IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

Transcription

1 PLEASE CAREFULLY REVIEW THIS OBJECTION AND THE ATTACHMENTS HERETO TO DETERMINE WHETHER THIS OBJECTION AFFECTS YOUR CLAIMS. SUBSTANTIVE RIGHTS MAY BE AFFECTED BY THIS OBJECTION. IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x : In re : Chapter 11 : ADVANTA CORP., et al., : Case No (KJC) : Debtors. 1 : (Jointly Administered) : Hearing Date: December 20, 2012 at 4:00 p.m. (ET) x Response Deadline: December 13, 2012 at 4:00 p.m. (ET) TRUSTEE S EIGHTH OMNIBUS (SUBSTANTIVE) OBJECTION TO AND MOTION FOR ESTIMATION OF CERTAIN MORTGAGE INSURANCE CLAIMS AGAINST ADVANTA CORP. AND ADVANTA MORTGAGE CORP. USA FTI Consulting, Inc., solely in its capacity as the Trustee 2 of the AMCUSA Trust and the AC Liquidating Trust (the Trustee ), by and through its attorneys, Latham & Watkins LLP and Drinker Biddle & Reath LLP, in the above-referenced chapter 11 cases of Advanta Corp. and its affiliated debtors and debtors-in-possession (collectively, the Debtors ), hereby files this (i) eighth substantive omnibus objection to certain claims listed on Schedule 1 to the Proposed Order (collectively, the MOLI Claims ) asserted against the estates of the former Debtors Advanta Corp. ( Advanta ) and Advanta Mortgage Corp. USA ( AMCUSA ) and (ii) motion 1 The Debtors in these jointly administered chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, were Advanta Corp. (2070); Advanta Investment Corp. (5627); Advanta Business Services Holding Corp. (4047); Advanta Business Services Corp. (3786); Advanta Shared Services Corp. (7074); Advanta Service Corp. (5625); Advanta Advertising Inc. (0186); Advantennis Corp. (2355); Advanta Mortgage Holding Company (5221); Advanta Auto Finance Corporation (6077); Advanta Mortgage Corp. USA (2654); Advanta Finance Corp. (8991); Advanta Ventures Inc. (5127); BE Corp. (8960); ideablob Corp. (0726); Advanta Credit Card Receivables Corp. (7955); Great Expectations International Inc. (0440); Great Expectations Franchise Corp. (3326); and Great Expectations Management Corp. (3328). 2 Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Plan (as defined below). WM01 /

2 for an order estimating such MOLI Claims at $0.00 (together, the Omnibus Objection ) and requests the entry of an order substantially in the form attached hereto as Exhibit A (the Proposed Order ). In support of this Omnibus Objection, the Trustee respectfully represents as follows: JURISDICTION AND VENUE 1. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper before this Court pursuant to 28 U.S.C and BACKGROUND A. The Chapter 11 Cases 2. On November 8, 2009, the majority of the Debtors 3 filed their petitions under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ). On November 20, 2009, the remaining Debtors 4 filed their chapter 11 cases. 3. On November 2, 2010, the Debtors filed (i) the Joint Plan Under Chapter 11 of the Bankruptcy Code (as modified on February 28, 2011, the Plan ) [Docket No. 1185] and (ii) the Disclosure Statement for Debtors Joint Plan Under Chapter 11 of the Bankruptcy Code (as modified on December 17, 2010, the Disclosure Statement ) [Docket No. 1038]. 4. On December 17, 2010, the Court entered the Order (I) Approving the Disclosure Statement, (II) Approving Notice and Objection Procedures for the Disclosure Statement 3 The Debtors that filed their petitions on November 8, 2009 are: Advanta Corp.; Advanta Investment Corp.; Advanta Business Services Holding Corp.; Advanta Business Services Corp.; Advanta Shared Services Corp.; Advanta Service Corp.; Advanta Advertising Inc.; Advantennis Corp.; Advanta Mortgage Holding Company; Advanta Auto Finance Corporation; Advanta Mortgage Corp. USA; Advanta Finance Corp.; Great Expectations International Inc.; Great Expectations Franchise Corp.; and Great Expectations Management Corp. 4 The Debtors that filed their petitions on November 20, 2009 are: Advanta Ventures Inc.; BE Corp.; ideablob Corp.; and Advanta Credit Card Receivables Corp. WM01/

