American Home creditor decries company's plan to sell loan servicing business

By Reshmi Basu

New York, Sept. 11 - American Home Mortgage Corp. creditor DB Structured Products, Inc. objected to the company's request to sell its loan servicing business, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

In 2006, DB Structured Products (DBSP) purchased about $189 million in mortgages from American Home, which the company serviced as part of an agreement.

According to the objection, DBSP argued that it was unable to sell the loans when American Home was no longer qualified by the Federal National Mortgage Association (Fannie Mae), forcing it to maintain the mortgages at "a substantial monetary risk, and likely loss."

Furthermore, DBSP contended that the company's loss of qualification constituted an event of default because it occurred prior to its bankruptcy filing.

However under its Chapter 11 case, American Hom said it plans to sell the rights to those loans, which DBSP said cannot be turned over to a third party without its consent.

In addition, DBSP noted that American Home owed it at least $18 million in repurchase obligations and premium recapture amounts.

Moreover, DBSP reserves the right to file more claims, according to the court document.

As previously reported, the auction for American Home's mortgage loan servicing business will be held on Sept. 24 while the sale hearing will take place on Oct. 1.

American Home, a Melville, N.Y.-based real estate investment trust focused on residential mortgage loans, filed for bankruptcy on Aug. 6. Its Chapter 11 case number is 07-11047.

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