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In Re Sohmer - Motion to Approve Settlement Agrement

In Re Sohmer - Motion to Approve Settlement Agrement

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MASSACHUSETTS EASTERN DIVISION

Debtor

) )

) Chapter 7

) Case No. 06-14073-JNF )

)

)

In re:

ALEC G. SOHMER

MOTION BY TRUSTEE TO APPROVE SETTLEMENT AGREEMENT

Harold B. Murphy, the duly appointed trustee (the "Trustee") in the case of Alec G.

Sohmer (the "Debtor"), respectfully moves that this Honorable Court approve the Settlement

Agreement appended hereto pursuant to the provisions of Federal Rule of Bankruptcy Procedure

9019.

INTRODUCTION

In the two years preceding the filing of this bankruptcy case, the Debtor, his spouse

Jennifer Sohmer, and the Debtor's brother Bradley Sohmer (the "Sohmers") engaged in a series

of transactions with individual Homeowners whose mortgage indebtedness had fallen in arrears,

whereby the Homeowners transferred their residences (the "Subject Property" or "Subject

Properties") to the Sohmers, subject to certain repurchase rights (hereinafter, the "Foreclosure

Avoidance Transactions"). The Sohmers secured financing for the Foreclosure Avoidance

Transactions from a series of financial institutions (those financial institutions who either

originated loans to the Sohmers, are the current holders of such loans, or subsequently provided

refinancing are referred to collectively as the "Lenders").

During the course of the bankruptcy case, five (5) of the Lenders filed motions for relief

from the automatic stay to commence foreclosure proceedings against the Subject Properties.

The Trustee, the Commonwealth of Massachusetts, Office of the Attorney General ("Attorney

General"), and the Homeowners filed oppositions to the motions. Additionally, and as set forth

more fully herein, the Trustee and the Attorney General asserted claims against the Lenders

arising from their participation in the Foreclosure Avoidance Transactions.

Over the past several months, the Trustee, the Attorney General, and the Lenders have

been engaged in intensive negotiations respecting a resolution of potential claims against the

Lenders and other matters pertaining to the Foreclosure Avoidance Transactions. As a result of

such negotiations, the parties have entered into the Settlement Agreement, a copy of which is

attached hereto. An overview of the settlement provisions is set forth below.

SETTLEMENT OVERVIEW!

I. Parties to the Settlement:

The parties to the Settlement Agreement are:

(i) the Trustee;

(ii) the Attorney General;

(iii) those Lenders who elect to participate in the settlement by executing the Settlement Agreement (the "Setting Lenders"); and

(iv) those Homeowners who do not elect to opt out of the settlement (the "Participating Homeowners").

II. Resolution of claims of Settling Lenders:

(i) Reduction of Settling Lenders' claims: Settling Lenders who continue to hold mortgages on the Subject Properties (as identified on Exhibit A to the Settlement Agreement) shall reduce the amount of their claims to the Settlement Amount set forth on Exhibit A to the Settlement Agreement, which generally represents the amount of mortgage indebtedness existing immediately prior to the execution of the Foreclosure Avoidance Transaction, as well as any other loan proceeds

I The following represents a briefsurnmary of the principal terms of the Settlement Agreement. To the extent of any inconsistencies between the Settlement Agreement and the provisions of this motion, the terms of the Settlement Agreement shall govern. Parties are encouraged to retain independent legal advice respecting their rights and obligations under the Settlement Agreement.

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generated from the Foreclosure Avoidance Transaction for which the Participating Homeowner derived a direct benefit.2 Participating Homeowners shall have 90 days (such 90 day period, as it may be extended by agreement ofthe parties, is referred to as the "Payment Period") after Court approval of the Settlement Agreement (the "Order Date") in which to pay the Settlement Amount, plus any regular monthly loan payment amounts (the "Interim Payments") accruing during such 90-day period, pursuant to a sale or refinancing;

(ii) Payments to Participating Homeowners: Settling Lenders who previously held a mortgage secured by a Subject Property (as identified on Exhibit B to the Settlement Agreement) which has since been satisfied shall pay to the Participating Homeowner the amount set forth on said Exhibit B, which generally represents the difference between the amount paid to the Settling Lender in satisfaction of its loan and the Settlement Amount which the Settling Lender would have otherwise received under the settlement if such Settling Lender's loan had not been previously paid.

