NEW YORK (Associated Press) - The judge presiding over the bankruptcy of American Home Mortgage Investment Corp. on Wednesday denied requests from some homebuyers to appoint a consumer privacy ombudsman.
Paula Rush of Churchville, Md., and two other women who obtained mortgages through American Home asked that an ombudsman be appointed to ensure that borrowers' personal information is protected as American Home sells off its assets, including its mortgage servicing business.
"I think there are open issues that have not been addressed," said Rush, who is suing American Home in federal court in Maryland for allegedly fraudulent loan practices.
American Home is expected to close the sale of its mortgage servicing business to a group led by billionaire Wilbur Ross Jr. by mid-November, in a deal estimated at about $500 million.
Robert Brady, an attorney for American Home, argued that the court has taken steps to ensure that borrowers' privacy was protected, and that the sale of loan servicing rights was allowed under the federal Gramm-Leach-Bliley Act, which protects personal financial information held by financial institutions.
Joseph McMahon Jr., representing the Office of the United States Trustee, said he was satisfied that American Home was not violating privacy policies.
Judge Christopher Sontchi said privacy has been a concern for him, but that he had faith in the trustee's office and that there was no need for an ombudsman.
"The debtors are not using, selling, or leasing property in a manner that is inconsistent with the privacy laws," Sontchi said.
Sontchi also rejected motions by Rush and Laura Beall of Oakton, Va., asking that an independent examiner be appointed to review American Home's conduct for possible fraud or dishonesty, and that the company be required to divulge who owns the women's loans.
Rush, who said she was promised one loan but given another that was completely different, is hoping to hold the existing loan owner liable in her lawsuit.
"Who is the owner of the note? Who got the fruits of the fraud?" she asked Sontchi. "The debtor's estate is basically protecting another party."
Beall, who claims she was told two days before closing on a home that she was not eligible for the loan she expected to receive, is trying to get her loan modified following a 3 percent rate hike in July. Beall said the master service provider or owner of the loan must approve a modification, but that she has been getting the run-around. She learned last week that Wells Fargo was the master service provider, but said Wells Fargo told her to go back to American Home.
Brady, the attorney for American Home, said the women have been given information about their loans and the options they have, even though they may not like them.
"I think the vast majority of borrowers are not unhappy with the way their loans are being serviced," he added.
Sontchi agreed with attorneys for American Home and its creditors that the loan information Rush is seeking should be sought through the discovery process in her lawsuit.
"I think frankly Ms. Rush has been given a great deal of information that she otherwise might not be entitled to," the judge noted.
While sympathizing with Beall's plight, Sontchi said American Home has provided her with all the information required, and that he was reluctant to make exceptions in the bankruptcy law for individual cases.
"This is a nationwide if not a worldwide situation," the judge said. "There are literally hundreds of thousands if not millions of people like yourself."
Sontchi denied without prejudice the motion for an independent trustee to look into possible fraud or dishonesty, saying he had no evidence to justify the appointment but that the issue could be revisited later if necessary."My instincts tell me that to the extent that there are real issues out there, they're going to be investigated by somebody in the future," the judge said. Ombudsman - Wikipedia, the free encyclopedia