Homeowners Want Their Own Committee in ResCap Bankruptcy

  Homeowners with mortgages serviced by Residential Capital LLC want to form an official committee in the company's bankruptcy case, which would give them a louder voice in the company's complicated Chapter 11 proceedings.

In a Friday filing with U.S. Bankruptcy Court in Manhattan, a lawyer for the group of homeowners said they're concerned that state and federal settlements this year with mortgage servicers including ResCap's government-owned parent Ally Financial might not be enforced properly now that ResCap is in bankruptcy. A ResCap spokeswoman declined to comment.

The settlement, over borrower claims of improper foreclosure practices, offers billions of dollars in relief to many homeowners who either owe more than their homes are worth or were forced to sell their homes and move. While the homeowners do have one representative on ResCap's official committee of unsecured creditors--a plaintiff in a Pennsylvania class-action lawsuit brought by the same lawyer asking for a committee--the group said it needs more say to protect its interests.
"One borrower claimant seated on the Committee will simply be overruled if any objection is made" by other "dominant" members of the committee, the lawyer said. Further, if the class-action suit isn't viable, "then the one and only borrower representative will be found to have no standing to be on the creditors' committee," the lawyer said in the filing.

ResCap said at the time of its bankruptcy filing that 65,000 of its customers are in foreclosure proceedings, and 51,000 have declared bankruptcy.

An official committee gets more stature than standalone creditors in a bankruptcy case, most notably because it typically gets its legal and professional fees paid for by the estate.
The lawyer, Robert E. Brown of Robert E. Brown PC, points out in his filing that a borrowers' committee was appointed in the bankruptcy case of American Home Mortgage Holdings Inc. (AHMIQ).

ResCap's restructuring hinges on the sales of its various mortgage assets to Berkshire Hathaway Inc. (BRKA, BRKB) and Nationstar Mortgage Holdings Inc. (NSM), which have been named the stalking-horse bidders for ResCap's legacy loan portfolio and mortgage-servicing portfolio, respectively. The sales, which are subject to higher bids, could generate more than $4 billion for ResCap's estate.

ResCap filed for Chapter 11 protection May 14 as bond-related payments loomed and litigation over soured mortgage- backed securities mounted. The move is intended to help Ally, which isn't part of the bankruptcy, sever itself from an estimated $400 million to $1.25 billion in liabilities related to ResCap's troubles.

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Homeowners Seek Official Committee in ResCap Case

Homeowners with mortgages serviced by Residential Capital LLC want to form an official committee in the company's bankruptcy case, which would give them a louder voice in the company's complicated Chapter 11 proceedings. ...

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Support the Homeowners' Motion for an Official Committee

If you would like to support the Homeowners' motion for an official committee, you can do so by writing a letter to the Judge and the US Trustee.  We have provided a sample letter, which contains their addresses.  Feel free to make any changes you like, or write your own letter.   If you are a homeowner that has a claim against ResCap, GMAC or any related entity and would like to join the motion, please contact my office at 212-766-9779 or email me at rbrown@robertbrownlaw.com .

August ___, 2012

The Honorable Martin Glenn

United States Bankruptcy Court
Southern District of New York
One Bowling Green, Court Room 501
New York, NY 10004

Ms. Tracy Hope Davis, Esq.

Brian Masumoto, Esq.

Linda Riffkin, Esq.

Office of the United States Trustee
33 Whitehall Street

21st Floor

New York, NY 10004

Re: Case No. 12-12020 (MG)

Dear Judge Peck and Ms. Davis:

           We write to express our support for the formation of a separate committee to represent homeowner interest and to ensure that homeowners have an opportunity to be represented and to seek appropriate relief against Residential Capital LLC and related GMAC subsidiaries which participated in origination, servicing and securitization of mortgage loans.  

            GMAC was one of the top five mortgage lenders, loan servicers, and prolific securitizer of mortgage loans and therefore this bankruptcy affects millions of homeowners.    Ally's legacy mortgage assets - that is, GMAC mortgages and securities predating 2009 - totaled $10.9 billion on Dec. 31, according to the company's annual report. ResCap wrote off  $22 billion in mortgages in 2009, 2010, and 2011 much of it subprime mortgages. [1] Ally is the primary servicer on 2.3 million mortgages with collective unpaid principals totaling about $356 billion, according it a recent SEC filing.

            The federal government and 49 states reached a settlement with a group of banks on their defective foreclosure procedures and ResCap- GMAC participated in that settlement and paid a $212 million fine.    Homeowners spread out all over the United States have unique issues and are without the resources to advocate for their own interest in a New York bankruptcy court.  Absent appointment of a committee, the homeowners will not have a representative voice or any meaningful way to participate in the case.  The size of this bankruptcy with over 51 entities involved and inherent complexity weigh in favor of the appointment of an additional committee to represent this unique group of claimants.  