3 Hearing, (III) Establishing Solicitation and Voting Procedures, (IV) Scheduling a Confirmation Hearing, and (V) Establishing Notice and Objection Procedures for Confirmation of the Proposed Plan [Docket No. 1042]. 5. On February 11, 2011, this Court entered the Order Confirming Debtors Joint Plan Under Chapter 11 of the Bankruptcy Code, As Modified ( Confirmation Order ) [Docket No. 1173]. The effective date of the Plan was February 28, 2011 (the Effective Date ). On March 1, 2011, a notice of the Effective Date was filed with the Bankruptcy Court [Docket No. 1191] and such notice was sent to the parties in interest. 6. Upon the Effective Date and pursuant to Section 5.4 of the Plan, both the AMCUSA Trust and the AC Liquidating Trust were established with the sole purpose of liquidating and distributing the assets of the AMCUSA Trust and the AC Liquidating Trust, respectively, in accordance with applicable law, with no objective to continue or engage in the conduct of a trade or business. See Plan, at 5.4(b). Moreover, pursuant to the Plan, on the Effective Date, the Debtors, including AMCUSA and Advanta, transferred the Liquidating Trust Assets to the relevant and applicable Liquidating Trusts, including the AMCUSA Trust and the AC Liquidating Trust, subject to all Allowed Claims payable pursuant to the Plan. 7. Section 5.4(g) of the Plan specifically provides that the Trustee, on behalf of both the AMCUSA Trust and the AC Liquidating Trust, may, in its reasonable business judgment, reconcile and object to Claims against the Debtors or the applicable Liquidating Trust, 5 and manage, control, prosecute and/or settle on behalf of the applicable Estate and/or Liquidating Trust[,] objections to Claims on account of which the [Trustee] (as Disbursing Agent) will be responsible (if Allowed) for making distributions under the Plan. Plan, at 5.4(g). 5 The Plan defines the term Liquidating Trusts to include the AMCUSA Trust and the AC Liquidating Trust. See Plan, at WM01/

4 B. The Bar Date Order, Amended Schedules and Certain Proofs of Claim 8. On April 7, 2010, the Court entered an order (the Bar Date Order ) [Docket No. 399] establishing, among other things, May 14, 2010 at 5:00 p.m. (Eastern Time) as the deadline to file proofs of claim against the Debtors (the General Bar Date ). 9. Pursuant to the Bar Date Order, The Garden City Group, Inc., the courtappointed claims and noticing agent in these cases, mailed notice of the Bar Date (the Bar Date Notice ) to approximately 19,500 parties in interest. In addition to mailing the Bar Date Notices, the Debtors gave notice to potential creditors by publishing the Bar Date Notice in both The Wall Street Journal and The Philadelphia Inquirer. The mailing and publishing of the Bar Date Notice in newspapers of general circulation provided potential creditors with adequate and sufficient notice of the Bar Date. 10. On December 17, 2010, the Debtors filed the Second Amended Schedules of Assets and Liabilities for AMCUSA [Docket No. 1047] (the Amended Schedules ). In the interest of full disclosure and out of an abundance of caution, the Debtors included on Schedule F of the Amended Schedules certain contingent, unliquidated and disputed claims that potentially existed in connection with a certain mortgage owners life insurance policy ( MOLI ) held by AMCUSA. 11. On December 20, 2010, Brook Lyn Bower of The Garden City Group, Inc., filed the Affidavit of Service [Docket No. 1070] reporting that, at the direction of certain counsel to the Debtors and on behalf of the Debtors, she caused a true and correct copy of the Amended Schedules to be served on the parties listed on Exhibit D to the Affidavit of Service. Upon information and belief, Exhibit D to the Affidavit of Service included each of the potential claimants of the MOLI Claims. WM01/

5 12. Pursuant to the Bar Date Order, the bar date for filing proofs of claim in connection with claims contained in an amendment to Schedule D, E or F for a particular Debtor is the later of (i) the General Bar Date or (ii) thirty days after the date of the amendment of the schedule. As such, pursuant to the Bar Date Order, the deadline to file proofs of claim against the Debtors in connection with the Amended Schedules, and therefore in connection with MOLI, occurred on January 17, 2011 at 5:00 p.m. (Eastern Time) (the MOLI Bar Date ). 13. As of the date hereof, a total of seven MOLI Claims 6 filed by certain claimants in connection with MOLI (each a Claimant and collectively, the Claimants ) are currently pending before the Bankruptcy Court. The MOLI Claims include: Claim Number Claimant Name Debtor Amount of Claim 2908 Carlton Vaughn AMCUSA $85, Bob J. Russell and Advanta Unliquidated amount Judy K. Russell 2911 Samuel J. Cappuccio AMCUSA $150, Jenaro Garcia and Advanta $48, Kathleen Garcia Gregory Johnson AMCUSA $110, James R. Atkins and Sylvia P. Atkins AMCUSA Unliquidated amount 6 There were initially eight MOLI Claims filed with the Bankruptcy Court. However, Claim 2917 was withdrawn on October 12, To date, none of the remaining 403 mortgagors listed on the Amended Schedules have filed a proof of claim in connection with the MOLI policy. Accordingly, such potential claims have been expunged pursuant to the Bar Date Order. 7 In an effort to resolve disputed claims, the Trustee s professionals have been in contact with the Claimant who asserted claim The Claimant informed the Trustee s professionals that the Mortgagor (as defined below) on the property underlying his claim died prior to the Petition Date. The Claimant reported to the Trustee s professionals that he was unaware of the insurance arrangement (as described more fully below) prior to the filing of the Amended Schedules. The Claimant also informed the Trustee s professionals that he had contacted Chase (as defined below) in order to have the underlying mortgage paid off by the proceeds of the insurance (as more fully described below). Upon information and belief, Swiss Re (as defined below) has paid off the outstanding balance of the Claimant s mortgage and has issued a back payment for certain mortgage payments that should not have been made after the death of the Mortgagor. The Claimant indicated to the Trustee s professionals that he intended to withdraw claim 2914 based on these developments, but the Claimant has not yet withdrawn the claim. The Trustee objects to claim 2914, which should be disallowed and expunged in its entirety for the reason stated herein and because it appears the underlying mortgage debt has been satisfied. WM01/

