Mortgage

NY attorney general opposes Ditech sale, announces investigation into reverse mortgage business

Files brief with court claiming unlawful abuse of homeowners’ rights

Just last week, Bank of America filed a motion in bankruptcy court objecting to Ditech Holding’s sale of its reverse mortgage business, claiming that the current deal threatens to abandon elderly borrowers.

Now, New York’s attorney general is weighing in, filing her own brief in court expressing her objection to Ditech’s bankruptcy plan on the grounds that it promises to strip homeowners of their rights.

The office of Attorney General Letitia James filed a brief this week to oppose the servicer’s attempt to get around statutory protections for homeowners through its bankruptcy plan.

The brief states said Ditech has more than 880 foreclosure actions pending in New York alone, which include 642 forward and 239 reverse mortgages, and that the current deal threatens to sweep these homeowners’ claims and defenses under the rug.

“A free and clear sale of the Debtors’ mortgage assets would erase the key defenses of homeowners in the foreclosure process, defenses that may be necessary to save their homes,” the brief states.

The brief also asserts that Ditech is the subject of numerous consumer complaints, stating that in the last year, 83 New York homeowners have filed complaints against Ditech and its reverse business, Reverse Mortgage Solutions, with the Federal Trade Commission alleging servicer abuses. These claims would be effectively “extinguished” should the bankruptcy plan proceed, the brief asserts.

“Bankruptcy Court should never be used as a tool to unjustly oust New Yorkers from their homes,” said James stated in a release issued by her office on Monday. “Ditech’s action is an illegal attempt to strip hundreds of homeowners of their legitimate claims and eviscerate New York’s carefully created foreclosure process. Housing is a right, and we will continue to use every legal tool at our disposal to stand up for homeowners and to protect their rights.”

The attorney general said she is making this move to ensure that these borrowers receive due protection in the bankruptcy proceedings, standing in solidarity with the Consumer Creditors Committee established by the court earlier this year to advocate on these borrowers’ behalves.

The attorney general also said her office is currently investigating RMS, which is set to be sold to Mortgage Assets Management, a Washington, D.C.-based manager of mortgage servicing rights.

In the brief, the attorney general says her office has an open investigation into RMS’ servicing practices following multiple complaints about unnecessary foreclosures mostly related to RMS’ early payment of property taxes.

The attorney general’s office provided no other details regarding the investigation in its release, and HousingWire’s requests for more information have not yet been returned. A follow-up story will run when more details come to light.

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