American Home Criticized for Plan to Destroy Hard Loan Files

January 3, 2008 No Comments »

Defunct mortgage lender American Home Mortgage Investment Corp. has been slammed for its plan to destroy 490,000 hard mortgage files to save on warehouse rent.

The failed lender says it can no longer afford the $45,000-per-month lease on warehouse space housing the hard loan files, drawing criticism from Kelly Beaudin Stapleton, the U.S. Trustee monitoring the case.

“Homeowners may have claims against (American Home) and/or third parties stemming from the origination of their mortgage loans,” Stapleton said in court papers filed last week. “These homeowners may need access to the original copy of the loan file to prove their claim.”

But American Home’s deputy general counsel and chief compliance officer John Kalas said today that the planned destruction would not negatively affect homeowners, as the paper copies are supposed duplicates.

“The only loan files that we are destroying or seeking to destroy have been fully imaged,” Kalas said. “Anything related to consumer concerns or loan fraud or anything like that, the information would be available on American Home servers.”

Investors aren’t pleased about the plan to destroy the files either, noting that it has been difficult to get any information out of American Home, while Bank of America said destroying them could diminish the market value of the mortgages.

Paula Rush, a homeowner who accused the lender of fraud in a recent lawsuit, said in an interview today that destroying potential evidence that could be used for future lawsuits shouldn’t be authorized.

“Leaving American Home Mortgage…total discretion to destroy what they want to destroy and image what they want to image is crazy,” Rush said.

She added that having the complete loan documentation was essential to her battle in court.

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