III. Procedures for Participating in Settlement:

(i) Settling Lenders: Lenders may become Settling Lenders by executing the Settlement Agreement at least ten (10) days prior to the hearing on the motion to approve the Settlement Agreement;

(ii) Participating Homeowners: Homeowners shall become Participating Homeowners unless a Homeowner opts out of the settlement by written notice delivered to the Trustee no later than 45 days after the Order Date.3

IV. Releases of Claims:

Effective as of the Order Date, the following releases, excluding those obligations arising under the Settlement Agreement, shall be deemed to have been provided:

(i) Release of Settling Lender: The Trustee, the Attorney General, and Participating Homeowners shall release all claims against the Settling Lenders arising out of the Foreclosure Avoidance Transactions;

(ii) Release of the Trustee: The Settling Lenders shall release the Trustee of all claims arising out of the Foreclosure Avoidance Transactions, except for the right to assert a subordinated, unsecured claim for that portion of a claim which is not

2 Items within the Settlement Amount include, other among things, amounts necessary to pay outstanding verified real estate taxes or to pay other creditors of the Participating Homeowner.

3 Homeowners who are debtors in bankruptcy must, in order to become Participating Homeowners, obtain Bankruptcy Court approval of the Settlement Agreement in their individual bankruptcy case within 45 days after the Order Date.

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satisfied pursuant to the terms of the settlement. The Participating Homeowner shall release the Trustee and the bankruptcy estate of all claims;

(iii) Release of the Participating Homeowner: The Trustee and the Settling Lenders shall release the Participating Homeowners of all claims;

(iv) Release of the Attorney General: The Settling Lenders shall release the Attorney General of all claims arising out of the Foreclosure Avoidance Transactions.

V. Default Provisions:

(i) Sale Provisions: If a Participating Homeowner fails to pay the Settlement Amount on or before the expiration of the Payment Period (the "Payment Date"), the Trustee shall be authorized to sell the Subject Property by public auction;

(ii) Distribution of Sale Proceeds: In the event of a Trustee sale of a Subj ect Property, the net proceeds shall be distributed as follows: first, to pay the fees and expenses incurred by the Trustee and his professionals in connection with the sale; second, to the Settling Lender in an amount equal to the Settlement Amount plus any regular monthly payments accrued and unpaid since the Order Date; and third the balance to the Participating Homeowner;

(iii) Alternative disposition of Subject Property: If a Participating Homeowner defaults under their payment obligations under the settlement and the Subject Property is deemed to have no equity, the Trustee shall, at the option of the Settling Lender, either sell the property, transfer the Subject Property to the Settling Lender by deed in lieu of foreclosure, or consent to relief from the automatic stay.

VI. IOLTA Account:

(i) Participating Homeowner: Participating Homeowners shall assign to their corresponding Settling Lender any claims to funds previously held in the Debtor's IOLTA Account", generally representing 'surplus' proceeds generated from the Foreclosure Avoidance Transactions (the "IOLTA Funds"), subject to the rights, claims, and defenses of the Trusteer'

(ii) Nonparticipating Homeowners: Nonparticipating Homeowners shall retain any claims or interest in the IOLTA Funds, subject to the rights, claims, and defenses of the Trustee.

4 The assignment will be made because any rights that the Participating Homeowner may have in such IOLTA Account funds were considered in determining the Settlement Amount.

S In the event that the Ban1cruptcy Court determines that a Settling Lender, as assignee of a Participating Homeowner, or a Nonparticipating Homeowner maintains an interest in the IOLTA Funds, such funds shall be paid to the Settling Lenders or Nonparticipating Homeowners, net of any Court approved costs incurred by the Trustee and his professionals in connection with the analysis, investigation, or distribution of such IOLTA Funds.

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The Trustee has considered various factors in evaluating the reasonableness of the

compromise including, but not limited to, the probability of success in litigation, the complexity

of the litigation, the costs, expenses, and delays of continued litigation, and the benefits which

the compromise will afford Participating Homeowners and other creditors. The Trustee has

determined, in his business judgment, that the benefits of the settlement outweigh the benefits

Factual Background

that might be achieved from continued litigation.

In further support of this motion, the Trustee states as follows:

1. Commencing in early 2005 and continuing for almost two years, the Debtor

engaged in approximately twenty-five (25) Foreclosure Avoidance Transactions with individual

Homeowners.

