Ditech bankruptcy could leave homeowners in foreclosure

The New York Attorney General’s office is trying to block the approval of a bankruptcy plan for the mortgage company Ditech. The New York AG office released a statement that objected to the sale of the company as a part of its bankruptcy deal that would release Ditech from any obligation to pay the $1 billion in claims made by homeowners for wrongly committed foreclosures and credit payments by the company.

According to Bloomberg News: “Consumer advocates say if U.S. bankruptcy judge James L. Garrity Jr. blesses the deal, it would be difficult or impossible for homeowners to correct what they say are errors related to their loans.”

The New York AG office’s case consists of allegations that some homeowners are facing foreclosure due to errors made by Ditech “in which the firm misapplied or refused to record payments that they made, misrepresented the amounts they owed or failed to acknowledge tax payment plans that would bring their accounts up to date.”  They also have collected testimony from several of the customer complaints, mostly New York City residents and elderly customers of Ditech that have mismanaged mortgage plans.

The Chief Executive of Ditech, Tom Marano, also contributed to the mortgage business Bear Stearns Cos. before the 2008 housing collapse.  

The US Trustee from the bankruptcy division in the Department of Justice, as well as six other Attorney Generals have come to join the New York office to form a committee to represent the consumer interests. Bank of America is another (unexpected) ally of homeowners who emerged to defend BofA’s elderly loan borrowers.


Image Credit: Niall Kennedy via Flickr.