Some docs saved from doomed AHM loan files

A U.S. Bankruptcy Court judge Monday allowed defunct American Home Mortgage, once one of the largest subprime lenders, to destroy most of the 4,100 boxes of original loan files it still has in a parking garage in its former Melville headquarters.

But Judge Christopher Sontchi in Wilmington, Del., granted a request by Margaret Becker, a lawyer in Staten Island for the Legal Aid Society, to require the American Home trustee to set aside and cull through a few hundred of the boxes, which may contain records still relevant to possible foreclosures.

Becker said many low-income homeowners were victims of deception about how much their loans actually would cost, and records from the boxes could help prove they had been defrauded. "These documents are critical for borrowers to demonstrate to foreclosing courts the deception and fraud that was a routine part of this mortgage industry," Becker said.

Sean Beach, a lawyer for AHM liquidation trustee Steven Sass, said the company under an earlier court order already had destroyed or returned to loan servicers 50,000 boxes of "hard copy loan files."

In December Sass informed Sontchi he gave lenders ample time to request the documents and has to pay $15,000 a month in storage and other costs at the underground parking garage at AMH's former headquarters at 538 Broadhollow Rd.

In a separate hearing Monday at the same court, a bankruptcy judge temporarily blocked bankrupt subprime lender Mortgage Lenders Network USA from destroying 18,000 boxes of original loan files after federal prosecutors said documents in them may be needed as evidence in 50 criminal investigations.