2. Based upon the Trustee's examination which included depositions, a review of

the documentation utilized in the Foreclosure Avoidance Transactions, and discussions with the

Attorney General, the Trustee determined that the transactions were structured, summarily, as

follows:

(i) the Homeowners typically entered into a purchase and sale agreement, purportedly for the fair market value ofthe property, whereby the Homeowner conveyed their residence to one ofthe Sohmers;

(ii) the Sohmers obtained financing from one of approximately ten (10) Lenders participating in the Foreclosure Avoidance Transactions;

(iii) the Sohmers typically borrowed the maximum amount available based upon the "purchase price" ostensibly agreed to be paid for the property;

(iv) the "sale" was purportedly for the fair market value of the property. The HUD settlement statements frequently provided for substantial downpayments to be made by the Sohmers and for substantial cash to be paid to the Homeowner.

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Typically, however, the only funds contributed to the transaction were the proceeds of the new financing. These proceeds were used to satisfy the existing mortgage indebtedness, fees to the Debtor and Timeless Funding, closing costs, and other claims. In some instances, residual funds were deposited into the Debtor's IOLTA Account as a reserve purportedly to subsidize future monthly mortgage payments;

(v) immediately following the closing, the Sohmers conveyed the property to a trust (the "Sohmer Trust(s)"). One or more ofthe Sohmers served as trustee of each Sohmer Trust. In most instances, the Homeowner held an eighty-five percent (85%) beneficial interest in the Sohmer Trust; the balance of the beneficial interest was held by Timeless;

(vi) Homeowners would be able to reacquire their residence pursuant to the provisions of an Interim Ownership Agreement ("Interim Agreement") executed by and between the Homeowner and the Debtor or his designee. The Interim Agreement provided in substance for the following:

a. Homeowners were required to make monthly "rent" payments to the Sohmers in amounts approximating the new monthly mortgage obligation. To the extent the rent payment was somewhat less than the monthly mortgage obligation, the differential was to be satisfied through a drawdown of the IOLTA Funds;

b. the net cash proceeds ostensibly "paid" to the Homeowner was contributed by the Homeowner to the Debtor as purported consideration for the Homeowner's eighty-five percent (85%) beneficial interest in the Sohmer Trust;

c. Homeowners were responsible for all costs attendant to ownership of the real property, including but not limited to payment of real estate taxes, water and sewer charges, and repairs and improvements;

d. the Homeowner was required to pay to the Debtor or Timeless the sum of $15,000 at closing "as an incentive" for the Debtor to acquire and hold the property for the three-year period;

e. in the event the Homeowner defaulted on the monthly "rent" payments or failed to satisfy the new mortgage indebtedness within three years, the Debtor could evict the Homeowner and sell the property. In such event, the Debtor was entitled to reimbursement of all fees and costs of sale, as well as fifteen percent (15%) of any residual sale proceeds, with any balance paid to the Homeowner;

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(vii) The Homeowners were also provided a "Disclosure Document". The documents drafted and utilized in the Foreclosure Avoidance Transactions were generally consistent.

3. In 2006, the Foreclosure Avoidance Transactions began to unravel. Several of the

Homeowners were unable to remain current on their "rent" obligations. The Sohmers lacked the

wherewithal to satisfy the monthly mortgage obligations in the absence of payment by the

Homeowners. Following nonpayment of the rent, the Debtor's attempts to evict Homeowners

4. As a result of three Homeowner complaints, on or about August 30, 2006, the

were vigorously contested and largely unsuccessful.

Attorney General commenced an action (the "Superior Court Action") in the Superior Court for

the Commonwealth of Massachusetts, case no. 06-3664A, against Timeless, the Debtor and

Jennifer Sohmer, individually and as trustees ofthe 57 Stage Coach Road Nominee Trust, the 19

Shangri-La Boulevard Nominee Trust, and the 41 Weston Street Nominee Trust. The Attorney

General alleged therein that the defendants had engaged in numerous misrepresentations in the

solicitation and implementation of the Foreclosure Avoidance Transactions. On August 30, 2006,

the Superior Court issued a temporary restraining order prohibiting the Debtor from evicting any

Homeowners or mortgaging or encumbering any of the Debtor's real or personal property.

5. The Attorney General moved for the appointment of a receiver (the "Receiver

Motion") for the Debtor's financial affairs based upon the allegations set forth in the Superior

Court Action. A hearing on the Receiver Motion was scheduled to be heard on November 6,

2006. The Chapter 11 petition was filed on November 6, 2006, hours before the scheduled

hearing. The Superior Court Action was subsequently removed by the Attorney General to this

Court, and remains pending as adversary proceeding number 06-1433.

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6. Because of the improprieties associated with the Foreclosure Avoidance

Transactions, motions for the appointment of a Chapter 11 trustee (the "Trustee Motions") were filed by the Attorney General, the Office of the United States Trustee, and Ronald McCallum, a Homeowner.

