Creditors unhappy with Hometown Lenders' liquidation plan

Hometown Lenders' bankruptcy proceedings have hit a snag in recent weeks, as many creditors have disagreed with a proposal for how the company will be unwound.

This came after the now-defunct Hometown Lenders, which, after struggling with rising interest rates, filed for Chapter 11 bankruptcy and submitted an amended liquidation plan on Nov. 11, detailing how its assets would be distributed.

The 27-page proposal includes details such as plans to pay more than $200,000 to Flagstar Bank to settle a previous contract breach lawsuit. In exchange, the bank will return 49 of the lender's loans, held as collateral, to the lender. Proceeds from the sale of these loans will be used to pay off outstanding debts.

Additionally, the liquidation plan notes that Hometown's "management" will be in charge of making sure the plan is implemented. 

Parties affected by the proceedings, including the Department of Housing and Urban Development, Anthony Perri Sr. and Jr., Bank of Frankenwig, the Internal Revenue Service (IRS), and Nevada's Department of Taxation, filed objections to the liquidation plan in mid-December.

In its objection filing, HUD noted that neither it nor the Federal Housing Administration were listed as creditors, even though its data shows Hometown holds at least six FHA loans, for which it should be paying mortgage insurance premiums. Numerous legal filings from 2023 claimed that instead of paying MIP on FHA loans to HUD, Hometown was allegedly pocketing those sums.

Meanwhile, the IRS wrote in its objection that the liquidation plan inadequately addresses a substantial tax debt of over $12 million, failing to provide for the payments of both secured and unsecured priority text debts. The agency's objection further argues that the plan doesn't comply with several sections of the U.S. Bankruptcy Code.

The Perri's, who ran the top-performing Hometown branch and sued Hometown for nonpayment, wrote in their objection that the plan is not in the best interest of creditors because it allows the existing management (Billy Taylor) to oversee the liquidation, which is a conflict of interest. The father and son duo are creditors with priority claims in the bankruptcy.

Hometown anticipates its liquidation fund will reach approximately $23 million, which will be divided up to stakeholders impacted by the company's nonpayments and breaches of contract. However, this amount is dependent upon the success of Hometown's efforts in settling with Flagstar and litigation efforts involving an insurance company, it wrote.

The defunct lender has left a trail of companies and former employees that it has outstanding debts to.A recent article notes that in Oklahoma, Hometown Lenders ranks second in owing payments to employees. Nine former Hometown employees residing in Oklahoma are owed over $500,000 in unpaid wages, The Frontier, an Oklahoma non-profit publication wrote.

Shelby Weston, former branch manager at Hometown, is quoted in the article saying he and other workers in his Oklahoma-based branch stopped being paid by the company and had some customer mortgage applications almost fall through the cracks."It was a bad situation," Weston said in his interview with the Oklahoma-based publication. "'Hey, you're not getting paid. See you later.' 

According to Weston, the mortgage applications were ultimately rerouted to other lenders. He also said in the interview that many former employees have "not been made whole" and that Hometown's bankruptcy case has stalled the process.

"They owed us a lot of money, still owe us a lot of money. They owe so many people, they let it get way too bad, " Weston said. 

It is uncertain whether those owed unpaid wages will somehow be compensated through Hometown's final liquidation plan. Billy Taylor, the CEO of Hometown, could not be reached. Attorneys representing Hometown did not respond to a request for comment.