The Wall Street Journal-20080116-American Home Unveils Fresh Woes on Expenses
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American Home Unveils Fresh Woes on Expenses
American Home Mortgage Investment Corp. accidentally paid about $190,000 in travel and expense reimbursements to 236 employees it dismissed last year but says it would be too costly to try to get the money back.
The mortgage lender, which recently sought court permission to destroy 490,000 loan files, arguing it couldn't afford the $45,000-a- month cost of maintaining them, Friday asked a judge to let its former employees keep their reimbursements.
"When coupled with the time the debtors and their professionals would expend initiating and litigating each action, recoupment of the [travel and entertainment]] expenses is cost-prohibitive," the company said in papers filed with the U.S. Bankruptcy Court in Wilmington, Del.
U.S. Bankruptcy Judge Christopher Sontchi will consider the request at a Feb. 1 court hearing.
American Home, once one of the country's biggest mortgage lenders, collapsed into bankruptcy-court proceedings in August after its own financiers cut off the supply of funds to the company. It immediately shut down its loan-origination business, laid off more than 6,500 employees and began selling its assets.
The company said it was authorized by the bankruptcy court to make travel and expense reimbursements to current employees. But it said it recently discovered that some of those reimbursements also accidentally went to 236 employees who were terminated.
The individual reimbursement amounts were small -- all but one of the 236 terminated employees received payments of less than $5,000, the company said. Under the circumstances, "it may actually cost more to recoup the payment than the actual payment itself."
American Home, based in Melville, N.Y., has sought to cut some of its costs as it prepares to go out of business. Last month it sought permission to destroy what it called duplicate loan files because the $45,000-a-month storage cost was an "unnecessary burden" on the company. It said it would cost $500,000 to destroy the documents.
The U.S. trustee monitoring the case opposed that move, saying homeowners may need the documents for potential lawsuits against the company. "These homeowners may need access to the original copy of the loan file to prove their claim," said the trustee, Kelly Beaudin Stapleton.
