Franklin Credit Holding Corp. (FCMC) filed for bankruptcy with plans to sell its only asset, an 80 percent stake in a mortgage-servicing unit, to help pay creditors owed $827.3 million.
Franklin listed $1.2 million in assets in a Chapter 11 filing yesterday in Newark, New Jersey. Creditors including Huntington National Bank agreed to support a plan to sell operating unit Franklin Credit Management Corp., which isn’t in bankruptcy, Franklin said in a U.S. Securities and Exchange Commission filing.
The sale may allow “Franklin Holdings stockholders to potentially retain some value,” according to the regulatory filing. The company could exit bankruptcy by August if creditors and the court approve the plan, Franklin said.
Mortgage-servicing companies, which collect payments from borrowers and oversee foreclosures, have struggled after a drop in housing prices led more homeowners to default. Residential Capital LLC, the mortgage lender and servicer owned by Ally Financial Inc. (ALLY), last month filed the year’s biggest bankruptcy.
The case is In re: Franklin Credit Holding Corporation 12-24411, U.S. Bankruptcy Court District of New Jersey (Newark).
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