Moving from Loss‐Loss to Win‐Win: Mortgage Loss Mitigation Programs ABA Business Law Section – Business Bankruptcy Committee Fall Meeting 2010 National Conference of Bankruptcy Judges Hilton New Orleans Riverside Wednesday, October 13, 2010 3:00 p.m. – 5:00 p.m. Panelists Patricia Antonelli Hon. Robert D. Drain
Partridge Snow & Hahn LLP United States Bankruptcy Court for the 180 South Main Street Southern District of New York
Providence, Rhode Island 02903–7104 300 Quarropas Street
E‐mail: [email protected] White Plains, NY 10601‐4140
Phone: (401) 861‐8200 Victor G. Milione Nixon Peabody LLP 100 Summer Street Boston, MA 02110‐2131 E‐mail: [email protected] Phone: (617) 345‐1215 Debra L. Miller John Rao
Chapter 13 Trustee National Consumer Law Center
Northern District of Indiana 7 Winthrop Square, 4th Floor
P.O. Box 11550 Boston, MA 02110
South Bend, IN 46634‐0550 E‐mail: [email protected]
Phone: (617) 542‐8010
Moderator Hon. Elizabeth S. Stong United States Bankruptcy Court for the Eastern District of New York 271 Cadman Plaza East Brooklyn, NY 11201 Program Materials Panelist Biographies United States Bankruptcy Court for the Southern District of New York General Order #M‐364 – Adoption of Loss Mitigation Program Procedures  Loss Mitigation Program Procedures  Loss‐Mitigation Request – By the Debtor  Loss‐Mitigation Request – By a Creditor  Loss‐Mitigation Order Instructions for Commencement of Loss Mitigation Notice of Loss Mitigation Request Loss Mitigation Order (Chapters 7 or 11) Loss Mitigation Order (Chapter 13) Sample Orders  Order Extending Loss Mitigation Period and Adjourning Status Conference  Order to Show Cause Directing HSBC Mortgage Corporation to Comply with Order Directing Loss Mitigation and to Appear at March 11, 2010 Conference  Order to Show Cause Directing a Representative of Household Finance Realty Corporation of New York (i) to Comply with Order Directing Loss Mitigation; (ii) to appear at a Hearing on August 18, 2010; (iii) to Pay Debtors’ Attorneys Fees and (iv) to Pay a Daily Penalty until it Complies Herewith United States Bankruptcy Court for the Eastern District of New York General Order #543 – Adoption of Loss Mitigation Program Procedures  Loss Mitigation Program Procedures  Loss Mitigation Request – by the Debtor  Loss Mitigation Request – By a Creditor  Loss‐Mitigation Order Sample Orders  Loss Mitigation Order Directing Parties to Participate in Loss Mitigation Program  Order Extending Loss‐Mitigation Period and Scheduling Adjourned Loss‐
Mitigation Status Conference  Stipulation and Order Approving Loan Modification  Order Terminating Loss Mitigation Period United States Bankruptcy Court for the District of Rhode Island General Order No. 09‐003: Order Adopting Loss Mitigation Program and Procedures  Loss Mitigation Program and Procedures  Form A to G.O. 09‐003: Notice and/or Request for Loss Mitigation – By the Debtor  Form B to G.O. 09‐003: Loss Mitigation request – By a Creditor  Form C to G.O. 09‐003: Loss Mitigation Order General Order No. 10‐001: General Order Adopting First Amended Loss Mitigation Program and Procedures  First Amended Loss Mitigation Program and Procedures  Amended Form A to G.O. 10‐001: Notice and/or Request for Loss Mitigation – By the Debtor  Instructions Re: Loss Mitigation Program and Procedures (General Order No. 10‐
001) General Order No. 10‐002: General Order Adopting Second Amended Loss Mitigation Program and Procedures  Second Amended Loss Mitigation Program and Procedures  Second Amended Form C to G.O. 10‐002: Loss Mitigation Order  Instructions Re: Loss Mitigation Program and Procedures Loss Mitigation Best Practices Loss Mitigation Frequently Asked Questions In re Sosa  Objection of PHH Mortgage Corporation d/b/a PHH Mortgage Service Center to Debtor’s Request for Entry of a Loss Mitigation Order; Memorandum in Support of PHH Mortgage Corporation d/b/a PHH Mortgage Service Center to Debtor’s Request for Entry of a Loss Mitigation Order  Brief of Amicus Counsel John Rao and the National Consumer Law Center in Response to Objections to Debtors’ Request for Loss Mitigation Orders National Consumer Law Center John Rao, Recent Developments in the Home Affordable Modification Program (HAMP) NCLC Notices  Getting a Second Look  Identifying Participating Servicers  What to Do When the Servicer Asks You to Re‐verify Income Documentation  What to Do When the Servicer Denies a HAMP Mod Because the Client Received a Discharge in a Chapter 7 Case and Did Not Reaffirm the Mortgage Debt?  What to Do When the Servicer Denies a HAMP Mod Because They Re‐ran the NPV Test  What to Do When the Servicer Refuses to Accept or Process a HAMP Application Because Client is in an Active Bankruptcy Case  What to Do When the Servicer Says the Investor Is Not Participating Other Making Home Affordable HAMP Supplemental Directive 10‐02 United States Bankruptcy Court for the District of New Jersey – General Order Clarifying that Participation in the New Jersey Foreclosure Mediation Program does not Violate the Automatic Stay Patricia Antonelli
Patricia Antonelli is a partner in the law firm of Partridge, Snow & Hahn LLP. In her
practice, Ms. Antonelli advises creditors, lending institutions, banks and mortgage
companies about creditors’ rights in foreclosures, bankruptcies and collection matters and
works with clients to assist in and enforce compliance with Rhode Island and
Massachusetts law. She has extensive experience in bankruptcy and insolvency matters
and in handling commercial and residential foreclosures and workouts. Additionally, she
advises clients on issues concerning licensing and consumer compliance. She frequently
represents clients with respect to licensing issues before the Rhode Island Division of
Banking and the Massachusetts Division of Banks.
