Homeowners who say mortgage servicer Ditech Holding Corp. mishandled their payments and charged illegal fees could be blocked from collecting damages because of the company’s bankruptcy, despite a 2005 law aimed at preventing such an outcome, WSJ Pro Bankruptcy reported. Officials at the Justice Department and consumer advocates are warning homeowners that they could miss out on compensation if Ditech reorganizes in chapter 11 without selling its operations. The Fort Washington, Pa.-based company, which collects mortgage-loan payments on about 1.4 million residential loans through Ditech Financial LLC, Green Tree Servicing Corp. and other associated companies, filed for bankruptcy in February. The company, which blamed its financial troubles on rising interest rates and its own heavy debt payments, faces thousands of litigation claims from homeowners who have notified the company, through letters and lawsuits, of mistakes related to their mortgage accounts, according to documents filed in U.S. Bankruptcy Court in New York. Some homeowners said Ditech companies failed to properly credit payments, while others said the company has charged improper fees or mistakenly begun to foreclose on their properties. Consumer lawyers said homeowners who accuse servicers of wrongdoing generally seek compensation ranging from a few hundred dollars to more than $1 million.
