Daily Deal/The Deal
September 14, 2009 Monday
LENGTH: 374 words
HEADLINE: Creditors to get U.S. Mortgage plan
BYLINE: by John Blakeley
BODY:
Bankrupt mortgage loan originator U.S. Mortgage Corp. is set for an Oct. 26
confirmation hearing for its liquidation plan that would give unsecured
creditors proceeds of litigation related to the company's downfall.
Judge Donald Steckroth of the U.S. Bankruptcy Court for the District of New
Jersey in Newark approved the plan's disclosure statement in a Sept. 11 order.
Under the plan, U.S. Mortgage would transfer avoidance actions and other
litigation proceedings to a trust that would help pay off unsecured claims.
Among the potential targets for causes of action are J.H. Cohn LLP (the debtor's
prepetition accountant), all members of the McGrath family (Michael McGrath Jr.
is U.S. Mortgage's former CEO), Fannie Mae, each credit union with which the
debtor did business prepetition and several others, filings show.
The debtor would fund its plan with potential proceeds from liquidation, cash
on hand, $1.5 million from a first mortgage on a property in Hoboken, N.J., and
the sale of a small portfolio of 17 loans. Some $13 million in funds seized from
the company and McGrath would also be distributed.
U.S. Mortgage did not estimate recoveries for creditors.
The Pine Brook, N.J., company filed for Chapter 11 on Feb. 23, nearly a month
after the FBI and other federal agencies raided its offices in the wake of
allegations that the debtor sold mortgages more than once and engaged in other
improprieties. After the raid, the company shut down its mortgage loan
origination network and affiliate CU National Mortgage. The credit union filed
its own petition on April 1.
U.S. Mortgage has already transferred loans owned by Fannie Mae to other
mortgage servicers and has either sold its remaining servicing rights or
returned them to certain credit unions. The company no longer operates.
In court documents, U.S. Mortgage listed assets of $17.25 million and
liabilities of $216.98 million.
Before shutting down, U.S. Mortgage sold conventional loans, jumbo mortgages,
alternate documentation or no-documentation loans and flexible credit programs.
The debtor also serviced some of the mortgages it originated directly and
serviced mortgages for other entities.
Bruce Buechler and Kenneth Rosen from Lowenstein Sandler PC are debtor
counsel. |