7. This Court held a hearing on November 15,2006 on the Trustee Motions. After

oral argument, the Court appointed Harold B. Murphy as the Chapter 11 Trustee.

8. On or about November 16, 2007, the Debtor filed a motion to convert the case to

Chapter 7, which was granted after a hearing held on November 20,2007.

9. Since the conversion of the case, the following five (5) Lenders who participated in

the Foreclosure Avoidance Transactions filed motions for relief from the automatic stay (the "Motions for Relief') for alleged nonpayment of mortgage obligations:

(i) Mortgage Electronic Registration Systems, as nominee for American Brokers

Conduit, filed on December 4, 2006 with respect to real property located at 57 Stage Coach Road, Barnstable, Massachusetts and formerly owned by the Goffs;

(ii) Wells Fargo Bank, N.A., filed on December 7,2006 with respect to real property

located at 73 Adams Avenue, Pembroke, Massachusetts and formerly owned by William Marsh;

(iii) First Horizon Home Loan Corporation, filed on December 20, 2006 with respect

to real property located at 49 Courtland Street, Middleboro, Massachusetts and formerly owned by Jeffrey Imbrogna;

(iv) Option One Mortgage Corporation, filed on December 20, 2006 with respect to

real property located at 28 Vineyard Avenue, Oak Bluffs, Massachusetts and formerly owned by Guy Guiffre;

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(v) Select Portfolio Servicing, filed on January 31,2007 with respect to the real

property located at 1 Diamond Street, Plymouth, Massachusetts and formerly owned by John and

Barbara Bryson.

10. The Trustee has filed oppositions to each of the Motions for Relief, eachjoined

by the Attorney General, and has requested that the relief be denied.

11. The Trustee and the Attorney General have conducted discovery pursuant to the

removed Superior Court Action and the contested Motions for Relief Discovery has included

requests for production of documents and multiple depositions. The Trustee and Attorney

General have deposed, among others, the Debtor, Attorney Andrew Palmer (closing counsel who

represented the Lenders in most ifnot all of the Foreclosure Avoidance Transaction closings);

Edward De la Flor (the mortgage broker who participated in a substantial number of the

Foreclosure Avoidance Transactions), and Attorney Shaun Ellis (bankruptcy counsel who

referred some of the Homeowners to the Debtor's foreclosure rescue program). The Attorney

General also conducted formal and informal interviews of many of the Homeowners.

Potential Claims Against Lenders

12. As a result of the discovery conducted, the Trustee and the Attorney General

determined that claims may exist against the Lenders in connection with their participation in the

Foreclosure Avoidance Transactions. A summary of the potential claims is set forth below:

(i) Vicarious liability for actions of agents: The Lenders may have vicarious liability on account of the actions taken by their agents, Andrew Palmer, Edward de la Flor, and Shaun Ellis, in implementing the Foreclosure Avoidance Transactions;

(ii) Violations of state consumer protection laws: The Lenders may be liable for violation of state statutes prohibiting the unfair or deceptive conduct of their agents in connection with the Foreclosure Avoidance Transactions;"

6 The Consumer Protection Act (M.G.L. ch. 93A, §§2, 4, and 9) prohibits unfair or deceptive acts or practices in trade or commerce. Pursuant to 940 CMR. §3.16(3), (4), an act or practice violates M.G.L. ch. 93A, §2 ifit: (i) fails to comply with existing Massachusetts statutes, rules, regulations, or laws meant for the protection of the public's

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(iii) Violation of federal and state truth in lending laws: The Lenders may be liable for failure to make adequate disclosure to the Homeowners, as the de facto borrowers, of all ofthe terms ofthe Foreclosure Avoidance Transactions;"

(iv) Violations of the Federal Real Estate Closing Practices Law (RESP A): The Lenders may be liable for failure to provide advance disclosure of a good faith estimate of settlement charges, and failure to accurately disclose costs and charges on the HUD-1 settlement form.''

(v) Violations of Federal and State High-Cost Mortgage Loan Statute: The Lenders may have violated federal and state laws prohibiting lenders from making highcost loans without regard to the borrower's ability to pay that contain balloon payments or that have inadequate disclosures.''

(vi) Violations of Usury laws: Lenders may be liable for claims of usury or charging excessive interest and fees, after factoring in all costs, fees, and interest charges associated with the Foreclosure Avoidance Transactions. 10

13. After extensive negotiations, the Trustee, the Attorney General, and the Settling

Lenders reached a consensual resolution embodied in the Settlement Agreement which is

attached hereto and a summary of which is set forth in the Introduction to this motion.

