American Home's Intention
To Destroy Files Raises Ire
By PEG BRICKLEY
January 4, 2008; Page C2
American Home Mortgage Investment Corp.'s plan to destroy 490,000 hard-copy mortgage 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 paper 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 create trouble for American Home borrowers, compromising their ability to file lawsuits against the Melville, N.Y., company, Ms. 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," Ms. 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 yesterday that the planned destruction wouldn't affect homeowners because the paper copies are "duplicates."
"The only loan files that we are destroying or seeking to destroy have been fully imaged," Mr. 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 paper files, complaining in court papers that they have had trouble getting full documentation from American Home.
Bank of America, a unit of Bank of America Corp., objected both in its role as an owner of some of the mortgages and in its role as the lead agent for American Home's bank syndicate. Destroying original documents could diminish the market value of the mortgages, it said.
Wells Fargo Bank, and arm of Wells Fargo & Co., also complained, warning that destruction of the paper files could make it tough to foreclose on borrowers.
A hearing on the document destruction was pushed off from today until Jan. 14 so American Home can attempt to resolve objections, according to a court document.
Write to Peg Brickley at email@example.com