6 2916 Dolores J. Springer AMCUSA $43, However, since the MOLI Claims were filed, the outstanding balances on the mortgage loans underlying the MOLI Claims have decreased as the Claimants continue to make payments on their debts. Upon information and belief, at the time of the filing of this Omnibus Objection, the outstanding mortgage loan balances associated with each of the MOLI Claims is as follows: Claim Number Amount of Claim Outstanding mortgage loan balance Difference between Amount of Claim and outstanding mortgage loan balance 2908 $85, $62, $22, Unliquidated amount $85, Not Applicable 2911 $150, $0.00 $150, $48, $45, $2, $110, $ $110, Unliquidated amount $4, Not Applicable 2916 $43, $52, ($9,436.44) C. The Mortgage Owners Life Insurance Claims 14. In September 1995, AMCUSA s board of directors assented to AMCUSA s initiation of the Mortgage Customer Insurance program, whereby AMCUSA would purchase MOLI on behalf of certain homeowners who had already completed mortgage transactions with AMCUSA (each a Mortgagor and together, the Mortgagors ). Pursuant to this authorization, AMCUSA sent a solicitation letter (the Solicitation Letter, a sample of which 8 The proof of claim associated with MOLI Claim 2916 reflects a total claim in the amount of $43, The Claimant, however, also indicated on the proof of claim a secured claim in the amount of $70, and an unsecured claim in the amount of $2, Thus, the proof of claim appears to be internally inconsistent. For the avoidance of doubt, the Trustee objects to MOLI Claim 2916 in its entirety no matter the intent of the Claimant in completing the proof of claim. 9 As noted in footnote 7 above, upon information and belief, the Claimant has been paid the full amount of this claim through insurance proceeds and the Claimant does not intend to pursue further payment from the former Debtors or the Trusts. WM01/

7 is attached hereto as Exhibit B) to each such Mortgagor offering to purchase MOLI on behalf of the Mortgagor, with the proceeds of such insurance being guaranteed to pay part 10 or all of the balance on the Mortgagor s AMCUSA mortgage. The Solicitation Letter made clear that MOLI would be acquired by AMCUSA at no cost to the Mortgagor and that the benefits of the insurance would be irrevocably assigned to AMCUSA in order to pay off the mortgage balance upon the death of the Mortgagor or co-mortgagor. The Solicitation Letter also specifically required the Mortgagors to authorize AMCUSA to acquire the MOLI by completing and returning an authorization form or calling AMCUSA directly. Upon receipt of such authorization, AMCUSA sent authorizing Mortgagors a notification (i) confirming that MOLI had been acquired on the Mortgagor s behalf and that the benefits of the insurance had been assigned to AMCUSA and (ii) that included the terms and conditions of the MOLI (together the Terms & Conditions Documentation, a sample of which is attached hereto as Exhibit C). 15. In order to supply MOLI, AMCUSA purchased that certain Single or Joint Mortgagor Group Life Insurance Policy (the ALIC Policy, a copy of which is attached hereto as Exhibit D) from Advanta Life Insurance Company ( ALIC ). The ALIC Policy became effective on February 28, 2001 and includes a schedule of all Mortgagors for whom the insurance was procured. 11 The ALIC Policy, which originally listed AMCUSA as the Policyholder, makes clear that any proceeds under the policy will be paid to the Policyholder in the event of a death of a Mortgagor for whom the insurance was procured. 10 The letter made clear that (1) upon the death of the Mortgagor during the first year of coverage, proceeds would be used to pay off 25% of the mortgage balance, (2) upon the death of the Mortgagor during the second year of coverage, proceeds would be used to pay off 50% of the mortgage balance, (3) upon the death of the Mortgagor during the third year of coverage, proceeds would be used to pay off 75% of the mortgage balance and (4) upon the death of the Mortgagor or co-mortgagor after year three, proceeds would be used to pay off 100% of the mortgage balance. 11 Each of the Claimants, with the exception of the Claimants that filed MOLI Claim 2913, was included on the schedule of covered Mortgagors and, therefore, is covered by the ALIC Policy. WM01/

