What Is This All About
Ditech Financial, LLC, Reverse Mortgage Solutions , and other related businesses filed for bankruptcy on February 11, 2019. Ditech Financial, LLC, is going out of business. Its assets were sold to New Residential Investment Management LLC. RMS was reorganized and now operates under new owners. More information about the Ditech/RMS Chapter 11 Bankruptcy including general information, docket information, and on-line claim forms, can be found at
Chapter 7 Bankruptcy And Your Mortgage
If you file for Chapter 7 bankruptcy and your home is exempt, you can continue to make your mortgage payments if you want to keep your home. Although the bankruptcy will discharge your personal liability for the home loan at the end of the case, the lender’s security interest in the property remains in force. So, if you don’t make your payments, the lender can foreclose.
If you are behind in your mortgage payments and want to keep your home, you’ll have to catch up in order to keep your home. Unlike Chapter 13 bankruptcy, Chapter 7 does not provide a method for you to pay an arrearage through bankruptcy. To learn more about how Chapter 7 bankruptcy affects a home in foreclosure, see Chapter 7 Bankruptcy and Foreclosure.
In Re Ditech Holding Corp
In re: Ditech Holding Corporation, et al., Debtors.
APPEARANCES: WEIL, GOTSHAL & MANGES, LLP Attorneys for Debtor 767 Fifth Avenue New York, New York 10153 By: Richard Slack, Esq. Sunny Singh, Esq. Mr. James Beekman Appearing Pro Se 427 9th Street West Palm Beach, FL 33401
HON. JAMES L. GARRITY, JR. U.S. BANKRUPTCY JUDGE
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Is Us Household Debt A Problem
Yes. I mean, hell yes.
After mortgage debt, student loan debt comprises the second largest category of outstanding debt, with a total of $1.4 trillion. Over the past decade, student loan debt has almost doubled in size, carrying with it a delinquency rate of 11.5 percent. Student loans represent the highest level of delinquency rates today, higher than mortgage delinquency and almost as high as credit card delinquency . These numbers raise red flags. There are approximately 44 million student loan borrowers, with the largest concentration between 30 and 39 and accounting for $461 billion, or 32%, of total student loans. This indicates that the youngest cohort of working-age Americans are holding the most student debt.
Above is from an article in the Georgetown Public Policy Review.
If you read my other blog, you know this is more than a red flag.
And it is piled on top of big mortgage debt and over a trillion dollars of vehicle loans and a like amount of credit card debt.
I am a little shocked at the last negative comment about Mr OKeefe.. Anyways, I dealt with him over the course of 4-5 months and never had one problem or issue. He was great to work with. He is straight to the point who gets it done! He was efficient and does exactly what he says he is going to do. Super easy to work with and I would recommend him to anyone. Thank you again Kurt!
Small Issues Snowball For Senior
Leroy Roebucks loan is held by Reverse Mortgage Solutions, but his experience follows the twists and turns in the industry.
When Roebuck forgot to pay his insurance bill in 2010 and it cascaded into a foreclosure proceeding, Bank of America was his lender. Responding to the missed payment, the bank took out its own insurance policy for $5,000 on the home and added the bill to his loan balance.
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New York Court Approves Representation For Mortgage Borrowers In Ditech Bankruptcy
Ditech loses motion to dismiss consumer committee
The Bankruptcy Court of the Southern District New York denied Ditechs motion Friday to dismiss the formation of a consumer committee to protect the interests of mortgage borrowers who have loans with Ditech or its subsidiaries.
The creation of the committee was first approved last month by the U.S. Trustee, a division of the Department of Justice, after a number of advocacy groups filed petitions claiming that many Ditech borrowers, including those who have reverse mortgages with its subsidiary Reverse Mortgage Solutions, were unlikely to be fairly represented in the bankruptcy proceedings.
