Monday, August 27, 2012

Support the Homeowners' Motion for an Official Committee


If you would like to support the Homeowners' motion for an official committee, you can do so by writing a letter to the Judge and the US Trustee.  We have provided a sample letter, which contains their addresses.  Feel free to make any changes you like, or write your own letter.   If you are a homeowner that has a claim against ResCap, GMAC or any related entity and would like to join the motion, please contact my office at 212-766-9779 or email me at rbrown@robertbrownlaw.com .


August ___, 2012
The Honorable Martin Glenn
United States Bankruptcy Court
Southern District of New York
One Bowling Green, Court Room 501
New York, NY 10004

Ms. Tracy Hope Davis, Esq.
Brian Masumoto, Esq.
Linda Riffkin, Esq.
Office of the United States Trustee
33 Whitehall Street
21st Floor
New York, NY 10004

Re: Case No. 12-12020 (MG)

Dear Judge Peck and Ms. Davis:

           We write to express our support for the formation of a separate committee to represent homeowner interest and to ensure that homeowners have an opportunity to be represented and to seek appropriate relief against Residential Capital LLC and related GMAC subsidiaries which participated in origination, servicing and securitization of mortgage loans.  

            GMAC was one of the top five mortgage lenders, loan servicers, and prolific securitizer of mortgage loans and therefore this bankruptcy affects millions of homeowners.    Ally's legacy mortgage assets - that is, GMAC mortgages and securities predating 2009 - totaled $10.9 billion on Dec. 31, according to the company's annual report. ResCap wrote off  $22 billion in mortgages in 2009, 2010, and 2011 much of it subprime mortgages. [1] Ally is the primary servicer on 2.3 million mortgages with collective unpaid principals totaling about $356 billion, according it a recent SEC filing.


            The federal government and 49 states reached a settlement with a group of banks on their defective foreclosure procedures and ResCap- GMAC participated in that settlement and paid a $212 million fine.    Homeowners spread out all over the United States have unique issues and are without the resources to advocate for their own interest in a New York bankruptcy court.  Absent appointment of a committee, the homeowners will not have a representative voice or any meaningful way to participate in the case.  The size of this bankruptcy with over 51 entities involved and inherent complexity weigh in favor of the appointment of an additional committee to represent this unique group of claimants.  

              The seated unsecured creditors committee consists of Trustees, Deutsche Bank. US Bank, and Bank of New York Mellon, the very parties who are currently seeking to foreclose on homeowners in state courts. The remaining members are insurers, MBIA and AIG, who are assigned the right to collect deficiency judgments from homeowners after foreclosure. This dynamic creates a conflict of interest that is only rectified by the appointment of a separate committee of homeowners only. 

           Ally Financial, the former GMAC still owes taxpayers about $12 billion $17.2 billion in loans it received as part of the bailouts and the government still owns 74% of Ally, who has repaid only $5.5 billion of $17.2 billion it got in the bailout.     It has been widely reported that Ally put its home mortgage subsidiary into bankruptcy court to end the drag of its toxic mortgage assets on Ally's profitable businesses.   Ally CEO Michael Carpenter said in a statement: "The action by ResCap will enable Ally to achieve a permanent solution to its legacy mortgage risks and put these issues behind us." [2]

           The taxpayers and victims of fraudulent practices as detailed in the settlement agreement and consent orders deserve a seat at the table and representation in this bankruptcy as Ally attempts to leave behind and dump its “toxic mortgage assets” – translation their homes.   

          Our state has been hit hard with foreclosures, and we believe that the formation of a homeowner committee will ensure that the promises made by Ally and GMAC to work with homeowners in distress will be followed through during the bankruptcy proceedings.  The committee will also help to avoid confusion and give homeowners a point of contact to assist them in understanding the complex and byzantine process of Chapter 11 bankruptcy and how it affects their rights. 


  Thank you for your consideration,


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2 comments:

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