8 16. Subsequent to AMCUSA s purchase of the ALIC Policy, ALIC acquired that certain Reinsurance Agreement # (the Reinsurance Policy, a copy of which is attached hereto as Exhibit E), dated February 28, 2001, by and between ALIC and Swiss Re Life & Health America Inc. ( Swiss Re ). Pursuant to the Reinsurance Policy, Swiss Re agreed to reinsure 100% of the ALIC Policy. As of the date hereof, the Reinsurance Policy remains in full force and effect. 17. In 2001, Advanta sold its mortgage business, including the AMCUSA mortgages insured under the ALIC Policy, to Chase Manhattan Mortgage Corporation ( Chase ), through that certain Purchase and Sale Agreement, dated January 8, 2001, by and between Advanta and Chase (the PSA ). Pursuant to Section 7.01 and Schedule 7.01(b) of the PSA (a copy of such section and schedule are attached hereto as Exhibit F), Chase agreed to provide the MOLI insurers with notice of any loan prepayments and with notices of the death of any Mortgagor covered by the ALIC Policy so that the insurers could arrange to pay off any mortgage loan balances when necessary. Upon information and belief, since the sale of Advanta s mortgage business, Chase has notified Swiss Re of any relevant death upon the request of the estate of a decedent Mortgagor covered by the ALIC and Reinsurance Policies. Furthermore, upon information and belief, with such notice, Swiss Re has paid off the balance of the mortgage loan outstanding at the time of the death of the Mortgagor pursuant to the Reinsurance Policy. 18. During the pendency of these cases, the Court approved the sale by Advanta Insurance Company and Advanta of all of the issued and outstanding common stock of ALIC to United Prosperity Life Insurance Corp. ( Prosperity ) pursuant to the Order Authorizing the Sale of Stock of Advanta Life Insurance Company Free and Clear of Liens, Claims, and Encumbrances dated May 12, 2010 [Docket No. 499]. Prior to the Effective Date, out of an WM01/

9 abundance of caution and despite the fact that the Plan accomplishes the same end, AMCUSA and Prosperity agreed to the transfer and the assignment of AMCUSA s rights, title and interests in the ALIC Policy to the AMCUSA Trust. At the same time, AMCUSA and Prosperity agreed to concomitant amendments to the ALIC Policy to make clear that the AMCUSA Trust was and remains entitled to all of AMCUSA s rights, title and interests under the ALIC Policy. Both the assignment of the ALIC Policy and the amendment of the ALIC Policy were negotiated and consummated with the acknowledgement of Swiss Re. RELIEF REQUESTED 19. After reviewing each of the MOLI Claims and any relevant substantiation provided by the Claimants and the Debtors books and records, which, upon information and belief, are accurate, the Trustee has determined that neither the AMCUSA Trust nor the AC Liquidating Trust is liable for any of the MOLI Claims. Consequently, the MOLI Claims should be disallowed and expunged in their entirety. Alternatively, if the MOLI Claims are allowed, the Trustee requests that the Court estimate the MOLI Claims at $0.00 for all purposes. A. Neither the AMCUSA Trust nor the AC Liquidating Trust is Required to Pay the Mortgage Loan Balances of the Claimants 20. The Claimants are currently not entitled to any payment of insurance proceeds under the ALIC and Reinsurance Policies because there has not been a required death; nevertheless, the Claimants have asserted the MOLI Claims against Advanta and/or AMCUSA. The Claimants have not and cannot, however, support the existence of a valid claim for such mortgage loan balances against AMCUSA or Advanta because neither entity offered or agreed to pay such loan balances. 21. Section 101 of the Bankruptcy Code makes clear that a claim is a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, WM01/

10 contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured U.S.C. 101(5)(A) (emphasis added). Here, even if a Claimant could provide proof that the Mortgagor or co-mortgagor underlying a MOLI Claim died, and the proceeds of the MOLI were thus due and payable, neither the AMCUSA Trust nor the AC Liquidating Trust would be liable to pay the remaining balance on the mortgage loan. Nothing in the Solicitation Letter, the Terms & Conditions Documents or the ALIC Policy creates an obligation of AMCUSA or Advanta to pay any portion of any Mortgagor s outstanding mortgage loan balance. Thus, neither the AMCUSA Trust nor the AC Liquidating Trust has ever been, is now or will ever be liable to the Claimants for their mortgage loan balances. 22. Rather, the Solicitation Letter makes clear that AMCUSA only offered to purchase MOLI on behalf of those Mortgagors that authorized AMCUSA to do so. As stated in the Terms & Conditions Documentation, AMCUSA acquired the ALIC Policy on behalf of the Claimants and simultaneously arranged for any proceeds of such insurance to be assigned, upon the death of a Mortgagor or co-mortgagor, to AMCUSA. Thus, AMCUSA was merely the policyholder of the ALIC Policy, agreeing to pay all premiums due on behalf of each Claimant and to use any proceeds from the ALIC Policy to pay off any outstanding balance on the insured s Advanta Mortgage Account. See Terms & Conditions Documentation, at 2. In return, each Claimant agreed to assign all policy proceeds to [AMCUSA]. Id. Thus, AMCUSA was never under any obligation to pay the Claimants any proceeds, whether from the ALIC Policy or otherwise. AMCUSA was simply expected to collect the insurance proceeds from the insurer and to use such proceeds to pay off the mortgage loan balance upon the death of the Mortgagor or co-mortgagor. WM01/

