MILA files Chapter 11 amid mortgage lender woes, seeks Chapter 11 trustee to find transaction

By Caroline Salls

Pittsburgh, July 5 - MILA, Inc., doing business as Mortgage Investment Lending Associates, filed Chapter 11 bankruptcy on July 2 in the U.S. Bankruptcy Court for the Western District of Washington.

According to court documents, as of April 15, MILA had received $3.8 million in margin calls since the beginning of the year and found itself in breach of its liquidity covenants because of insufficient equity and operating capital.

Additionally, MILA said it continued to receive an influx of new repurchase claims during the first quarter of 2007, and by the end of February, MILA had more than $25 million in repurchase claims with new claims being received on a daily basis.

As a result of these covenant defaults and because of continued repurchase requests from investors in early 2007, MILA said its warehouse lines were first restricted, and ultimately declared in default and closed.

Although MILA had interest from a potential buyer for the company, because of the mounting financial pressure it was unable to maintain the liquidity needed to stay in operation, which was a requirement of the potential buyer.

In connection with the filing, the company has asked the court to appoint a Chapter 11 trustee for its case.

In the trustee motion, MILA said the recoverable value of the remaining loans it nominally holds is likely significantly less than the claims they secure.

However, the company said an industry experienced trustee may be able to begin a business transaction involving MILA's assets to return some value to creditors.

MILA listed $7.89 million in assets and $174.73 million in debt.

The company's largest unsecured claims include:

• Bear Stearns, Dallas, with a $21 million repurchase obligation claim;

• GMAC/RFC, Minneapolis, with a $10.5 million repurchase obligation claim;

• Goldman Sachs Mortgage Co., New York, with a $6.8 million repurchase obligation claim;

• Nomura Securities, New York, with a $6.7 million repurchase obligation claim;

• Wachovia Mortgage Corp., Charlotte, N.C., with a $4.7 million repurchase obligation claim;

• Deutsche Bank, New York, with a $4 million repurchase obligation claim;

• DB Structured Products Inc., New York, with a $4 million repurchase obligation claim;

• Credit Suisse First Boston, Princeton, N.J., with a $3.8 million repurchase obligation claim;

• Countrywide Home Loans, Simi Valley, Calif., with a $3.5 million repurchase obligation claim; and

• CitiMortgage-Home Equity, O'Fallon, Mo., with a $3 million repurchase obligation claim.

MILA was a Mountlake Terrace, Wash., wholesale residential mortgage lender. Its Chapter 11 case number is 07-10359.

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