Basis For Approval of the Settlement

14. Bankruptcy Rule 9019(a) provides, in relevant part, that "On the motion by the

trustee and after notice and a hearing, the court may approve a compromise or settlement."

Settlements and compromises are normal parts of the process of reorganization. While the

decision to approve a particular settlement lies within the sound discretion of the Bankruptcy

Court, the Court should give some deference to the business judgment of the estate

health, safety or welfare; or (ii) violates the Federal Consumer Credit Protection Act or other federal consumer protection statutes within the purview ofM.G.L. ch. 93A.

7 Pursuant to 15 U.S.C. §1638, and M.G.L. ch. 140D, §12, Lenders may have been required to disclose to Homeowners: (i) the amount fmanced, all finance charges, total payments, and late payment charges; and (ii) the three day right of rescission. 7 Additionally, Regulation Z prohibits a pattern or practice of making loans which a borrower is unable to repay.

8 See HUD Regulation X and RESPA, §4(b).

9 See 15 U.S.C. §1639; M.G.L. ch. 183, §28C, and ch. 183C. 10 See M.G.L. ch. 271, §49(a).

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representative. Jeffrey v. Desmond, 70 F.3d 183 (1 st Cir. 1995).

15. The Court of Appeals has described the test to be used by Bankruptcy Courts

called upon to approve or reject proposed compromises and settlements as follows:

A bankruptcy judge has the authority to approve a compromise of a claim pursuant to Bankruptcy Rule 9019(a). The ultimate issue on appeal is whether the bankruptcy court abused its discretion when it approved the compromise, which is a process requiring the bankruptcy court to "assess and balance the value of the claim that is being compromised against the value to the estate of the acceptance of the compromise proposal." In re GHR Cos., 50 B.R 925, 931 (Bankr. D. Mass. 1985) (quoting In re Boston & Providence RR, 673 F.2d. 11, 12 (1 st Cir. 1982». The specific factors which a bankruptcy court considers when making this determination include: (i) the probability of success in the litigation being compromised; (ii) the difficulties, if any, to be encountered in the matter of collection; (iii) the complexity of the litigation involved, and the expense, inconvenience and delay attending it; and (iv) the paramount interest ofthe creditors and a proper deference to their reasonable views in the premise. In re Anolik, 107 B.R 427, 429 (D. Mass. 1989).

Jeffreyv.Desmond, 70F.3d 183, 185 (lstCir.1995).

16. The proposed settlement among the Trustee, the Attorney General, the Settling

Lenders, and the Participating Homeowners fairly balances "the value ofthe claims being

compromised against the value to the estates ofthe acceptance of the compromise proposal." It

is well within the bounds of this Court's discretion to approve the proposed settlement. Jeffrey

v. Desmond, 70 F.3d at 185.

Assessment of the Potential Recoveries and Likelihood of Success

17. Although there may exist several potential grounds for the assertion of claims

against the Lenders arising out of their participation in the Foreclosure Avoidance Transactions,

the potential outcome of such litigation is uncertain.

18. Many of the claims potentially available against the Lenders may require

Homeowners to establish a borrower-lender relationship with the Lenders, even though the

Lenders typically loaned funds directly to the Sohrners. In order for Homeowners to

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demonstrate the necessary lending relationship with the Lenders, Homeowners would likely need to rely upon the doctrine of 'equitable mortgage'. Under the equitable mortgage doctrine, courts can look to the intention ofthe parties and the overall transaction to determine the parties' respective rights and responsibilities. Vietro v. Vietro, 2005 WL 387984, at *4 (Super. Ct. 2005)( determining whether an apparent conveyance should be viewed as an equitable mortgage, court considers whether conveyance made as security and intention of parties); Levenson v. Feuer, 60 Mass. App. Ct. 428,437 (2004)(when homeowners lacked intent to sell home and deeded home to secure a debt, court may treat deed as equitable mortgage). Homeowners would likely assert that the Foreclosure Avoidance Transactions were in essence no more than

disguised financing transactions, and that the Lenders were effectively entering into a loan transaction with the Homeowners. The outcome of this litigation is uncertain and could materially impact available claims and remedies against the Lenders.