11 23. Failure to disallow and expunge the MOLI Claims will result in the receipt by the Claimants of an unwarranted recovery against the AMCUSA Trust and/or the AC Liquidating Trust to the detriment of all other creditors in these cases. Accordingly, pursuant to sections 502 and 506 of the Bankruptcy Code, Rule 3007(d) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and Bankruptcy Rule of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the Local Rules ), the Trustee requests the entry of the Proposed Order disallowing each of the MOLI Claims. B. If the MOLI Claims are Allowed, Each Such Claim Should be Estimated at $ Alternatively, in the event that the MOLI Claims are deemed to be valid, the Court should estimate each MOLI Claim at $0.00 for all purposes. The MOLI Claims are covered by the ALIC Policy and the Reinsurance Policy. As such, upon the death of the Mortgagor or co-mortgagor underlying a particular MOLI Claim, the remaining loan balance will be satisfied by insurance proceeds. See ALIC Policy, at 1. The Claimants may rightfully look to Prosperity and Swiss Re, when appropriate, as the insurers obligations have not been altered in any way by these Chapter 11 Cases. To the extent that the Reinsurance Policy does not cover any of the Claimants, however, the Trustee submits that any claims filed by such Claimants should nevertheless be disallowed for the reasons stated above. C. The Claimants Have No Right to Payment of the Mortgage Loan Balance Under the Terms of the Insurance Policies 25. The benefits under the ALIC and Reinsurance Policies, respectively, are only payable by the insurance company upon the death of the Mortgagor or co-mortgagor and are only to be paid to the mortgage lender at the time of such a death. Here, apart from the Claimant asserting claim 2914, the Claimants have neither alleged nor provided substantiation evidencing WM01/

12 the death of the Mortgagor or co-mortgagor underlying the MOLI Claim. Accordingly, the Claimants currently have no right to have any insurance proceeds from the ALIC Policy or the Reinsurance Policy applied to satisfy their outstanding mortgage loan balances. APPLICABLE AUTHORITY 26. Section 502(b) of the Bankruptcy Code provides in pertinent part that: 11 U.S.C. 502(b)(1) the court, after notice and a hearing, shall determine the amount of [a] claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount, except to the extent that... such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured. 27. The MOLI Claims noted above are unenforceable against the estate because the Debtors against which the MOLI Claims are asserted owed no obligations to the Claimants as of the Petition Date. RESPONSES TO OMNIBUS OBJECTION 28. To contest the relief requested in this Omnibus Objection, a Claimant must file and serve a written response to this Omnibus Objection (a Response ) so that it is received no later than December 13, 2012 at 4:00 p.m. (Prevailing Eastern Time) (the Response Deadline ). Every Response must be filed with the Office of the Clerk of the United States Bankruptcy Court for the District of Delaware: 824 North Market Street, Wilmington, Delaware 19801, and served upon the following parties, so that the Response is received no later than the Response Deadline, at the following addresses: WM01/

13 DRINKER BIDDLE & REATH LLP 1100 North Market Street Suite 1000 Wilmington, DE (302) Attn: Howard A. Cohen - and - LATHAM & WATKINS LLP 885 Third Avenue, Suite 1000 New York, NY (212) Attn: Aaron M. Singer 29. Every Response to this Omnibus Objection must contain at a minimum the following information: (a) (b) (c) (d) (e) a caption setting forth the name of the Court, the name of the Debtor, the case number, and the title of the Omnibus Objection to which the Response is directed; the name of the Claimant, his/her/its claim number, and a description of the basis for the amount of the proof of claim; the specific factual basis and supporting legal argument upon which the party will rely in opposing this Omnibus Objection; any supporting documentation, to the extent it was not included with the proof of claim previously filed with the clerk or claims agent, upon which the party will rely to support the basis for and amounts asserted in the proof of claim; and the name, address, telephone number, and fax number of the person(s) (which may be the Claimant or the Claimant s legal representative) with whom counsel for the Trustee should communicate with respect to the claim or the Omnibus Objection and who possesses authority to reconcile, settle or otherwise resolve the objection to the disputed claim on behalf of the Claimant. 30. If a Claimant fails to file and serve a timely Response by the Response Deadline, the Trustee may present to the Court an appropriate order disallowing such Claimant s claim, without further notice to the Claimant or a hearing. WM01/

