According to a settlement agreement filed Friday in U.S. Bankruptcy Court in Delaware, American Home Mortgage Corp. won the right to continue to service $5.2 billion in agency-backed loans.
Fannie Mae had made an effort to recapture the loan servicing rights after American Home Mortgage went bankrupt earlier this month, but the settlement ruled in favor of the beleaguered mortgage lender.
American Home will continue to service the 36,700 loans as an approved servicer for Fannie Mae until October 31st, when it must sell its entire loan servicing unit.
The loans account for about 10% of American Home Mortgage Servicing’s unpaid balance, and about 15% of its total loan value.
The settlement is a big victory for the bankrupt lender, as the value of a loan servicing unit greatly diminishes when control is lost.
The news comes after American Home Mortgage lost the rights to its loan servicing agreement with Morgan Stanley worth $519 million last Friday.
American Home Mortgage called the ruling “hard-fought” but failed to comment further on the matter.
The servicing unit has continued to operate since the company filed for bankruptcy, and is the only asset of real value at American Home Mortgage.