Magazine article American Banker

Lomas Sale of Servicing Assets to First Nationwide Is Blocked

Magazine article American Banker

Lomas Sale of Servicing Assets to First Nationwide Is Blocked

Article excerpt

A federal bankruptcy judge on Wednesday rejected Lomas Financial Corp.'s proposed sale of its remaining servicing assets to First Nationwide Bank, saying creditors deserve time to seek a better offer.

Handing down his ruling at a 45-minute hearing, Judge Peter J. Walsh said Lomas's management failed to give creditors sufficient time or information to vote on the sale, which was announced last month. The planned sale would have given First Nationwide a $20 billion servicing portfolio for a below-market price of $150 million.

"This company belongs to the creditors and they have a paramount right to exercise their judgment," Judge Walsh said to a courtroom audience of about 30 people, most of them lawyers and creditors.

The judge said the creditors' right to seek the best price outweighs Lomas's concern that the servicing portfolio will only deteriorate in value if the sale collapses. He added that the creditors' committee was given inadequate time to digest the 150 pages of information about the sale.

The ruling reopens the bidding for the Lomas servicing portfolio, which has been on the auction block since March 1994.

The bankruptcy court has been deliberating since Monday on the plan by Lomas - once the nation's preeminent home-mortgage lender - to liquidate its assets. The company declared bankruptcy last month, having emerged from a bankruptcy reorganization in 1992.

During this week's proceedings, it has come to light that Mellon Bank Corp., PNC Bank's mortgage unit, Source One Mortgage Co. …

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