14 31. Consistent with Local Rule (d), the Trustee may, at his option, file and serve a reply to a Response no later than 4:00 p.m. (Eastern Time) one day prior to the deadline for filing the agenda on any hearing to consider the Omnibus Objection. SEPARATE CONTESTED MATTERS 32. To the extent that a response is filed regarding any MOLI Claim listed in this Omnibus Objection and the Trustee is unable to resolve the response, each such MOLI Claim, and the objection by the Trustee to each such MOLI Claim asserted herein, shall constitute a separate contested matter as contemplated by Bankruptcy Rule Any order entered by the Court regarding an objection asserted in the Omnibus Objection shall be deemed a separate order with respect to each Claim. RESERVATION OF RIGHTS 33. The Trustee hereby reserves the right to object in the future to any of the proofs of claim listed in this Omnibus Objection or on the exhibits attached hereto on any ground, and to amend, modify and/or supplement this Omnibus Objection, including, without limitation, to object to amended or newly-filed claims. Separate notice and hearing may be scheduled for any such objection. 34. Notwithstanding anything contained in this Omnibus Objection or the attached exhibits, nothing herein shall be construed as a waiver of any rights that the Trustee may have: (a) to bring avoidance actions under the applicable sections of the Bankruptcy Code against the holders of claims subject to the Omnibus Objection; or (b) to exercise his rights of setoff against the holders of such claims relating to such avoidance actions. STATEMENT OF COMPLIANCE WITH LOCAL RULE The undersigned representative of Drinker Biddle & Reath LLP certifies that he has reviewed the requirements of Local Rule and that the Omnibus Objection WM01/

15 substantially complies with that Local Rule. To the extent that the Omnibus Objection does not comply in all respects with the requirements of Local Rule , Drinker Biddle & Reath LLP believes such deviations are not material and respectfully requests that any such requirement be waived. NO PRIOR REQUEST 36. No previous request for the relief sought herein has been made to this or any other court. NOTICE 37. Notice of this Omnibus Objection will be provided to (i) the Office of the United States Trustee for the District of Delaware; (ii) each holder of a MOLI Claim at the address for notices set forth in each party s proof of claim; and (iii) those parties who have requested notice pursuant to Bankruptcy Rule 2002 (collectively, the Notice Parties ). The Trustee respectfully submits that no further notice of this Omnibus Objection is required. 38. Pursuant to Bankruptcy Rule 3007, the Trustee has provided all Claimants affected by this Omnibus Objection with at least thirty days notice of the hearing to consider this Omnibus Objection. (Remainder of this page intentionally left blank) WM01/

16 WHEREFORE the Trustee respectfully requests entry of the Order granting the relief requested herein and such other and further relief as the Court may deem just and appropriate. Dated: November 16, 2012 Wilmington, Delaware DRINKER BIDDLE & REATH LLP /s/ Howard A. Cohen Howard A. Cohen (DE 4082) 1100 North Market Street Suite 1000 Wilmington, DE (302) and - Robert K. Malone (pro hac vice) Marita S. Erbeck (pro hac vice) 500 Campus Drive Florham Park, NJ (973) and - Roger G. Schwartz (pro hac vice) Aaron M. Singer (pro hac vice) LATHAM & WATKINS LLP 885 Third Avenue New York, NY (212) Attorneys for FTI Consulting, Inc., Trustee WM01 /

17 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re: : Chapter 11 : ADVANTA CORP., et al., 1 : Case No (KJC) : Debtors. : (Jointly Administered) x Hearing Date: December 20, 2012 at 4:00 p.m. (ET) Objection Deadline: December 13, 2012 at 4:00 p.m. (ET) NOTICE OF THE TRUSTEE S EIGHTH OMNIBUS (SUBSTANTIVE) OBJECTION TO AND MOTION FOR ESTIMATION OF CERTAIN MORTGAGE INSURANCE CLAIMS AGAINST ADVANTA CORP. AND ADVANTA MORTGAGE CORP. USA PLEASE TAKE NOTICE that on November 16, 2012, FTI Consulting, Inc. ( FTI ), in its capacity as the Trustee of the AMCUSA Trust and the AC Liquidating Trust (the Trustee ), by and through its attorneys, Latham & Watkins LLP and Drinker Biddle & Reath LLP, filed its Eighth Omnibus (Substantive) Objection to and Motion for Estimation of Certain Mortgage Insurance Claims Against Advanta Corp. and Advanta Mortgage Corp. USA (the Objection ) with the United States Bankruptcy Court for the District of Delaware (the Court ). PLEASE TAKE FURTHER NOTICE that each claimant that has filed a claim that is affected by the Objection is receiving a copy of the Objection and this Notice. Each claimant should read the Objection and review the Exhibits attached thereto, which list all of the claims that are subject to the Objection and the grounds for each objection. PLEASE TAKE FURTHER NOTICE that a hearing on the Objection shall be held 1 The Debtors in these jointly administered chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, were Advanta Corp. (2070) ( Advanta ), Advanta Investment Corp. (5627), Advanta Business Services Holding Corp. (4047), Advanta Business Services Corp. (3786), Advanta Shared Services Corp. (7074), Advanta Service Corp. (5625), Advanta Advertising Inc. (0186), Advantennis Corp. (2355), Advanta Mortgage Holding Company (5221), Advanta Auto Finance Corporation (6077), Advanta Mortgage Corp. USA (2654), Advanta Finance Corp. (8991), Advanta Ventures Inc. (5127), BE Corp. (8960), ideablob Corp. (0726), Advanta Credit Card Receivables Corp. (7955), Great Expectations International Inc. (0440), Great Expectations Franchise Corp. (3326), and Great Expectations Management Corp. (3328). WM01/

