WILMINGTON, Del. (AP) -- American Home Mortgage Holdings Inc. has "started to get bombarded" with demands from its lenders that it hand over home loans it's servicing, an attorney for the company said Monday.
The clamor from lenders is complicating American Home's attempt to liquidate its assets in an orderly fashion, the attorney, John T. Dorsey said at a hearing in the U.S. Bankruptcy Court in Wilmington, Del.
One of the country's largest home lenders, American Home filed for Chapter 11 bankruptcy Aug. 6, with plans to shut down its business under court protection. Those plans, Dorsey told the judge presiding over the case, did not include "running in here every day" to fend off lenders anxious to grab their collateral.
On Friday, Impac Funding Corp. and Deutsche Bank's DB Structured Products Inc. initiated actions similar to those already begun by Morgan Stanley and Credit Suisse First Boston.
On Thursday and Friday, Melville, N.Y.-based American Home clashed in court for hours with CSFB, which was trying to get permission to immediately seize $46 million worth of home loans. American Home goes up against Morgan Stanley Tuesday in a battle for control of $519 million worth of home loans owned by Morgan Stanley, but serviced by American Home.
Dutch bank ABN Amro has also filed papers staking a claim to $146 million worth of mortgages that American Home is servicing.
Dorsey, who is with the law firm of Young, Conaway, Stargatt and Taylor, asked the judge overseeing the case, Judge Christopher Sontchi, for "breathing room," as the company prepares for asset sales in bankruptcy while jousting with major lenders.
The automatic stay of bankruptcy protects distressed companies from abrupt demands by creditors. Big investors in the mortgage boom of recent years, however, structured their deals with lenders like American Home so that they could move quickly in the event of a bankruptcy and reclaim the mortgages that were made with their money.
Impac Funding is attempting to retrieve only a few loans from American Home's pile of assets. However, DB is after $189 million worth of its mortgages, which are ensnared in American Home's Chapter 11 case.
The big lenders want American Home to release files and cash connected to mortgages made with their money, so they can sell or securitize the home loans, free and clear of any ties to the bankrupt mortgage company.
American Home wants to sell its loan servicing unit, which collects payments on $57 billion worth of mortgages, at a bankruptcy court auction in early September.
If former lenders pull their mortgages out of American Home's servicing pool, it could dent the value of the loan servicing business.
Sontchi on Monday set a Sept. 4 hearing for Impac's request to get its loans back from American Home.