Yesterday, representatives from the United States Trustee’s Office (“UST”) conducted a town hall meeting with representatives from the creditor’s bar to provide details on a new initiative they are moving forward with called the “Credit Abuse Program.”  During the meeting, the UST indicated that it will be more closely scrutinizing documentation submitted by mortgage lenders with their proofs of claim, Reaffirmation Agreements and attachments to Motions for Relief from Stay.  This increased scrutiny will not just be limited to the Cleveland Bankruptcy Court, but will extend to all five (5) courts in the Northern District of Ohio.  The UST will be focusing its inquiry on the following issues:

• Whether the collateral was properly perfected
• Whether the moving party is entitled to enforce the claim
• Whether payments were misapplied
• Whether escrow was miscalculated
• Whether certification attesting to lost notes is in a blank form
• Whether certification attesting to missed payments was pre-signed
• Whether the documents filed with the courts are legally and factually sufficient

If an issue comes to light, the UST will informally contact creditors by phone or letter to correct an issue or provide additional documentation.  Also, the UST may formally make its requests through objections to proof of claims or objections to motions for relief and abandonment.  In extreme situations, the UST indicated that it would file motions for an order to show cause or motions for sanctions to correct an issue or provide additional documentation.

 
Specific Areas of Concern

The UST is paying particular attention to the following issues that come up with mortgage creditors:

• Failure to attach assignments of mortgage
• Failure to attach documents showing who owns the claim
• Failure to itemize statement of amounts (UST is requesting the items be specific)
• Failure to take out improper fees or fees that are vague, estimated, excessive or unsubstantiated by law or contract
• Miscalculation of arrearage
• Failure to attach supporting documents
• Attaching boilerplate affidavits of lost note
• Disclosing personal identifiable information in violation of Rule 9037

What does this mean to mortgage creditors? 
With closer scrutiny by the UST, it is imperative to have your documents together before any timelines or deadlines come due.  Also, review the documents you are providing to the court and omit any items that are not appropriate.  If this additional work is not done on the front end, the result may very well be increased cost and time in attempting to respond to and comply with UST inquiries and/or requests.

What does this mean to all creditors? 
Documentation is important to substantiate your claim.  All creditors should make it a practice to attach the appropriate documentation and make sure all personal identifiable information is omitted or risk contact from the UST seeking remedial action.