Judge rules that American Home Mortgage does not have to transfer loan servicing rights to Calyon

By Caroline Salls

Pittsburgh, Jan. 4 - American Home Mortgage Investment Corp. does not have to transfer contracted mortgage loan servicing rights to administrative agent Calyon New York Branch, according to an opinion filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

According to the ruling filed by judge Christopher S. Sontchi, Calyon filed a complaint against American Home Mortgage in August, asking the court to force the company to transfer some mortgage loan servicing rights to Calyon.

In the complaint, Calyon also asked Sontchi to rule that the reservicing contract for the mortgage loans in question is a repurchase agreement, while American Home argued that the contract should be classified as a secured financing.

Sontchi said the mortgage loans were sold on a servicing retained basis, which gave American Home the right to choose the loan servicer. The ruling said AHM Servicing was selected to service the loans, and AHM Servicing is therefore entitled to receive a monthly servicing fee.

On Aug. 1, Calyon said American Home was in default under the contract. The bank demanded that American Home repurchase the loans and transfer servicing to JPMorgan Chase Bank NA, which Calyon had selected to service the loans.

After American Home filed bankruptcy in August, Calyon terminated AHM Servicing, which was acting as interim servicer, and demanded that American Home transfer the loans to JPMorgan.

However, American Home disputed Calyon's right to exercise its default remedies under the contract and refused to transfer the servicing rights.

Although Sontchi ruled that the contract does qualify as a repurchase agreement, he said in his opinion that the portion of the contract that covers mortgage loan servicing is not a repurchase agreement or a securities contract.

As a result, Sontchi said there is no basis to require American Home to transfer property of its estate to Calyon.

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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