Judge Glenn Denies Request for ResCap Borrowers' Panel

Judge Martin Glenn of the U.S. Bankruptcy Court in Manhattan turned down a bid for the appointment of an official committee to represent borrowers in the Chapter 11 proceeding of the nation's fifth-largest home-loan servicer on the grounds the company's troubles, and those of the industry, have spawned sufficient safeguards.

Judge Glenn, however, cited a promise by the official creditors committee to refer borrower issues to special counsel. That is enough to guard against the "theoretical risk" that ResCap's official creditors committee, which has one borrower member, won't have the interests of borrowers at heart, the judge said.

Mr. Brown said he was surprised by the ruling but was encouraged by Judge Glenn's recognition that borrowers allegedly injured by ResCap's practices have a special stake in the case, which should be addressed by the special counsel the creditors committee has offered to hire.

"Now if they appoint a firm that has a nationwide practice foreclosing on people or that has a huge banking practice, that's not someone borrowers will trust and probably not someone that will understand the unique problems of someone in foreclosure," Mr. Brown said.

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