Ms. Antonelli is certified as a Creditors’ Rights Specialist by the American Board of
Certification. She is a frequent lecturer on bankruptcy and insolvency topics and on
mortgage regulatory compliance topics.
EDUCATION
Suffolk University Law School, J.D.
Dean’s List, 1989
Florida State University Law Conference
Oxford University, England, 1988
Boston College, B.A., 1986
PROFESSIONAL AFFILIATIONS
Rhode Island Bar Association
Boston Bar Association
Bankruptcy Committee
American Bankruptcy Institute
Massachusetts Mortgage Bankers Association
International Women’s Insolvency and Restructuring
Rhode Island Mortgage Bankers Association
USFN
Confederation
REPRESENTATIVE PUBLICATIONS
"Recent Massachusetts Land Court Cases Delay Foreclosures", United Trustees
Association's UTA Quarterly, Summer 2009
"Massachusetts Bankruptcy Court Issues Standing Order Addressing Borrower Contact
for Loan Modifications and Escrow Issues" United Trustees Association's UTA
Quarterly, Summer 2009
"Providence, Rhode Island Institutes New Foreclosure and Eviction Ordinances",
Partridge Snow & Hahn LLP Take Note E-news, July 2009
"Rhode Island DBR Issues Press Release on Loan Modification Activity" Partridge Snow
& Hahn LLP Take Note E-news, June 2009
”Massachusetts Bankruptcy Court Issues Standing Order Addressing Borrower Contact
for Loan Modifications and Escrow Issues” Partridge Snow & Hahn LLP Take Note Enews, May 2009
" Recent Massachusetts Land Court Cases Delay Foreclosures" Partridge Snow & Hahn
LLP Take Note E-news, April 2009
"Loan Modifications: Key to Solving the Housing Crisis?", Banker & Tradesman March
2, 2009
"Regulation of Loan Modifications Limited" Providence Business News, March 2, 2009
”Reminder: New Requirements for Foreclosure Sales Held On or After September 2,
2008” Partridge Snow & Hahn LLP Take Note E-news, September 2008.
