With a Delaware bankruptcy court's approval of $13 million in financing in hand, officials at Reverse Mortgage Funding LLC are now focused on making sure payments to borrowers that were halted by the company’s Chapter 11 filing last week are resumed.
“Today the focus is making sure that payments that were trapped get out in the next 24 hours,” a company spokesperson said Tuesday.
The court order, signed by Bankruptcy Court Judge Mary F. Walrath, also allows the company to: continue making payments to its employees; cover out-of-pocket expenses; honor servicing obligations; honor and pay curtailment obligations; collect and securitize servicing fees; and remit servicing advancements.
The $13 million debtor-in-possession financing from BNGL Holdings LLC includes $10 million in loans to be funded within one business day of the order and $3 million in loans to funded no earlier than Dec. 12. unless otherwise agreed to by the lender.
Debtor-in-possession financing is a short-term loan used by a business to bridge the gap between when it receives payment from its customers and when it needs to pay creditors.
The next step, the spokesperson said, will be making sure that customers can get access to their funds and finalizing a plan to permanently transfer them to Mahwah, N.J.-based Longbridge Financial LLC.
Longbridge Financial is ranked fourth in reverse mortgage sales volume by Reverse Mortgage Insight. The company was also acquired in October by Ellington Financial. according to its website.
Longbridge CEO Chris Mayer said at the time: "This purchase by Ellington allows Longbridge to continue to grow and secure its position as the leading reverse mortgage company."
The next hearing in the case is scheduled for Jan. 5, but the RMF spokesperson said an agreement could be finalized before that date.
The spokesperson also said RMF customers could take “additional comfort” in knowing that the FHA loans involved are 100% guaranteed by the federal government.
The Bloomfield, N.J.-based reverse mortgage lender filed a petition on Nov. 30th for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the District of Delaware. Under Chapter 11, a business may continue to operate under court supervision while it reorganizes its finances.
The filing came one day after the company laid off about 80% of its staff — about 400 people.
RMF is a wholly owned subsidiary of Reverse Mortgage Investment Trust Inc. (RMIT), a specialty finance company in the reverse mortgage sector. RMIT is an affiliate of Starwood Capital Group, a global private investment firm and an innovator in non-agency mortgages. According to the filing, Starwood affiliates own 94.3% of the shares in RMIT; the filing does not identify who owns the other 5.7%.
In its court filing, the company told the court the estimated number of its creditors totals between 1,000 and 5,000. It also checked boxes indicating that both its estimated assets and its estimated liabilities are between $10 billion and $50 billion.
Editor David Krechevsky contributed to this report.
