HomeBanc Stiffs 26 Closing Attorneys With An Estimated $20 Million In Rubber Checks; Fires 1,100, Files Chapter 11

(last revised 8-21-07)
Daily Report (Atlanta, Georgia) reports:

• "John K. Haley, a real estate closing attorney in Buford [Georgia] left work July 31 thinking the HomeBanc mortgages he’d closed earlier that day had cleared. That turned out not to be true. Haley was one of dozens of Atlanta-area real estate closing attorneys who received bounced checks last month from HomeBanc Mortgage Corp. Lawyers estimate HomeBanc may have issued $20 million or more in bounced checks July 30 and July 31. HomeBanc filed for Chapter 11 bankruptcy protection Aug. 9."

• "Because HomeBanc’s primary lender, JPMorgan Chase, stopped financing the company around the end of July, HomeBanc could no longer provide funds on the mortgages it had sold. That caused a big problem for some lawyers: HomeBanc had already issued checks to these lawyers, who then disbursed the money to sellers, real estate agents, surveyors and others. That left numerous lawyers high and dry."

• "Unfortunately for many real estate closing lawyers, that has meant taking out home equity loans on their own homes, maxing out credit cards or scrounging up money in some other way from their own personal accounts to cover for HomeBanc’s mistake."

For the whole story, see Closing attorneys see red after receiving bad checks from HomeBanc Mortgage (Lawyers scramble to cover HomeBanc Mortgage’s mistake of bouncing checks or face bar violations).

See also, Georgia Lawyers Stranded by HomeBanc (Forbes)

Postscript I

Shortly after the estimated $20 million mass stiffing of the closing attorneys, HomeBanc reportedly fired most of its 1,100 employees and is shutting down its 22 branches and 139 kiosks in real-estate and builders’ offices, exiting the mortgage-loan origination business and processing no new loans, including ones in its pipeline (see Mortgage woes take toll on HomeBanc Corp.). They really went out with a bang, didn't they?

Postscript II

An Associated Press report on the WTXL-TV Channel 27 website (Tallahassee, Florida) states:

• "HomeBanc Corporation will ask a judge [today] to approve a settlement that will aid worried Georgia lawyers who have dug into their own pockets to fund mortgage deals caught in the pipeline when the lender collapsed. About $28 million worth of Georgia home loans were headed to closing when Atlanta-based HomeBanc filed for Chapter Eleven on August Tenth. [...] If the judge approves the settlement, it would clear the way for lawyers who have been stuck covering shortfalls in their escrow accounts with their own funds by allowing the mortgages to be funded elsewhere. Otherwise, the lawyers would be left holding the bag and hoping for a partial recovery from HomeBanc's Chapter Eleven liquidation."

For more, see HomeBanc to seek court OK to settle with Georgia lawyers.

See also, HomeBanc to seek court OK to settle with Georgia lawyers (Macon Telegraph).

Postscript III

A Federal Bankruptcy Court approves a deal for the transfer of over $20 million in mortgages from Homebanc to the Georgia closing attorneys who were forced to cover HomeBanc's bad checks with their own funds. See Judge Approves HomeBanc Deal. (8-21-07 - The Associated Press).