The representative of some of the borrowers, J. Samuel Tenenbaum of Northwesterns Complex Civil Litigation and Investor Protection Center, said such a committee was necessary to protect the rights of reverse mortgages borrowers, who are mostly elderly, disabled or financially unstable, and therefore vulnerable.
Theres a lot of people who could be negatively affected, Tenenbaum told HousingWire. We just want to make sure that the bankruptcy does not do anything that negatively impacts consumer rights.
The Trustee approved of the creation of a five-member consumer committee, but not long after the request was granted, Ditech filed a motion objecting to such a committee, asking that it be disbanded.
No such luck, the New York Court ruled.
Modifying Mortgages: Cram Down In Bankruptcy
In some instances, you can modify a mortgage in Chapter 13 bankruptcy so that the new principal equals the actual value of your home. For example, if your mortgage is $500,000 but the property value has declined to $300,000, you could modify the mortgage amount to $300,000. This is called a cram down .
While this sounds wonderful, it’s not available for a mortgage secured by your residence . It’s only available for these types of mortgages:
- Loans obtained to purchase a multiunit building.
- Loans obtained to purchase other buildings or lots that are not part of your residence .
- Loans obtained to purchase a mobile home you live in that is personal property.
- Loans not secured solely by your residence .
And the final kicker: If you are able to cram down the mortgage to the actual value of the property, you have to pay off the entire new mortgage amount through your Chapter 13 repayment plan. This gives you three to five years to pay it off — which is untenable for most people.
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Section 363 Does Not Apply To Chapter 11 Plan Sales
In In re Ditech Holding Corp., 2019 WL 4073378 , the U.S. Bankruptcy Court for the Southern District of New York addressed several objections to confirmation of a chapter 11 plan that proposed to sell home mortgage loans “free and clear” of certain claims and defenses of the homeowner creditors, contrary to a provision of the Bankruptcy Codesection 363which was enacted in 2005 to prevent free and clear sales of certain claims and defenses relating to consumer credit agreements. The court ultimately ruled that section 363 of the Bankruptcy Code does not apply to sales in a chapter 11 plan and that the debtors proposed their plan in good faith.
Importantly, however, the court initially denied confirmation of the plan and refused to approve a related global settlement because the debtors were unable to satisfy the “best interests” test, which requires that creditors receive more under a plan than they would in a chapter 7 liquidation. The debtors obtained the court’s approval of the plan after amending it to increase the funds available to satisfy consumer creditor claims and to provide that such creditors’ recoupment claims and defenses would remain intact.
Sales Free and Clear
Exception for Consumer Credit Transaction Interests
In 2005, Congress amended section 363 of the Bankruptcy Code to add what is now
section 363. That subsection provides as follows:
147 Cong. Rec. 2018, at *2032 .
Setoff and Recoupment
Are You Thinking Of Getting A Reverse Mortgage Who Should Consider One And Who Shouldn’t
The broader public also pays a steep price. Reverse mortgages are insured by a Federal Housing Administration fund, which is in the red more than $13.6 billion because of an increase in claims paid out to reverse mortgage lenders since the recession.
Federal regulators and industry leaders cautioned that numbers alone tell only part of the story, since many foreclosures result from the natural end of reverse mortgages: the homeowners death. The average term of a reverse mortgage is about seven years, and if a family member is not willing or able to repay the loan, lenders push the property through foreclosure.
Regulators said actual evictions of seniors are rare. Theres no way to verify that, though, since HUD, the top government regulator of Home Equity Conversion Mortgage 4 loans, does not sign off on evictions or even count them.
A foreclosure is a failure, no matter the trigger, said Sandy Jolley, a California consumer advocate and whistleblower who helped the government secure an $89 million penalty 5 against reverse mortgage companies two years ago.
For HUD or anyone else to say that people dying and foreclosure is the natural end to a reverse mortgage is ridiculous, Jolley said. No consumer gets into one of these thinking, Eventually my home will go into foreclosure. All foreclosures are unnecessary, and this increase indicates a failure of the program to deliver on its promise.
