American Home Mortgage, one of the country’s largest lenders has recently stopped doing business and is likely to be filing for bankruptcy in the very near future. It is my understanding that the company’s credit sources closed forcing the company to shut its doors and fire over 7,000 employees.
I have received phone calls from clients who have financed with American Home Mortgage who are concerned about their loans and payments to be made. If borrowers have already financed and have closed loans with American Home Mortgage, their loans are still valid obligations and payments should still be made. Loans with American Home Mortgage will be sold to other lenders. The sale of a borrower’s loan will not affect its terms (interest rate, due dates or amounts). A lender cannot change the terms of a loan without the permission of the borrower. The failure to make payments will cause borrowers to be in default of their loan, create problems with credit history (affecting the ability to obtain future loans) and ultimately lead to foreclosure of the loan.
People that have loan applications or commitments with American Home Mortgage should quickly make applications with other lender as your loan will not fund with American Home Mortgage. Inquire if the new lender will accept the loan appraisal obtained by American Home Mortgage, if any. This will save the borrower money. It is likely that fees previously paid to American Home Mortgage will have to be paid to the new lender. It is my understanding that lenders such as Wells Fargo and Countrwide Home Loans have been accepting applications from former American Home Mortgage borrowers. Attorneys whose clients have commitments with American Home Mortgage in a purchase transaction should put the Seller’s attorney on notice of the situation and negotiate an extension of time to close. Even if a seller has declared a purchaser in default under a contract of sale, the purchaser will be given a reasonable time to cure this unintentional default.