New York state has asked a federal judge to put a stop to Ditech Holding Corporation’s sale of its reverse mortgage business.
Ditech, which filed for bankruptcy in February, announced in June that it intended to sell its reverse business, Reverse Mortgage Solutions (RMS), to New Residential Investment. However, New York Attorney General Letitia James has filed an objection to the plan with the US Bankruptcy Court for the Southern District of New York, calling the intended sale an “attempted end-run around statutory protections for homeowners.”
“Bankruptcy court should never be used as a tool to unjustly oust New Yorkers from their homes,” James said. “Ditech’s action is an illegal attempt to strip hundreds of homeowners of their legitimate claims and eviscerate New York’s carefully crafted foreclosure process. Housing is a right, and we will continue to use every legal tool at our disposal to stand up for homeowners and to protect their rights.”
Bank of America, which has a reverse servicing agreement with Ditech, has also filed an objection to the sale. The bank said its agreement with Ditech’s Reverse Mortgage Solutions stipulated that RMS provide the bank with substantial prior notice to establish other servicing arrangements should RMS not be able to meet its obligations. Bank of America said in its objection that the proposed sale “threatens to abandon” the elderly borrowers whose mortgages are being serviced by the Ditech subsidiary.
Ditech currently has more than 88- active foreclosure actions pending in New York state, the attorney general’s office said. The office said that James filed the objection to the sale “to ensure that vulnerable homeowners, who were victims of predatory lending and mortgage servicing abuses, including seniors with reverse mortgages, can assert their rights under the protections of New York’s robust judicial foreclosure process.”
The state attorney general’s office said that it has also opened an investigation into RMS.