Residential Capital LLC (ResCap), the bankrupt mortgage firm indirectly owned by the US government, has won court approval to stop financing US$1.7 billion (S$2.15 billion) in loans to conserve cash.
“I consider this to be a fairly important matter,” said US Bankruptcy Judge James Peck, who approved the company’s request to inform customers that it will no longer finance their mortgages.
He ordered ResCap to provide its customers with information on their legal rights with regards to the loan contracts.
The decision also means that ResCap will no longer support customers who have approved home-equity loans, as financing such loans would “create liquidity concerns for the estates”.
However, it will continue to service mortgages that have already been funded and keep making and financing mortgages to consumers purchasing homes.
ResCap filed for bankruptcy on 14 May 2012 with plans to sell most of its assets to Fortress Investment Group. In its petition to the US Bankruptcy Court in Manhattan, the firm listed assets of US$15.7 billion (S$19.85 billion) and US$15.3 billion (S$19.34 billion) in debt.
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