18 before the Honorable Kevin J. Carey, United States Bankruptcy Judge, on December 20, 2012 at 4:00 p.m. (Prevailing Eastern Time) at the United States Bankruptcy Court, 824 Market Street, 5 th Floor, Courtroom 5, Wilmington, Delaware PLEASE TAKE FURTHER NOTICE that any party wishing to oppose the relief requested in the Objection must file a written response with the Clerk of the Bankruptcy Court for the United States Bankruptcy Court for the District of Delaware at 824 Market Street, Wilmington, Delaware 19801, and serve it so as to be received by the undersigned counsel by December 13, 2012 at 4:00 p.m. (Prevailing Eastern Time) (the Response Deadline ). PLEASE TAKE FURTHER NOTICE that any response filed with the Court must contain, at a minimum, the following: (a) (b) (c) (d) (e) a caption setting forth the name of the Court, the name of the Debtors, the case number, and the title of the Objection to which the Response is directed; the name of the Claimant, his/her/its claim number, and a description of the basis for the amount of the Proof of Claim; the specific factual basis and supporting legal argument upon which the party will rely in opposing this Omnibus Objection; all documentation or other evidence in support of the claim, to the extent not included with the Proof of Claim previously filed with the Bankruptcy Court, upon which the claimant will rely in opposing the Objection at the hearing; and the name, address, telephone number, and fax number of the person(s) (which may be the Claimant or the Claimant s legal representative) with whom counsel for the Trustee should communicate with respect to the claim or the Omnibus Objection and who possesses authority to reconcile, settle, or otherwise resolve the objection to the disputed claim on behalf of the Claimant. WM01/

19 PLEASE TAKE FURTHER NOTICE that if you file a response to the Objection, you should be prepared to argue that response at the Hearing. You need not appear at (or participate in) the Hearing if you do not object to the relief requested in the Objection. PLEASE TAKE FURTHER NOTICE that consistent with Local Rule (d), the Trustee may, at his option, file and serve a reply to a Response no later than 4:00 p.m. (Prevailing Eastern Time) one day prior to the deadline for filing the agenda on any hearing to consider the Omnibus Objection. PLEASE TAKE FURTHER NOTICE that if you do not timely file and serve a response to the Objection, the relief requested in the Objection may be granted without further notice to you. PLEASE TAKE FURTHER NOTICE that the Hearing may be continued from time to time upon written notice to you or as declared orally at the Hearing. PLEASE TAKE FURTHER NOTICE that the Trustee reserves the right to object in the future to any of the claims that are the subject of this Objection on any further or additional grounds. Separate notice will be provided and a separate hearing will be scheduled for any such objection. WM01/

20 Dated: November 16, 2012 Wilmington, Delaware DRINKER BIDDLE & REATH LLP /s/ Howard A. Cohen Howard A. Cohen (DE 4082) 1100 North Market Street Suite 1000 Wilmington, DE (302) and - Robert K. Malone (pro hac vice) Marita S. Erbeck (pro hac vice) 500 Campus Drive Florham Park, NJ (973) and - Roger G. Schwartz (pro hac vice) Aaron M. Singer (pro hac vice) LATHAM & WATKINS LLP 885 Third Avenue New York, NY (212) Attorneys for FTI Consulting, Inc., Trustee WM01/

21 EXHIBIT A Proposed Order

22 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x : In re : Chapter 11 : ADVANTA CORP., et al., : Case No (KJC) : Debtors. 1 : (Jointly Administered) : x ORDER GRANTING TRUSTEE S EIGHTH OMNIBUS (SUBSTANTIVE) OBJECTION TO AND MOTION FOR ESTIMATION OF CERTAIN MORTGAGE INSURANCE CLAIMS AGAINST ADVANTA CORP. AND ADVANTA MORTGAGE CORP. USA Upon the Eighth substantive omnibus objection, dated November 16, 2012 (the Omnibus Objection ) of FTI Consulting, Inc., solely in its capacity as the Trustee of the AMCUSA Trust and the AC Liquidating Trust (the Trustee ), by which the Trustee respectfully requests the entry of an order pursuant to section 502(b) of title 11 of the United States Code (the Bankruptcy Code ), Rules 3003 and 3007 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and Rule of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the Local Rules ), disallowing and expunging each of the MOLI Claims identified on Schedule 1 hereto; and this Court having jurisdiction to consider the Omnibus Objection and the relief requested therein pursuant to 28 U.S.C. 157 and 1334; and consideration of the Omnibus Objection and the relief requested therein being a core proceeding pursuant to 28 U.S.C. 157(b); and venue being proper before this Court pursuant to 28 U.S.C and 1409; and due and proper notice of the Omnibus Objection having been provided to the Notice Parties, and 1 All capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Omnibus Objection.

