Ditech Bankruptcy Deal Assures Sale To New Residential Investment & Mortgage Assets Management
The Ditech bankruptcy deal ends a dispute over the sales. This now allows Ditech to pay creditors and exit bankruptcy.
A group of consumer creditors and a dozen state AGs objected to a previous plan to offload the assets in “free and clear” transactions. Those arrangements would have stripped homeowners of rights to save their homes from wrongful foreclosures.
Late last month, the federal judge overseeing the case also rejected the sales. The bankruptcy court still needs to approve the new Ditech bankruptcy plan.
Indiana University Law Professor Pamela Foohey told Bloomberg:
This is a win for homeowners. That the homeowners were able to negotiate this settlement is a testament that consumers can ask for a voice in large bankruptcy cases, and that doing so can result in increased recovery and commitments to fixing wrongs going forward.
The Ditech Bankruptcy Deal Settles The 4,000 Complaints By Consumers
Ditech and the consumer groups reached an agreement that creates a $10 million fund for claims holders. The Ditech Bankruptcy Deal also requires the appointment of a special master to hear consumer claims. The sale doesn’t ratify mistakes in mortgage accounts. Ditech and the new buyers have committed to investigate account misstatements and correct them.
Ditech has signed agreements to sell its mortgage servicing rights to New Residential Investment Corp. for just over $1 billion. Ditech’s Reverse Mortgage Solutions was sold to Mortgage Assets Management LLC for about $762 million.
More than 4,000 homeowners have filed complaints to federal agencies regarding Ditech over the past year. They allege that Ditech and RMS failed to properly credit payments and wrongly foreclosed on their homes. Ditech lawyers argued in court that the buyers would only complete the transactions if they were unencumbered by consumer claims.
Homeowners alleging they were wronged by the company include a man who says Ditech refused to apply a 2017 mortgage payment and an elderly woman in Long Island who claims the company began foreclosure proceedings for failure to pay property taxes. Yet, Ditech knew she had a repayment plan with her town to catch up.