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Foreclosures Siphon Life From Struggling Neighborhoods
The scar reverse mortgage failures leave on neighborhoods can be seen on a drive through Chicagos South Side with longtime resident and community organizer Pat DeBonnett. A cluster of six ZIP codes together have endured more than 1,000 reverse mortgage foreclosures over the past five years higher than many entire states. Boarded up homes and empty parcels followed.
DeBonnett points out blocks in the Roseland area as absolutely devastated.
Yale and 113th fits that description. In the 60628 ZIP code, it is the epicenter of the reverse mortgage foreclosure crisis, where more homes have been seized than anywhere else in the nation.
The house at the end of the block that abuts train tracks is intact, but many others along the leafy green street are either boarded up or vacant.
Empty single-family and bungalow-style houses dot many of the blocks in neighboring Pullman, a comparatively prosperous neighborhood that is home to the A. Philip Randolph Pullman Porter Museum. Named for the fabled labor leader, the museum honors black workers contributions to American history.
About 13,000 seniors live in the 60628, where lenders wrote about 760 reverse mortgages at the height of the program, through 2009. The loan origination rate about 57 per 1,000 senior residents is more than five times the national average. The foreclosure rate is even worse: more than nine times the average.
Frazier tried to negotiate with the lender. Then her mother, Osie, died last May.
Chapter 13 Bankruptcy And Your Mortgage
Chapter 13 bankruptcy does not affect your home mortgage. You continue to make your mortgage payments during and after the bankruptcy.
If you are behind in mortgage payments, you can pay off the arrears through your Chapter 13 repayment plan . As long as you make your current mortgage payments and your plan payments, the lender cannot foreclose. This effectively gives you more time to make up missed payments. To learn more, see Using Chapter 13 Bankruptcy to Avoid Foreclosure.
In some cases, you can get rid of second or third mortgages on your home. This is called “lien stripping.” Here’s how it works. If you don’t have enough equity in your home to secure the second or more junior mortgages, then the bankruptcy court can “strip” the liens securing the mortgages and reclassify the debt as unsecured. This debt then gets paid off through your repayment plan. Most Chapter 13 filers pay only a portion of their unsecured debt through their plan. For more details on lien stripping, see How to Strip a Second Mortgage or HELOC in Chapter 13.
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Help My Mortgage Company Filed Bankruptcy
Sometime during the third or fourth week in May, 1.2 million homeowners went to their mailbox and pulled out a notice that their mortgage company, GMAC Mortgage , filed for Chapter 11 bankruptcy protection. Actually Residential Capital, GMACs parent company, filed along with 50 of its subsidiaries, including GMAC. About 30 seconds after the average guy tried to decipher the legalese on the notice, a collective wail arose from the already-beleaguered homeowners nationwide. Now what?!
The big stuff first
First, keep making your payments! GMAC sent a separate letter to homeowners explaining that you must keep paying your mortgage on time and in full and payments should be made to the address listed on your current statement. This is the most important thing to remember. GMACs bankruptcy filing does not affect its ability to foreclose on your home if you default on your loan.
Second, no, your interest rate wont change. The bankruptcy filing wont affect your interest rate or the amount of your monthly payment. You and GMAC signed a contract agreeing to an interest rate and payment amount when you closed on your mortgage. GMACs bankruptcy does not change those terms.
I got a different letter!
What about my loan modification?
Can I still strip GMACs mortgage in my bankruptcy?
So, what should I do?
For information about stripping a mortgage in bankruptcy, see Mortgage Stripping in Bankruptcy.
If Your Mortgage Is Sold
According to the Consumer Financial Protection Bureau or CFPB, if your mortgage is sold, the new lender must “notify you within 30 days of the effective date of transfer. The notice will disclose the name, address, and telephone number of the new owner.”ï»¿ï»¿
Please note that it’s important to read the fine print when you take out a mortgage. You can check your original loan agreement and your documentation for a section that defines the responsibilities of each party if the mortgage is sold or assigned to another company.
