HomeBanc trustee and Bear Stearns entities agree to claim settlement

By Caroline Salls

Pittsburgh, April 30 - HomeBanc Mortgage Corp.'s Chapter 7 trustee requested court approval of a settlement reached with Bear, Stearns & Co., Inc., Bear, Stearns International Ltd. and Strategic Mortgage Opportunities REIT, Inc., according to an April 29 filing with the U.S. Bankruptcy Court for the District of Delaware.

In 2005, HomeBanc entered into two repurchase agreements with Bear Stearns.

Chapter 7 trustee George L. Miller said mortgage-backed certificates securities administrator Wells Fargo Bank, NA filed an adversary proceeding against HomeBanc and the Bear Stearns entities in October 2007.

As securities administrator and paying agent, the trustee said Wells Fargo held $759,832 in principal and interest for the month of August 2007. The Bear Stearns defendants and HomeBanc filed competing claims to the payment, which resulted in the filing of an interpleader complaint.

In addition, HomeBanc sought damages in excess of $100 million through cross claims filed against Bear Stearns.

The Bear Stearns defendants also filed a cross-claim against HomeBanc to recover more than $4 million in legal fees and expenses tied to a HomeBanc default.

Bear Stearns also sought set-off of a HomeBanc Residual against the amounts owed under the

repurchase agreements, $1.6 million for post-bankruptcy "re-factoring" in connection with the sale of the securities that generated the HomeBanc residual, $2.1 million for principal and interest payments, $237,708 for so-called "TBA pairoffs" and $330,715 for principal and interest payments received by HomeBanc post-bankruptcy.

In January, the trustee's motion for partial summary judgment was granted in connection with the request for turnover of the August 2007 payment and interpleader funds, and the Bear Stearns defendant's motion for summary judgment was granted in connection with the trustee's claims for nine of 10 securities at issue.

The parties reached a settlement on April 15 of the post-summary judgment remaining cross-claims and set-off claims.

Settlement terms

Under the proposed settlement,

• The Bear Stearns defendants will pay $3.25 million to the trustee for settled claims;

• The trustee will be entitled to receive the interpleader funds for the benefit of HomeBanc's estate;

• The Bearn Stearns defendants waive their rights to seek or recover attorneys' fees or other costs and expenses related to HomeBanc's alleged repurchase agreement default, the adversary proceeding, the trustee's appeals tied to the adversary proceeding and having to defend the claims filed by the trustee in connection with the securities at issue; and

• The trustee and HomeBanc's estate preserved their rights to appeal adverse rulings of the bankruptcy court related to the adversary proceeding.

A hearing is scheduled for May 21.

HomeBanc, an Atlanta-based mortgage banking business, filed for bankruptcy on Aug. 9, 2007. Its Chapter 11 case number is 07-11079.

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