RMS Sale Approved by Bankruptcy Court

After a tumultuous road stemming from a bankruptcy declaration and attempt to sell its forward and reverse mortgage servicing businesses, Ditech Holding Corporation’s previously-announced stock and asset sale agreements have been approved in the United States Bankruptcy Court for the Southern District of New York, which has also confirmed the company’s third amended bankruptcy plan.

“As previously announced, Ditech Holding has entered into an asset purchase agreement under which New Residential has agreed to acquire substantially all of the assets of the Company’s forward mortgage servicing and originations business, Ditech Financial LLC,” the company said in a press release announcing the confirmation. “In addition, Mortgage Assets has agreed to acquire certain stock and assets associated with the Company’s reverse mortgage business, Reverse Mortgage Solutions, Inc. (RMS), and to maintain the current operations of RMS as a wholly-owned subsidiary.”

The approval in court was lauded by Ditech Holding Corporation Chairman and CEO Thomas F. Marano.

“With the Court’s approval and confirmation of our Plan, we are able to move forward with these value-maximizing transactions and achieve the best path forward for our stakeholders, including homeowners,” said in the press release. “I would like to thank all of our employees for their hard work and dedication to serving our customers throughout this process.”

Until the transactions close, both Ditech Financial and RMS will continue to operate as part of the larger Ditech Holding Corporation, and “will continue serving customers in the ordinary course,” the press release said.

This effectively closes the book on an arduous journey for Ditech Holding to off-load both its forward and reverse mortgage servicing businesses. Most recently, the aforementioned third amended bankruptcy plan received approval from its primary legal opposition in the form of a Consumer Creditors Committee, after addressing several concerns related to consumer protections. Those concerns led to the denial of a previous bankruptcy plan by presiding Judge James Garrity, Jr.

Creditors and individual borrowers mounted an effort in court previously in an attempt to halt the sale of Ditech’s forward and reverse mortgage business “free and clear” of existing legal obligations. New Residential, the proposed buyer of forward mortgage servicer Ditech Financial, previously related that Ditech’s legal complications had the possibility of delaying the timetable of the purchase of its forward business, though New Residential’s CEO related confidence that the sale would go through as planned.

The proposed buyer for RMS is Mortgage Assets Management, LLC (MAM). While MAM filed a pleading in support of the previous “free and clear” proposal, Judge Garrity wrote in his denial of the plan that the purchase price for RMS will be reduced by $10 million if MAM assumes some of the legal complaints levied against RMS while under Ditech’s ownership.

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