Compounding a series of financial problems the companies are facing, Reverse Mortgage Solutions (RMS) and its parent company Ditech Holding Corporation are experiencing new scrutiny from consumer advocates and the United States Department of Justice (DOJ) due to the company’s latest chapter 11 bankruptcy filing, according to an article at the Wall Street Journal.
Some homeowners who may be entitled to compensation for damages could lose their chance due to a loophole created by Ditech’s latest bankruptcy filing. In addition to issues surrounding the consolidation and management of the company’s debts, Ditech currently, “faces thousands of litigation claims from homeowners who have notified the company, through letters and lawsuits, of mistakes related to their mortgage accounts, according to documents filed in U.S. Bankruptcy Court in New York,” according to WSJ.
Some homeowners have claimed that Ditech failed to properly credit mortgage payments that were made, while others allege that Ditech has either levied improper fees or even mistakenly foreclosed on their homes. Consumer lawyers shared that homeowners who accuse servicers of improper activity or outright wrongdoing often seek damages that can range from just a few hundred dollars to over $1 million, WSJ wrote.
Ditech itself is reportedly examining the claims of damages by homeowners and will evaluate whether those claims will be paid, according to Gerald Lombardo, chief financial officer for Ditech in a statement made to the DOJ, and cited by the Wall Street Journal.
The overarching situation is also unfair for homeowners seeking damages from Ditech since those affected often don’t have the option of choosing their loan servicer, according to attorney Theodore Bartholow III, who is representing several homeowners embroiled in mortgage disputes with Ditech.
“It’s also unfair because the servicing gets transferred so often that each transferee assumes that the records are accurate, which causes these problems to be perpetuated,” Bartholow told WSJ.
In the midst of the financial difficulties that Ditech is embroiled in, RMS seems to be relatively insulated from the larger problems of its parent company from an operational perspective. Recently after the closure of a Ditech facility in Minnesota, an RMS company spokesperson told RMD that operations related to reverse mortgages would be unaffected.
In a February filing with the Securities and Exchange Commission, Ditech also secured financing from its debtor-in-possession (DIP) facilities, allowing some of its subsidiaries – including RMS – to gain access to portions of up to $1.9 billion in available financing.
This follows a continually unfolding odyssey of financial problems for Ditech, which was delisted from the New York Stock Exchange (NYSE) following warnings that stemmed from its failure to meet the NYSE listing standard in 2018 following its first bankruptcy filing earlier that year.
In January, Ditech stated that it elected not to make an approximately $9 million cash interest payment to its creditors in December 2018, putting the company at risk of default.
Read the article at the Wall Street Journal for more.