WILMINGTON, Del. (AP) -- American Home Mortgage Investment Corp. is offering to hand over hard copies of 490,000 home loan files to Wall Street investors who claime they own the mortgages.
The failed Melville, N.Y., mortgage lender, which is liquidating its assets in bankruptcy, made the offer Tuesday to counter stiff opposition from former backers who said American Home's plan to destroy the files endangered their rights to enforce the loans.
American Home wants to set a March 14 deadline for investors to request that the home loan files, now housed in a storage facility, be shipped to them.
If a judge approves the company's proposal, requesters would have to pay $6.25 per file -- $13 if the request is for a DVD version. The company said those charges are necessary to defray the $5 million cost of retrieving, sorting and shipping the files.
The mortgages at issue may have been bought and sold many times since they were first issued by American Home sometime after September 2005. American Home isn't sure who owns the loans recorded in the hard-copy files it is storing, according to documents filed Tuesday in the U.S. Bankruptcy Court in Wilmington, Del.
An institution that wants a file must be prepared to make "a sworn declaration that such entity legally owns each loan file requested and that the declarant has the requisite corporate authority to make such a declaration," American Home's lawyers said.
The question of who really owns a mortgage and how to prove it has become a matter of high interest in the meltdown of an industry where home loans are bundled, bought and sold in large lots by investors from hedge funds to pension funds.
In an action that sent shudders through the mortgage market, judges in Ohio recently blocked home foreclosures by several big Wall Street banks that couldn't prove they owned the loans they were trying to enforce.
The threat of get-tough policies by foreclosure-wary judges worried some of the financial institutions that bought mortgages from American Home, according to court documents.
Bank of America Corp. was one of the lenders that opposed the company's plan to destroy the loan files.
Bank of America said it was worried it would lose its "ability to enforce its rights under any loan that it purchased (from American Home) for which the underlying loan documents were inadvertently destroyed."
Bank of America would become the country's largest mortgage lender if its acquisition of Countrywide Financial Corp. goes through.
Kelly Beaudin Stapleton, U.S. Trustee for the Delaware bankruptcy court, objected to the destruction plan on behalf of consumers. Homeowners looking for evidence of defects in their loans should get a chance to retrieve documents, said the federal bankruptcy watchdog.
American Home says it wants no problems with consumer privacy laws, and is wary of giving files to investors that no longer have a stake in the mortgages, "given the constant change in loan ownership in the secondary market of the loan industry." American Home says it wants to get rid of the loan files because it costs $45,000 per month to warehouse them. Destroying the 490,000 hard copy files would have cost the company an estimated $1 million.