Reverse Mortgage’s plan draws several objections ahead of hearing

By Sarah Lizee

Olympia, Wash., April 21 – Reverse Mortgage Investment Trust Inc.’s Chapter 11 plan has drawn several objections, according to documents filed Thursday with the U.S. Bankruptcy Court for the District of Delaware.

The U.S. trustee overseeing the case, mortgage-backed securities trustee U.S. Bank NA and the official committee of unsecured creditors are among those who filed objections ahead of a hearing scheduled for April 27.

Regions 3 and 9 U.S. trustee Andrew R. Vara said in his objection that the plan shouldn’t be confirmed because of its non-consensual third-party releases and impermissibly broad exculpation clause.

He also said the plan and all distributions under it are impermissibly cast as a settlement.

Meanwhile, U.S. Bank said the plan appears to contemplate a rejection of servicing agreements and the cessation of all loan servicing agreements relating to certain mortgage trusts without providing for any transition to a successor servicer.

Without the appointment of a successor servicer prior to confirmation of the plan, the trusts, as well as the customers associated with the underlying reverse mortgages held in those trusts, would suffer significant damages from any interim lull in servicing, or a disorderly transition to a new successor servicer, U.S. Bank said.

The committee said in its limited objection that negotiations with the debtors are ongoing, but certain issues remain unresolved.

Among other things, the committee is concerned with the scope of the plan administrator’s authority with lack of enough oversight by the plan advisory committee.

The committee said the plan administrator’s control over certain assets should be subject to “far greater oversight” by the plan advisory committee to ensure that all parties’ rights, especially those of unsecured creditors, are protected during the wind-down process.

The Bloomfield, N.J.-based reverse mortgage issuer filed Chapter 11 bankruptcy on Nov. 30 under case number 22-11225.

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