              The seated unsecured creditors committee consists of Trustees, Deutsche Bank. US Bank, and Bank of New York Mellon, the very parties who are currently seeking to foreclose on homeowners in state courts. The remaining members are insurers, MBIA and AIG, who are assigned the right to collect deficiency judgments from homeowners after foreclosure. This dynamic creates a conflict of interest that is only rectified by the appointment of a separate committee of homeowners only. 

           Ally Financial, the former GMAC still owes taxpayers about $12 billion $17.2 billion in loans it received as part of the bailouts and the government still owns 74% of Ally, who has repaid only $5.5 billion of $17.2 billion it got in the bailout.     It has been widely reported that Ally put its home mortgage subsidiary into bankruptcy court to end the drag of its toxic mortgage assets on Ally's profitable businesses.   Ally CEO Michael Carpenter said in a statement: "The action by ResCap will enable Ally to achieve a permanent solution to its legacy mortgage risks and put these issues behind us." [2]

           The taxpayers and victims of fraudulent practices as detailed in the settlement agreement and consent orders deserve a seat at the table and representation in this bankruptcy as Ally attempts to leave behind and dump its “toxic mortgage assets” – translation their homes.   

          Our state has been hit hard with foreclosures, and we believe that the formation of a homeowner committee will ensure that the promises made by Ally and GMAC to work with homeowners in distress will be followed through during the bankruptcy proceedings.  The committee will also help to avoid confusion and give homeowners a point of contact to assist them in understanding the complex and byzantine process of Chapter 11 bankruptcy and how it affects their rights. 

  Thank you for your consideration,

_______________________________________________

 

  

 

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[1] http://content.usatoday.com/communities/driveon/post/2012/05/auto-bailout-ex-gmac-puts-mortgage-unit-in-bankruptcy/1#.T7jX3MUbttw

[2] http://content.usatoday.com/communities/driveon/post/2012/05/auto-bailout-ex-gmac-puts-mortgage-unit-in-bankruptcy/1

Homeowners Want Their Own Committee in ResCap Bankruptcy

Homeowners with mortgages serviced by Residential Capital LLC want to form an official committee in the company's bankruptcy case, which would give them a louder voice in the company's complicated Chapter 11 proceedings.

In a Friday filing with U.S. Bankruptcy Court in Manhattan, a lawyer for the group of homeowners said they're concerned that state and federal settlements this year with mortgage servicers including ResCap's government-owned parent Ally Financial might not be enforced properly now that ResCap is in bankruptcy. A ResCap spokeswoman declined to comment.

The settlement, over borrower claims of improper foreclosure practices, offers billions of dollars in relief to many homeowners who either owe more than their homes are worth or were forced to sell their homes and move. While the homeowners do have one representative on ResCap's official committee of unsecured creditors--a plaintiff in a Pennsylvania class-action lawsuit brought by the same lawyer asking for a committee--the group said it needs more say to protect its interests.

"One borrower claimant seated on the Committee will simply be overruled if any objection is made" by other "dominant" members of the committee, the lawyer said. Further, if the class-action suit isn't viable, "then the one and only borrower representative will be found to have no standing to be on the creditors' committee," the lawyer said in the filing.

ResCap said at the time of its bankruptcy filing that 65,000 of its customers are in foreclosure proceedings, and 51,000 have declared bankruptcy. An official committee gets more stature than standalone creditors in a bankruptcy case, most notably because it typically gets its legal and professional fees paid for by the estate.

The lawyer, Robert E. Brown of Robert E. Brown PC, points out in his filing that a borrowers' committee was appointed in the bankruptcy case of American Home Mortgage Holdings Inc. (AHMIQ).

ResCap's restructuring hinges on the sales of its various mortgage assets to Berkshire Hathaway Inc. (BRKA, BRKB) and Nationstar Mortgage Holdings Inc. (NSM), which have been named the stalking-horse bidders for ResCap's legacy loan portfolio and mortgage-servicing portfolio, respectively. The sales, which are subject to higher bids, could generate more than $4 billion for ResCap's estate.

ResCap filed for Chapter 11 protection May 14 as bond-related payments loomed and litigation over soured mortgage-backed securities mounted. The move is intended to help Ally, which isn't part of the bankruptcy, sever itself from an estimated $400 million to $1.25 billion in liabilities related to ResCap's troubles.

Read more: http://www.foxbusiness.com/news/2012/08/27/homeowners-want-their-own-committee-in-rescap-bankruptcy/#ixzz24mHFRrIB

Lack of Evidence that Mortgage Assigned to Plaintiff Dooms Foreclosure: FTBK Inv. II LLC v Mercy Holding LLC

In a July 24, 2012 decision by Justice Demarest, the court denied summary judgment seeking to foreclose on a mortgage and note.  The mortgage and note were held by Washington Mutual Bank (“WaMu”), until the Federal Deposit Insurance Corporation (“FDIC”) appointed a receiver for WaMu and transferred all of its loans to Chase Bank.  When defendants stopped making payments, Chase notified them they were in default.  Chase then transferred the loan to a new entity, which later transferred the loan to Plaintiff.

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