Author Archive for Jack Day

New HAMP Guidelines Announced Affecting Foreclosures

Published
by
Jack Day
on March 29, 2010
in Bankruptcy Filings, Homeowners Affordable Modification Program and Real Estate
. 0 Comments

On March 24, 2010, the Treasury Department announced new guidelines for handling pending or threatened foreclosure actions for lenders participating in the Home Affordable Modification Program (HAMP) effective June 1, 2010. Lenders participating in HAMP include Fannie Mae (FNMA) and Freddie Mac (FHLMC) loans, lenders accepting TARP funds, and other lenders who voluntarily agree to participate.

Under the new guidelines, a participating servicer or lender may not refer any loan to foreclosure or conduct a scheduled foreclosure sale unless and until at least one of the following circumstances exists:

  1. The borrower is evaluated for HAMP and is determined to be ineligible for the program; or
  2. The borrower is offered a trial period plan, but fails to make a trial period payment by the last day of the month in which such payment is due; or
  3. The servicer has established right party contact, has sent at least two written requests asking the borrower to supply required information in accordance with HAMP guidelines and has otherwise satisfied the Reasonable Effort solicitation standard, and the borrower failed to respond by the dates indicated in those requests; or
  4. The servicer has satisfied the Reasonable Effort solicitation standard without establishing right party contact; or
  5. The borrower or co-borrower states he or she is not interested in pursuing a HAMP modification and such statement is reflected by the servicer in their servicing system

Existing foreclosure sales must be immediately halted when a borrower submits a request for HAMP consideration, so long as the request is received at least 7 full days prior to the sale date. The only exception is where the sale cannot be stopped because the local official fails or refuses to halt some or all of the activities. For example, in some jurisdictions, a sale may not be stopped without the approval of the judge assigned to that case. The local judge may not be available or may otherwise not approve stopping the sale.

When a borrower is in foreclosure and is simultaneously either being evaluated for HAMP or is in a trial period plan, the servicer/lender must provide the borrower with a written notification that explains, in clear language, the concurrent modification and foreclosure processes and which states that even though certain foreclosure activities may continue, the home will not be sold at a foreclosure sale while the borrower is being considered for HAMP or while the borrower is making payments under a trial period plan.

Lenders need to review these new requirements carefully to make sure they are in compliance by June 1, 2010.

If you have any questions, please contact Mr. Jack Day, Esq. Jack is a Partner in the Bankruptcy department of the Cincinnati office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 513-723-2206 or via e-mail at jday@weltman.com.

Some Amounts Used in the Bankruptcy Code Are Adjusted Every Three Years

Published
by
Jack Day
on March 16, 2010
in Bankruptcy Court and Chapter 13
. 0 Comments

Some of the amounts used in the United States Bankruptcy Code are adjusted triennially according to the Consumer Price Index for All Urban Consumers published by the United States Department of Labor. The Administrative Office of the United States Courts announced the new figures that will be used starting April 1, 2010.

Some of the changes are as follows:

Non Dischargeability Presumptions
Some debts are presumed to be non dischargeable if the transaction occurred shortly before the bankruptcy was filed. If the debtor purchased luxury items within 90 days of the filing date totaling $600 or more, the debt is presumed to be non dischargeable.

If the debtor took a cash advance within 70 days of the filing date totaling $875 or more, the debt is presumed to be non dischargeable.

A complaint to determine dischargeability must be filed before these debts are not discharged.  The withholding of the discharge for these debts is not automatic.

Preference
Consumer Debts: If one creditor receives $600 or more from a debtor within 90 days of the filing date, the debt may be a preference that the creditor may be required to return. This figure is not changed.

Commercial Debts: However, the minimum amount, which must be paid to a creditor before there is a preference, was increased to $5,850.  

Typically, a preference becomes a problem only for unsecured debts.

Who Can File A Chapter 13?
Chapter 13 debtors may not have more than $360,475 in unsecured debt or more than $1,081,400 in secured debt.

Go here to see the complete list of changes: http://www.ohsb.uscourts.gov/pdffiles/Fees2010.pdf

If you have any questions, please contact Mr. Jack Day, Esq. Jack is a Partner in the Bankruptcy department of the Cincinnati office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 513-723-2206 or via e-mail at jday@weltman.com.

6th Circuit BAP Finds Kentucky’s Mortgage Curative Statute “IS” to be Applied Prospectively

Published
by
Jack Day
on November 23, 2009
in Real Estate
. 0 Comments

In 2006, the Kentucky legislature passed a statute titled “exception for instruments lodged for record prior to July 12, 2006” to cure defects in mortgages with defective acknowledgments.(1) Prior to that statute, bankruptcy trustees were filing many actions to avoid mortgages whose acknowledgment clauses contained minor technical and clerical errors. After passage of the statute, courts were applying the statute only to save mortgages filed prior to July 12, 2006. This may seem reasonable, given the title of the statute.

