Tag Archive for 'Chapter 13'

Has Mortgage Cramdown Died Its Final Death?

Published
by
Monette Cope
on December 17, 2009
in Chapter 13 and Real Estate
. 1 Comment

The House on December 11, 2009 rejected an amendment to the Wall Street Reform and Protection Act of 2009 that would allow mortgage cramdowns in Chapter 13 bankruptcies.  The surprise is that this is the same amendment that the House passed earlier this year.  This time it was defeated by a vote of 241 to 188 with both Democrats and Republicans voting it down.

The proponents argued that it would have limited effect on the mortgage financing industry because it would only apply to existing loans, not future loans, while slowing the rate of foreclosures and home depreciation.

Opponents argued that it would create havoc and more losses to the already unstable mortgage and lending industries, while increasing interest rates and toughening mortgage standards for all home buyers. 

Because the measure has now been defeated by both the House and Senate, it is unlikely to reappear in another bill, and should ease one of the worries facing lenders and investors from the flurry of new financial regulatory legislation.

Additional Documentation Requirements in Southern Indiana and Southern Ohio

Published
by
Laura Faulkner
on November 27, 2009
in Bankruptcy Act 2009, Chapter 13 and Local Procedures & Rules
. 0 Comments

The Southern District of Indiana and the Southern District of Ohio are revising their Local Rules effective December 1, 2009. Both jurisdictions are revising their Rules to require creditors to attach a post-petition payment history to motions for relief from stay in Chapter 13 cases.

Additionally, the Southern District of Ohio will require additional documentation to be supplied with motions for relief from stay on real estate. Creditors will be required to attach a copy of the recorded deed upon which the debtor acquired the property to the motion for relief from stay.

Please include these additional documents when referring motions for relief form stay to our office in order for us to more quickly process the motion.

Procedure for Filing Notice of Mortgage Payment Change Amended in Western District of Pennsylvania

Published
by
Holly Thurman
on November 17, 2009
in Chapter 13, Local Procedures & Rules and Real Estate
. 0 Comments

Effective January 1, 2010, the Western District of Pennsylvania Court Procedure will change regarding notifying the Court and the Debtor of monthly mortgage payment changes. The Chapter 13 Trustee is the acting disbursing agent for ongoing mortgage payments in this district.

Notice of Mortgage Payment Change must be filed with the Court at least twenty-one (21) days prior to the date that the change is to become effective or the Creditor is forever barred from collecting the difference in the change. In order to comply with this deadline, your attorney will need the information and documents as soon as possible after the escrow changes or the interest rate changes.

The Notice of Mortgage Payment Change must include:

  • A complete and accurate loan payment history;
  • A computation of the payment change “in a format which is readably understandable by the Court and the Parties-in-Interest;” and
  • A declaration under penalty of perjury by a competent official of the Creditor substantiating the veracity and accuracy of the requested change 

The Notice can no longer simply state what the monthly payment is and the effective date, rather, we will have to compute and accumulate detailed information justifying the change.

If a loan is transferred or sold, the procedure will now require the new owner to file a copy of any applicable lien assignment evidencing the Creditor’s alleged right to payment if the Creditor is not currently a Creditor “of record”. The assignment must also include, on a separate page, a narrative summary of the chain of title evidencing the Creditor’s authority to act and be paid.

After a Notice of Mortgage Payment Change is filed, the Court will issue a standard order requiring the debtor to:

  • Amend the chapter 13 plan;
  • File a declaration that the existing chapter 13 plan is sufficient to fund the plan with the modified debt; or
  • File an objection to the Notice of Mortgage Payment Change as stated and the Court will schedule a hearing on the matter

If a Declaration is filed by the debtor that the monthly plan payment doesn’t need to change, we recommend a review of the Chapter 13 Trustee’s website to be sure that the changed monthly payment amount is disbursed. If an Objection to the Notice of Mortgage Payment Change is filed, additional documentation may be necessary to defend the Notice of Mortgage Payment Change.

