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The judge presiding over Ditech Holding Corp.’s bankruptcy rejected a proposed restructuring of one of the nation’s largest mortgage origination and servicing businesses, ruling the terms weren’t fair to borrowers, WSJ Pro Bankruptcy reported. In a 134-page ruling filed yesterday, Judge James L. Garrity Jr. of the U.S. Bankruptcy Court in New York said the plan could prevent homeowners whose mortgages were serviced by Ditech from fighting back against fees, defaults and foreclosures once the company’s assets are sold. Ditech hasn’t shown the plan is fair to consumers who have claims against the Fort Washington, Pa.-based company, according to the judge’s ruling. Those consumers took out mortgages or reverse mortgage that were originated, serviced, sold, consolidated or owned by Ditech or any of its bankrupt affiliates, which also include Green Tree Servicing Corp. and Reverse Mortgage Solutions Inc. The restructuring proposal revolved around the $1.8 billion sale of its mortgage servicing businesses.

A type of unconventional mortgage that focuses on a borrower’s assets to vet repayment ability has drawn a warning from regulators for banks to maintain tight underwriting standards, the Wall Street Journal reported. Asset-depletion loans, also known as asset-dissipation loans, are part of a small but growing subset of the mortgage market that includes subprime loans and other riskier products. They assume borrowers draw from assets to cover a mortgage, rather than just income. They are designed for people who don’t have a conventional paycheck, including retirees or workers in the gig economy, and were traditionally aimed at high-net-worth individuals with portfolios that could be easily converted into cash for mortgage payments. Now the loans are reaching a broader set of borrowers, raising concerns that lenders aren’t properly measuring their risk. “As banks have expanded [asset-depletion underwriting] to qualify other applicants, examiners have noted weaknesses in policies and practices,” Richard Taft, the Office of the Comptroller of the Currency’s top credit-risk official, said in a written statement. He added that banks “should develop and implement policies, processes, and control systems in a manner consistent with safe and sound banking practices.”

Student debt is soaring — it is now nearly $1.5 trillion — and defaults are at a record. That has been fertile ground for companies that promise to help stretched borrowers navigate the maze of federal programs that can reduce or forgive debts for those who qualify, such as public-service workers or people on low incomes, the Wall Street Journal reported. Some companies operate legally, although there is nothing they offer that borrowers can’t get themselves for free, regulators say. Other firms are outright scams, or make promises to borrowers that are illegal, regulators and consumer advocates warn. Financial Preparation Services of Irvine, Calif. boasts on its website three glowing testimonials for its debt-relief services for student loans. It quotes Anthony Zwichirowski of California, Dawn Robinson of New Hampshire and a smiling Dean Edelman of Virginia, who says using the company “was the smartest move I have made since graduating.” One or more of the three ostensibly happy borrowers also appears, with slight variations, on at least 25 other websites of purportedly different companies offering student-loan debt-relief in the last four years. Financial Preparation Services has submitted claims for federal relief based on fictitious information, according to a former employee. Sales teams within the company also switched regularly to using new corporate names and websites, the former employee said. The company is one of several about which federal regulators are demanding information, according to a bankruptcy court filing.