Bankrupt Mortgage Company Proposal To Destroy 490,000 Mortgage Loan Files Draws Heavy Criticism

(originally posted 1-3-08)
In light of the recent stories about stalled mortgage foreclosure actions attributable to the foreclosing lenders' inability to produce original loan documents establishing ownership, and other stories on homeowners invoking their Truth In Lending rights to undo bad loans, a recent story reported by The Associated Press caught my eye:

• American Home Mortgage Investment Corp.'s plan to destroy 490,000 hardcopy mortgage loan files has drawn fire from federal bankruptcy monitors, who say it could hurt homeowners' ability to sue the failed lender. The company, once one of the country's largest mortgage lenders, says it can no longer afford the $45,000-per-month rental on warehouse space to preserve hard loan files. Its bid for court permission to destroy the files has been criticized by Kelly Beaudin Stapleton, the U.S. Trustee monitoring the case.

• Destruction of the paper files could mean big trouble for American Home borrowers, compromising their ability to file lawsuits against the Melville, N.Y., company, Stapleton said in papers filed with the U.S. Bankruptcy Court in Wilmington, Del. American Home, which collapsed into bankruptcy in August, is selling its assets and going out of business. "Homeowners may have claims against (American Home) and/or third parties stemming from the origination of their mortgage loans," Stapleton said in court papers filed last week. "These homeowners may need access to the original copy of the loan file to prove their claim."

• John Kalas, American Home's deputy general counsel and chief compliance officer, said Thursday that the planned destruction would not affect homeowners, because the paper copies are duplicates. "The only loan files that we are destroying or seeking to destroy have been fully imaged," Kalas said. "Anything related to consumer concerns or loan fraud or anything like that, the information would be available on American Home servers."

• Investors who own the loans also have protested the plan to destroy the files, complaining in court papers that they have had trouble getting full documentation from American Home, and don't want to see the paper files destroyed.

For more, see American Home Under Fire Over Loan Files.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here. missing mortgage foreclosure docs alpha undo mortgage loans TILA alpha