Failed Lender Makes Grab for Employee Funds
Bankrupt American Home Mortgage is attempting to seize as much as $27 million that former employees set aside from paychecks for retirement, according to an attorney representing them.
Employees say Melville, N.Y.-based American Home Mortgage Investment wants to release retirement money from a trust fund to pay off large creditors.
The attorney for a group of former employees alleged American Home or its trustee for the retirement plan "may have acted inappropriately with regard to withholding distributions or encouraging contributions."
Calls to American Home were not immediately returned early Tuesday.
The case in bankruptcy court in Delaware is being brought by 43 employees who had a total of $11.6 million in the retirement trust.
The deferred-compensation plan enabled employees making more than about $200-thousand per year to save money tax-free until they retired.
American Home has more than 1,000 creditors, some of which already have priority claims on the firm's assets.
American Home filed for bankruptcy protection in August. Once the nation's 10th largest mortgage lender, the company said it fell victim to 'extraordinary disruptions' that effectively cut off the funding it needed to make new loans.
Falling home prices and a spike in payment defaults scared investors away from mortgage debt, including bonds and other securities backed by home loans.
Its 40 biggest creditors include virtually all the major names of Wall Street.
At the top of the list are Deutsche Bank and JPMorgan Chase.