American Home Mortgage and Fannie Mae reach agreement

BY DANIEL WAGNER | daniel.wagner@newsday.com

3:54 PM EDT, August 27, 2007

American Home Mortgage Investment Corp., the bankrupt Melville-based lender, has struck an agreement that will allow it to continue servicing a crucial portfolio of $5.2 billion in government-backed mortgage loans.

According to a settlement agreement filed Friday in U.S. Bankruptcy Court in Delaware, American Home and Fannie Mae agreed that American Home will continue to service 36,700 loans with a total unpaid balance of $5.2 billion -- about 10 percent of American Home Mortgage Servicing's unpaid balance, and about 15 percent of its total loan value.

Fannie Mae had previously tried to recapture the loan servicing rights based on its having terminated the loan servicing agreement with American Home prior to its Aug. 6 bankruptcy filing.

Under the agreement, American Home will continue servicing the loans and will remain an approved servicer for Fannie Mae on an interim basis -- a concession the company called "hard-fought." The company will have until Oct. 31 to sell its servicing unit, including the Fannie Mae loans.

American Home has been beset with similar claims against its loan servicing business, which the company has said is one of its most valuable assets. It is also the only part of American Home that has continued to operate since the company shuttered its other divisions Aug. 3.

When it loses control of the loan servicing rights, as it did under a $519 million settlement with Morgan Stanley on Friday, the value of the asset diminishes.

An American Home spokesman declined to elaborate on the court filings.