19. Additionally, although the Homeowners and the Attorney General, on behalf of

the Homeowners, may be able to assert claims against the Lenders, the Trustee's right to assert direct claims against the Lenders is potentially subject to the defense of the in pari delecto doctrine. Simply put, because the Trustee stands in the shoes of the Debtor, the Trustee's ability to assert claims arising from the Foreclosure Avoidance Transactions may be limited by defenses that are otherwise available against the Debtor. See Nisselson v. Lernout, 469 F.3d 143 (1 st Cir. 2006)(trustee oflitigation trust subject to in pari delicto defense).

20. In addition to concerns respecting the legal hurdles to a successful prosecution of

claims against the Lenders, the quantification of damages is also uncertain. With respect to many of the claims against the Lenders, the potential recovery may be limited to restitution, namely, restoring the Homeowners to the extent possible to the position that was occupied

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immediately prior to the execution of the Foreclosure Avoidance Transactions. The settlement provides for restitution, in that amounts to be recovered by Settling Lenders will be limited to those amounts advanced to pay existing mortgage debt, real estate taxes, and other related claims. Participating Homeowners will not be required under the Settlement to repay Settling Lenders for loan amounts advanced to pay fees to the Debtor, Attorney Palmer, or other similar expenses for which no direct benefit was derived. Continued litigation might not generate a meaningfully greater recovery for Homeowners.

Assessment of the Complexity of Litigation and the Expense, Inconvenience and Delay Necessarily Attending It

21. Any litigation with the Settling Lenders would be fairly complex and expensive to

resolve. A trial, whether handled on a consolidated basis or individually by Homeowner, would entail testimony from multiple Homeowners, employees of the Settling Lenders and third party agents such as Messrs. Palmer and De la Flor. The Court would be asked to adjudicate a myriad of potential legal claims against the Settling Lenders, as set forth above. The costs of such litigation would likely be considerable to all parties. Additionally, because of the number of witnesses and parties, pretrial discovery and a trial would likely consume several months or longer.

Assessment of the Benefit to Homeowners and Creditors

22. The benefits of the settlement to Homeowners are immediate and substantial. In

the event all Lenders elect to participate in the settlement as Settling Lenders, the aggregate voluntary reduction in the secured claims asserted by the Settling Lenders will exceed $1,000,000. Participating Homeowners will effectively be restored to the position that they occupied immediately prior to entering into the Foreclosure Avoidance Transactions with the

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Debtor. Participating Homeowners who no longer have an interest in their residence will have an opportunity to receive a cash payment from their corresponding Settling Lender. Those Participating Homeowners who continue to reside in the Subject Properties will have the opportunity to retain their residence by refinancing the Settling Lender claims at a discount or, at their election, may pursue a sale of the Subject Properties. Participating Homeowners also will benefit from the agreement by Settling Lenders to forgo regular monthly mortgage payments from the inception of the bankruptcy case until the Order Date, a period of approximately eleven months.

23. In the absence of the Settlement, the Participating Homeowners, potentially joined

by the Attorney General and/or the Trustee, would be required to engage in protracted litigation with the Settling Lenders. As a result, Homeowners would be required to potential wait years in order to achieve a resolution to the Settling Lenders' claims and issues surrounding ownership of their homes. Additionally, Homeowners would be required to incur substantial professional fees in conjunction with any litigation.

Conclusion

24. Since the commencement of the Superior Court Action in August 2006 and the

subsequent bankruptcy filing, Lenders and Homeowners have been faced with considerable uncertainties as to ownership rights in the Subject Properties, the validity, priority and extent of the mortgages secured by the Subject Properties, and the continuing obligations of Homeowners under the Foreclosure Avoidance Transactions. The settlement provides a comprehensive resolution of all claims between the Settling Lenders and Participating Homeowners. Approval of the settlement is in the best interests ofthe parties and should be approved by this Court.

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WHEREFORE, the Trustee respectfully requests that the Court enter an order:

(i) Scheduling a hearing on the Trustee's motion to approve the Settlement Agreement;

(ii) After a hearing, approving the Settlement Agreement and authorizing the Trustee to take those actions required to implement its provisions;

(iii) Approving the form of Notice to Homeowners in accordance with Exhibit C to the Settlement Agreement; and

HAROLD B. MURPHY, CHAPTER 7 TRUSTEE, By his counsel,

(iv) Granting such other relief as is just and proper.

/s/ Andrew G. Lizotte

Harold B. Murphy (BBO# 362610) Andrew G. Lizotte (BBO# 559609) HANIFY & KING,

Professional Corporation

One Beacon Street

Boston, MA 02108

(617) 423-0400

September 12, 2007 478249

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