HOMEOWNER WIN FIRST ROUND
UPDATE: August 28, 2019:
Bankruptcy Judge James L. Garrity, Jr. of Manhattan ruled that a plan cannot cut off a homeowner’s defenses and rights of recoupment against someone who purchases his or her mortgage. The Judge held that the Ditech chapter 11 plan failed the “best interests test” because it did not provide consumers with a recovery equal to what they would realize in chapter 7, where Section 363(o) would apply and where their claims would survive against a purchaser.
July 23, 2019 – According to an article in the New York Banker: Bank of America, which took heat for how it treated customers in the mortgage crisis a decade ago, has emerged as a champion of elderly borrowers in Ditech’s second trip through bankruptcy.
Ditech’s proposed sale of reverse mortgage business exposes elderly to financial disaster
The bank is siding with a growing list of groups, including the U.S. trustee, attorneys general from several states and consumers, who object to Ditech’s plan to sell its reverse mortgage business.
BofA, for its part, has warned that the sale could leave thousands of BofA’s elderly borrowers without promised services on their loans, according to a court filing.
The reverse mortgages are held by people with an average age of 81, and for many of them, the loan is their primary source of income, court documents show. Some of the loans date from before the financial crisis, according a person familiar with the situation.
“They rely on this income to fund their basic living expenses,” the bank said in the filing. “Any interruption in the servicing of these reverse mortgage loans could have severe consequences for these borrowers.”