23 no other or further notice being required; and the Court having determined that the legal and factual bases set forth in the Omnibus Objection establish just cause for the relief granted herein; and after due deliberation and sufficient cause appearing therefor, it is hereby ORDERED that: 1. The Omnibus Objection is granted. expunged in their entirety. 2. The MOLI Claims listed on Schedule 1 hereto are hereby disallowed and 3. The Trustee reserves the right to amend, modify or supplement the Omnibus Objection, and to file additional objections to any claims filed in these Chapter 11 Cases including, without limitation, the claims that are the subject of the Omnibus Objection. 4. This Court shall retain jurisdiction with respect to any matters, claims, rights or disputes arising from or related to the Omnibus Objection or the implementation of this Order. Dated: Wilmington, Delaware, 2012 The Honorable Kevin J. Carey United States Bankruptcy Judge 2

24 SCHEDULE 1 MOLI Claims

25 MOLI Claims Claimant Claim No. Entity Amount of Claim Reason for Disallowance Carlton Vaughn 2908 AMCUSA $85, No Liability Bob J. Russell, 2910 Advanta Corp. Unliquidated No Liability Judy K. Russell Samuel J AMCUSA $150, No Liability Cappuccio Jenaro Garcia, 2913 Advanta Corp. $48, No Liability Kathleen Garcia Gregory Johnson 2914 AMCUSA $110, No Liability James R. Atkins, 2915 AMCUSA Unliquidated No Liability Sylvia P. Atkins Dolores J. Springer 2916 AMCUSA $43, No Liability 1 The proof of claim associated with MOLI Claim 2916 reflects a total claim in the amount of $43, The Claimant, however, also indicated on the proof of claim a secured claim in the amount of $70, and an unsecured claim in the amount of $2, Thus, the proof of claim appears to be internally inconsistent. For the avoidance of doubt, the Trustee objects to MOLI Claim 2916 in its entirety no matter the intent of the Claimant in completing the proof of claim.

26 EXHIBIT B Sample Solicitation Letter

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39 EXHIBIT E Reinsurance Policy

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63 EXHIBIT F Section 7.01 and Schedule 7.01(b) of the Purchase Sale Agreement

64 131 limitations to indemnification set forth in Section 10.05(a). At Closing, any ARM holdback and document holdback under the Mortgage Loan Purchase Agreement and Remaining Loans Purchase Agreement shall be taken into account in the ARM Holdback and Document Holdback under the provisions of Sections 1.05(l) and 1.05(m) of this Agreement, respectively. SECTION 6.26 Closing Tape. The Company shall provide an updated magnetic computer tape as soon as same can be available after each month end occurring between the date of execution of this Agreement and the Closing Date, and again as of the Closing Date. With respect to the tape delivered on the Closing Date (the "Closing Tape"), the information contained in the fields of such Closing Tape set forth in Section 4.28 of the Company Disclosure Schedule: (i) shall be true and correct in all material respects; (ii) shall be a true and correct copy of the information relating thereto contained in the loan servicing systems of the Company and the Selling Subsidiaries as of the date of such tape. ARTICLE VII CERTAIN INSURANCE RELATED ACTIVITIES SECTION 7.01 Insurance. The parties agree that, with respect to ongoing programs of insurance provided to mortgage customers, Schedule 7.01(a) identifies agreements, relationships, and other assets to be transferred to, and obligations to be assumed by, Buyer. The parties agree that Buyer's responsibilities are limited to sub-servicing and administrative functions as specified on Schedule 7.01(b), and Buyer assumes no other liabilities or obligations with respect to programs (and accompanying agreements) listed on Schedule 7.01(b). The parties further agree that, with respect to all programs of insurance included on Schedules 7.01(a) and 7.01(b), the Company shall retain all refund obligations for any commission payment paid to, and retained by, the Company, as of the Closing Date. The parties agree that, with respect to programs no longer offered to mortgage customers, Schedule 7.01(b) identifies the sub-servicing and administrative functions to be performed by Buyer. The parties further agree that Annex A to Section 4.19 of the Company Disclosure Schedule governs the insurance agreements, relationships, and other assets to be retained by the Company. Buyer shall, after Closing, perform the obligations set forth in Schedule 7.01(b). ARTICLE VIII CONDITIONS TO CLOSING SECTION 8.01 Conditions to the Company's Obligation to Close. The obligations of the Company and the Selling Subsidiaries to effect the sale of the Assets and the other transactions contemplated by the Agreement are subject to the satisfaction or waiver by the Company prior to or concurrently with the Closing of each of the following conditions: (a) Buyer shall have performed in all material respects its agreements and covenants contained in or contemplated by this Agreement and the Ancillary Agreements which are required to be performed by it at or prior to the Closing; (b) Each of the representations and warranties of Buyer set forth in this Agreement and the Ancillary Agreements shall be true and correct in all material respects (i) on and as of the date hereof as to the representations and warranties made at signing and (ii) on and as of the Closing Date as to the supplements to be provided at Closing under the provisions of Section 6.13 (in each case representations and warranties that expressly speak only as of a specific date or time need only be true and correct as of such date and time, and where a specific date, as mutually agreed upon by the parties, is set forth in any particular Section of the Buyer Disclosure Schedule, such information need only be true and correct as of the date and time set forth in the Section of the Buyer Disclosure Schedule or in any supplement to the Buyer Disclosure Schedule, except to the extent such failures to be true and correct individually or in 53

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