taxes on them, however. "Therefore, there is the imminent risk that borrowers' insurance policies may lapse for nonpayment, subjecting the borrowers to a risk of loss of their mortgaged properties," Freddie Mac said.

 

Property-tax bills will go unpaid, Freddie Mac said, "resulting in increased tax liabilities and possible tax-foreclosure sales." It added it needs a court order allowing it to seize American Home's loan files "to avoid these serious consequences stemming from AHM's inability to service the Freddie Mac mortgage loans."

 

The wave of mortgage-lender bankruptcies in the past few months has disrupted loan-servicing arrangements and triggered court fights over who should get control of the files necessary to service the loans, court documents show.

 

American Home has resisted demands that it give up loan-servicing files, hoping to auction its loan-servicing business intact in an effort to raise money for creditors. Loan-servicing businesses have proven to be among the few valuable assets left in the wreckage of the failed lenders. Some of Wall Street's biggest investment banks are fighting for control of them.

 

For ordinary homeowners, however, the results could be dire, consumer lawyers say. "Companies receive the loan files that they are supposed to be servicing, but the payments don't catch up," said Jill Bowman, an attorney with James Hoyer Newcomer & Smiljanich, a Tampa, Fla., law firm that represents consumers in class-action suits against mortgage companies. "Payments are being deemed late, even when they're not, because they can't catch up with the paper." The result is additional insurance costs and accumulating late fees.

 

American Home, based in Melville, N.Y., and once one of the country's biggest mortgage lenders, serviced about $50 billion in mortgages. Its bankruptcy-court filing generated particular concern at Freddie Mac and Ginnie Mae, an agency that is part of the Department of Housing and Urban Development.

 

Just days before American Home's bankruptcy filing, Freddie Mac and Ginnie Mae terminated the company's loan-servicing rights. They also sent representatives to collect loan files from American Home's servicing facility in Irving, Texas.

 

In court documents, American Home said Ginnie Mae representatives "stood in a line in front of the doors and sat on the stairs, preventing AHM Servicing employees from entering the office." Freddie Mac said American Home "had its security personnel escort the Freddie Mac representatives out."

 

In addition to Freddie Mac and Ginnie Mae, several Wall Street banks are fighting to extract their loans from American Home's servicing operation. The list includes Morgan Stanley, Deutsche Bank AG, Credit Suisse Group and EMC Mortgage.

 

In an interview last week, Ginnie Mae's senior vice president, Theodore B. Foster, said Ginnie Mae had seized from American Home some of the insurance and tax payments collected from homeowners. "What's occurred is that we have the money, but AHM hasn't been able to or willing to pay the taxes and insurance, and they have the loan records," Mr. Foster said. "Therefore, we don't know who to pay, and we don't know how much."

[DallasLoanGuy]

hogwash.

 

the irs will show up there, and believe me..... THEY will not be escorted out of the building.

 

unless some thievery is going on, then the money is there.

 

those with AHM loans should be diligent until this plays out.

[DesertRose]

We have one of our rentals w/AHM. We put 20% down on it, good credit, no impounds, no problem.

 

About a yr into the loan suddenly we had impounds.

 

Never got anywhere with CS. Had to go w/a RESPA complaint.

 

Then they went under.

 

So we're still overpaying every mo by about $400.

 

 

We will file a claim w/the BK trustee.

[OneStep]

There's at least one CBer who is having fallout from this: http://creditboards.com/forums/index.php?showtopic=280718

[jst300z]

And to think I entertained the idea of going with them because of the AMEX mortgage payment deal they had going just to earn some bonus money.....I will stick with my brick and mortar bank.

 

j

Edited September 12, 2007 by jst300z

[lizze]

Couldn't American Home customers independently contact somewhere within Freddie Mac to provide closing docs showing escrow details, would seem reasonable if all they're looking for in loan info. If it's in the Wall Street Journal now, there must be a way to make a public announcement in the media to let loan holders know info is needed in order to make the tax and ins pymts?

 

Lizze

[DesertRose]

All of AHM's assets are under the protection of the federal BK court & loans are assets. Ultimately the trustee will appoint someone to collect & review all the files.

 

I don't imagine an individual consumer is going to be able to pick up the phone and call Freddie or Fannie

 

AHM's creditors have an interest in those loan files, they are a sellable asset. I'm confident that all the files eventually will be reviewed & straightened out. In this type of case the trustee will likely appoint a law firm and/or accountants to take control over the files under the court's supervision. There will be lots of accountings & file reviews.