The 6th Circuit Bankruptcy Appellate Panel has now issued a decision finding that this statute must also be applied prospectively – to mortgages filed on or after July 12, 2006. The court noted that the title of the statute is not part of the statute and is ignored in determining what the statute means. Looking at the statute, the court agreed with the amicus brief filed by the Kentucky Bankers Association and held that the statute applies to both a mortgage which “is” or “has been, prior to the effective date of this Act, lodged for record. . . .”(2) In this case the “is” makes all the difference.  The court ruled the curative statute must also be applied to save mortgages with defective acknowledgments filed on or after July 12, 2006 from attacks by bankruptcy trustees.
(1) Ky Rev. Stat Ann. section 382.270
(2) In re Pelfrey, 2009 Bankr. Lexis 3623 (6th Cir BAP November 9, 2009)

Reaffirmation Agreements in Connecticut

Published
by
Jack Day
on September 9, 2009
in Local Procedures & Rules and Motor Vehicle
. 0 Comments

There is a Connecticut statute called “AN ACT CONCERNING REPOSSESSION OF MOTOR VEHICLES FROM RETAIL BUYERS” which goes into effect October 1, 2009. The state statute provides that filing bankruptcy or being in a bankruptcy is no longer an event of default under an installment loan agreement and is not grounds for repossession.

The vast majority of installment loan agreements contain a provision that filing bankruptcy is a default under the agreement. This means the loan may be called and the collateral repossessed, even if the payments are current, so long as a bankruptcy was filed. Some lenders are willing to repossess collateral on current loans where the debtors refuse to reaffirm the debt.

The statute essentially re-writes the terms of the contract between the lender and its customers. The title of the statute refers to motor vehicles, but text refers to the Connecticut Retail Installment Sales Finance Act. Therefore, it applies to boats, cars, RV’s, ATV’s, etc.

If the debtor is current on the loan agreement and stays current, then the debtor no longer needs to sign a reaffirmation agreement to retain possession of the vehicle. This effectively is an end run around the Bankruptcy Code provision that ended the 4th Option or “If Pay, Let Pay” arrangement.

House Passes Bankruptcy Cram Down Bill

Published
by
Jack Day
on March 6, 2009
in Bankruptcy Act 2009, Chapter 13 and Real Estate
. 0 Comments

Last night, the House of Representatives approved H.R. 1106 by a vote of 234-191, permitting bankruptcy judges to cram down residential mortgages to their current value, modifying variable interest rates to a fixed annual rate and extending the repayment period of up to 40 years. This part of the bill contains identical language to other bills pending in the House. One big change is a built in sunset provision; the only loans that can be modified are those dated before the statute takes effect. Future loans may not be modified under this statute. In addition, the debtor must certify that he or she has attempted to contact the lender regarding modification of the mortgage at least 15 days before the petition is filed, unless a foreclosure sale is scheduled within 30 days. If a foreclosure sale is pending or if the debtor wants to modify a mortgage covered by a confirmed plan, the debtor must first attempt to contact the lender and try to work out a loan modification. Nothing in the statute explains how the debtor is to prove that the attempt to contact the lender was actually made.

The legislation would be immediately effective and would apply to all pending, but not closed, cases. The value of the property is the value as of the hearing date, not the date the petition was filed. This would give debtors the option to ask for mortgage cram downs on plans that have already been confirmed, even those that are four years old.  The only limitation on the provision is that the court must determine that the debtor has proposed the modification in good faith and that the debtor has not been convicted of obtaining the extension, renewal or refinancing of loan by actual fraud.

If the debtor sells the house for more than the crammed down value within five years, the lender would share in the net proceeds.

The Chapter 13 trustee’s fee on modified loans is capped at 4%, which will encourage more debtors to make regular mortgage payments through the trustee. The court may also waive the trustee’s fees for certain low income individuals.

Furthermore, there are provisions that protect servicers who agree to modify mortgages from liability to owners of interests in securitized loans. The terms of some securitization agreements will be changed, declaring certain provisions to be against public policy. This could have the effect of allowing many servicers to go forward with loan modifications, which have not been possible in the past.

All eyes are now on the Senate. If the legislation that passes in the Senate is not identical to the House version, the bills will go to a conference committee to hammer out a compromise. The compromise bill would then go back to both houses for approval and then to the President for signature.