If lenders want to be paid post petition fees, expenses or charges, then within 180 days from the date incurred, lenders must file a Notice of Post-Petition Fees, Expenses and Charges. Examples of fees incurred post petition are attorney fees, BPO fees, property inspections and other administrative fees. The notice must include an itemized list of the fees and expenses and when they were incurred. The Court will issue a standard Order giving the Debtor twenty-one (21) days to amend the plan, file a declaration, or object to the Notice.

Lenders must now be very diligent in administering loans secured by real estate and file the required notices with the court on a timely basis, or they will be barred from collecting increases in payments and other expenses. WWR is continuing to monitor these developments and will advise you as procedures change so that you can take the steps necessary to protect yourself while the debtor is in bankruptcy. 

The Administrative Order implementing this new procedure can be found on the Western District of Pennsylvania Bankruptcy Court’s website at http://www.pawb.uscourts.gov.

If you have any questions regarding this client advisory, please contact Ms. Holly C. Thurman, Esq. Holly is an associate in the bankruptcy department within the Real Estate Default Group of Weltman, Weinberg & Reis Co., L.P.A., and is located in the Pittsburgh office. She can be reached directly at 412.338.7105 or via e-mail at hthurman@weltman.com.

New Bankruptcy Filing Requirements In The Northern District of Illinois

Published
by
Monette Cope
on August 20, 2009
in Chapter 13, Local Procedures & Rules and Motion
. 0 Comments

NEW: A post-petition payment history must be attached to all Chapter 13 motions for relief in the Northern District of Illinois.

The Northern District of Illinois (Chicago) requires filers to attach a “Statement to Accompany Motions for Relief from Stay” to all motions for relief.  The Statement has been revised three times in the last year.  The revisions have progressively required more details about payment defaults.

The latest revision (sent to all practitioners on August 19, 2009, and effective immediately) requires a post-petition payment history be attached to the Statement in all Chapter 13 motions for relief.  This is not required in Chapter 7 or Chapter 11 cases.

The history must detail the dates of individual payments and the amounts of those payments.  This can be satisfied in most cases by attaching a computer record for the period beginning on the date of the filing of the bankruptcy through the date of the referral.  If no payments have been made, a payment history is still required.

In addition to including a post-petition payment history for all Chapter 13 cases, all motions for relief (for all chapters) must include the following information:  the current balance, the next due date on the account, the amount of arrears, the amount of the regular payments, and the value of the collateral. 

The change occurred in part because courts are now heightening their scrutiny of mortgage defaults, but the result is that courts are requiring creditors holding collateral other than real estate, such as vehicles, to make the detailed disclosures as well.

Possible Compromise This Week on Bankruptcy Cramdown Legislation

Published
by
Monette Cope
on April 21, 2009
in Chapter 13 and Real Estate
. 0 Comments

While the House passed a bill permitting mortgage cramdowns, the Senate has yet to do so.  However, it hopes to have a compromise in place this week.  Senate Majority Whip Dick Durbin (D-Ill) met with banks, credit unions, and consumer groups to negotiate terms for the Senate bill.

Details are sketchy, but it appears that the terms would further limit the pool of borrowers who may be permitted to reduce the principal balance on mortgages in bankruptcy.  If a lender offers a refinance that reduces the interest rate through the current Obama plan, a borrower may not be permitted to reduce the principal balance in a Chapter 13 plan.  This is obviously an incentive for lenders to offer refinancing to certain borrowers in an attempt to avoid a reduction of the principal balance by a bankruptcy judge.

“At-risk low income borrowers” and those who spend less than 31% of their income on home mortgage payments would be ineligible as well for principal write-downs.  The program would apply only to loans originated before 2009, and would end in 2014, thus limiting bankruptcy cram downs to approximately five years from enactment of any bill.

WWR will continue to keep you informed as this Senate bill takes form.