Bankruptcy Law News

Ditech Mortgage Holders May Challenge Credit Suisse’s Liens

April 2, 2019, 7:58 PM

A class of Ditech Financial LLC’s mortgage customers is seeking to pursue potential claims against Credit Suisse AG, a secured lender of the bankrupt lender.

The Geary Class Action (GCA) filed a motion April 1 in the U.S. Bankruptcy Court for the Southern District of New York, seeking permission to investigate and possibly challenge the validity or the extent of Credit Suisse’s liens against Ditech.

Ditech, which filed for Chapter 11 protection in February, previously waived its right to challenge Credit Suisse’s liens or claims.

Ditech’s proposed reorganization plan, filed March 5, provides no recovery for unsecured creditors, including GCA, except for some select trade creditors. Under the plan, administrative claims and secured creditors’ claims will be paid.

The group, comprised of more than 31,000 Ditech customers, has been battling Ditech and its predecessors in a class action, pending in Ohio since 2014, over claims that the companies violated the federal Fair Debt Collection Practices Act, class attorney James Nobile said. Six certified classes have been confirmed on appeal, he said.

GCA estimates it has a claim for around $25.5 million in the case, Nobile said. If Ditech’s reorganization plan is confirmed, the group’s claim and five years of litigation will be lost, he said.

Ditech failed to provide “validation notices” along with collection notices, as required by the FDCPA, Nobile said. Validation notices alert the debtor that it can dispute a claim and request more information.

Ditech hasn’t provided documents GCA requested, Nobile said. The company hadn’t even listed GCA in its schedule of creditors, he said.

GCA had to file its April 1 motion before fully investigating Credit Suisse’s liens because of a deadline imposed by the bankruptcy court early in the case, he said.

Ditech’s counsel didn’t respond to a request for comment.

Ditech is represented by Weil, Gotshal & Manges LLP.

The case is In re: Ditech Holding Corp., Bankr. S.D.N.Y., 19-10412, Motion for Derivative Standing 4/1/19.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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