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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.

Falling mortgage rates have spurred a mini refinancing boom, a piece of good news for banks and other lenders that have been grappling with a cooling housing market, the Wall Street Journal reported. Mortgage-application volume jumped 18 percent last week from a week earlier, according to data released yesterday by the Mortgage Bankers Association. Refinance applications were up 39 percent, and the MBA’s refinance index, which measures applications, hit its highest level since November 2016. Purchase applications were up 4 percent. Mortgage rates reported by Freddie Mac last week dropped nearly a quarter percentage point to 4.06 percent, the lowest since January 2018 and the biggest one-week drop in more than a decade. Many lenders have already started offering mortgages with interest under 4 percent. That has boosted loan applications and is a welcome sign for mortgage executives who had earlier been bracing for a continued rise in rates in 2019.

President Trump ordered federal regulators on Wednesday to develop plans to change the way the country finances the majority of its home purchases, the Washington Post reported. The plan could upend decades of housing policy while finally reckoning with a major piece of unfinished business from the financial crisis — the fates of Fannie Mae and Freddie Mac, the housing finance giants that back more than half the mortgages written in the U.S. The two companies, which buy mortgages from lenders, then package them into securities to sell to investors, have been under government conservatorship for 10 years after receiving billions in taxpayer bailouts. Lawmakers have been wary of tinkering with their structure, fearful a wrong move could disrupt the housing market and the availability of 30-year mortgages, the most popular way home purchases are financed in the United States. Trump signed a presidential memorandum yesterday directing the Treasury Department to develop a plan that would end Fannie’s and Freddie’s government conservatorships and improve oversight of the companies, which have trillions in assets. Trump also instructed the Department of Housing and Urban Development to submit a plan to change the operations of other parts of the housing system, including the Federal Housing Administration, which helps low-income and first-time buyers.