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Ditech Objects To Borrower Damages As Bankruptcy Lingers
Pending a judges decision on whether the company will move forward with bankruptcy plans, Ditech is objecting to paying borrower damages in the interim.
Plaintiffs in the case against Ditech, which is currently trying to sell Reverse Mortgage Solutions as part of a bankruptcy plan, are pushing for the company to pay damages to a class of borrowers and debtors who have allegedly been impacted by the company. Ditech responded Sunday saying it objects to the claims.
Ahead of the appointed judges expected ruling on the companys bankruptcy plan on which the fate of the attempted sale of RMS depends Ditech should be able to remain focused on fulfilling bankruptcy obligations without the additional scrutiny provided by this additional legal obstacle, the company says.
This is according to a court filing made by Ditechs counsel in the Bankruptcy Court for the Southern District of New York, obtained by RMD.
Gmac Mortgage Will Acquire Ditech Funding
Ending months of speculation about its future, mortgage lending giant DiTech Funding Corp. of Irvine said Monday it agreed to be acquired by GMAC Mortgage Corp., a unit of General Motors Corp.
Terms werent disclosed. DiTech, one of the Southlands largest mortgage lenders and an aggressive marketer of higher-risk home-equity loans, shelved an initial public stock offering last fall. It had hoped the IPO would raise about $110 million for a minority stake in the company.
The stock sale was postponed indefinitely, however, after the market for DiTechs subprime home-equity loans, which offer a borrower up to 125% of a homes value, crumbled amid a global credit crunch and disarray in the mortgage market.
The company began talking with GMAC, one of the largest buyers of its loans, about broadening their relationship last October.
The sale to GMAC gives us all the capital we need to grow, said J. Paul Reddam, DiTechs chief executive and its TV pitchman, who will continue in those roles after the acquisition.
I think it gives us a lot of stability for good times and bad and allows us to be more aggressive in our lending practices.
Reddam said there will be no layoffs at the 700-employee company, which will become a subsidiary of GMAC.
DiTech will implement a host of already-planned changes in the coming months, Reddam said.
Industry experts said the acquisition will be good for both companies. The deal gives DiTech access to GMACs much deeper financial resources.
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What Happens To Your Mortgage When Your Bank Files For Bankruptcy
The 2007 housing market crash not only created hundreds of thousands of mortgage defaults monthly, it also took down many banks. Even more banks have gone bankrupt since 2007, leaving their mortgage borrowers with payment questions. When the bank holding your mortgage loan goes bankrupt, it’s sometimes briefly uncertain just where your mortgage loan will end up. In most cases of bank or lender bankruptcy, however, mortgage loan portfolios are simply transferred to new lenders or mortgage servicers.
Six Steps Advocates Say Would Curb Reverse Mortgage Foreclosure
For many homeowners, reverse mortgages are relatively safe, because the borrower is insulated from ever owing more than the initial appraised value of their home.
Problems emerged in the wake of full-draw loans 8 in the late 2000s, when reverse mortgage lenders issued a lump sum to a borrower. Sales picked up as Americans began struggling financially and property values eroded.
Since reverse mortgages assume the home will continue to appreciate, loan balances in some cases ballooned well past the market value of a post-recession home. Inflated appraisals also played a role.
Leroy Roebucks home was appraised at $112,000 in 2008. That allowed him to take out up to $83,000 in equity. By the time he was solicited for a second reverse mortgage, an appraiser said it was worth $241,000, allowing him up to $163,000 more. He borrowed $102,000 in all.
The 104-year-old house near Temple University is worth far less today, about $165,000.
At the National Reverse Mortgage Lenders Association 9, President and CEO Peter Bell said ideal borrowers didnt always match up with those targeted.
Were paying for an era where people were borrowing to survive, Bell said. We now look for people that are comfortable in their retirement with a plan and resources to maintain their basic obligations but could use a little extra help for a particular need or quality of life.
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