"RI Foreclosure Requirements Have Changed", Providence Business News, September
15, 2008
"RI Law Changes re Foreclosures, Condo Lien Priority, Escrow Accounts & More",
USFN e-Update, July/August 2008
”Changes to Rhode Island Law Affect Foreclosures, Priority of Condominium Liens for
Assessments, Mortgage Escrow Accounts and Reverse Mortgages”, Partridge Snow &
Hahn LLP Take Note E-news, July 2008
“Rhode Island Legislative Update” Partridge Snow & Hahn LLP Take Note E-news, July
15, 2008
“Rhode Island Legislative Update” USFN e-Update, July/August 2008
“Rhode Island Legislative Update” DSnews website, July 17, 2008
Rhode Island chapter, The American Bar Association Foreclosure Book 2008
“Recent Developments in Debtor/Creditor Law”, Recent Developments in Federal and
Massachusetts Law 2008
"New 90-Day Right to Reinstate Notice Required for MA Residential Foreclosures
Effective 5/1/08" Partridge Snow & Hahn LLP Client Alert, April 2008
“Foreclosure & Bankruptcies”, Banker & Tradesman Mass Market Trends Report, 2008
“Highlights of New Legislation Affecting Foreclosures in Massachusetts” USFN Report,
Winter 2008
"Moratorium on Certain Foreclosures in Massachusetts" Partridge Snow & Hahn LLP
Client Alert, May 2007
"Rhode Island Residential Update" Partridge Snow & Hahn LLP Client Alert, February
2007
"Massachusetts Foreclosure Procedures Threatened" Partridge Snow & Hahn LLP Client
Alert, February 2007
RECENT SPEAKING ENGAGEMENTS
“The Mortgage Meltdown”, Rhode Island Bar Association meetings, May 14, 2009 and
June 13, 2009
Panelist: "Dangerous Document Issues - Standing and Evidence in the Courts" USFN
Loan Management & Servicing Seminar, June 3 - 5, 2009
“Facing Foreclosure in 2009”, Citizens' Law School, May18, 2009
"Bankruptcy Law Overview", Mortgage Bankers of America's Legal Issues and
Regulatory Compliance Conference, May 3 to May 6, 2009
"The Financial Crisis", Partridge Snow & Hahn LLP Seminar, January 27, 2009
“Federal and Rhode Island Law and Regulation” Rhode Island Mortgage Bankers
Association, January 19, 2009
Panelist: "New Regulations and Laws: Do You Need to Change the Way You Do
Business Going Forward?", New England Mortgage Bankers Conference, September 25,
2008
Ms. Antonelli joined a panel of distinguished judges and attorneys from around the
country to discuss “The New Challenges of Chapter 13: Being Eligible, Administering
Cases and Confirming Feasible Plans,” National Conference of Bankruptcy Judges,
October 2007
BAR MEMBERSHIPS
Rhode Island, 1991
Massachusetts, 1989
Hon. Robert D. Drain
Robert Drain is a United States Bankruptcy Judge for the Southern District of New York.
Judge Drain received his B.A. degree cum laude with honors from Yale University in 1979 and his
J.D. degree in 1984 from the Columbia University School of Law, where he was a Harlan Fiske
Stone Scholar for three years.
At the time of his appointment in 2002, he was a partner in the Bankruptcy Department of the
New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison, where he represented debtors,
trustees, secured and unsecured creditors, official and unofficial creditors committees, and
buyers of distressed businesses and distressed debt in chapter 11 cases, out-of-court
restructurings and bankruptcy-related litigation. He also was actively involved in several
transnational insolvency matters.
Judge Drain is a fellow of the American College of Bankruptcy and a member of the American
Bankruptcy Institute, the International Insolvency Institute, and the National Conference of
Bankruptcy Judges. He is a past member and secretary of the Bankruptcy and Reorganization
Committee of the Association of the Bar of the City of New York. He is an adjunct professor at St.
John's University School of Law and has lectured and written on numerous bankruptcy-related
topics.
Since his appointment he has presided over such chapter 11 cases as Loral, RCN, Cornerstone,
Refco, Allegiance Telecom, Delphi, Coudert Brothers, Frontier Airlines and Star Tribune. He also
has presided over the ancillary or plenary cases, as the case may be, of Corporacion Durango,
Satellites Mexicanas, Parmalat S. p. A. and its affiliated United States debtors, Varig S.A., Yukos
(II), SphinX, and Galvex Steel.
Victor G. Milione
Partner
Practice Group Leader
[email protected]
617-345-1215
Fax: 866-947-1974
100 Summer Street
Boston, MA 02110
437 Madison Avenue
New York, NY 10022
Practice Areas
Bankruptcy & Financial Restructuring
Leveraged Finance
Energy
Subprime Task Force
Experience
Victor G. Milione is a partner with Nixon Peabody LLP and serves as the practice group leader
for the Financial Restructuring & Bankruptcy Group. He is also a member of the firm’s
litigation, real estate, and business departments. Victor has more than twenty-two years of
experience representing financial institutions, debtors, trustees, creditors’ committees, hedge
funds, loan servicers, collateral agents, indenture trustees, and other interested parties in out-ofcourt workouts and bankruptcy proceedings domestically and internationally. He counsels clients
primarily in the areas of bankruptcy reorganizations, asset sales, loan restructurings,
modifications and forbearance agreements, receiverships, assignments for the benefit of
creditors, and commercial loan transactions. He also works with private equity, hedge, and
venture funds to structure bridge financings and create innovative solutions to the difficulties of
troubled portfolio companies.
Victor's litigation practice concentrates on matters related to bankruptcy and commercial law,
where he has tried a number of cases to successful jury verdicts. He has significant experience in
representing lenders, executives, developers, investors, syndicators, landlords, and tenants in
bankruptcy and commercial litigation, complex Chapter 11 cases, and non-bankruptcy
restructurings, workouts, and state court proceedings. His clients participate in a broad range of
industries including financial services, real estate, health and elder care, telecommunications,
hospitality, and energy. Victor has extensive litigation and alternative dispute resolution
experience in U.S. bankruptcy courts, U.S. federal district courts, and state and local courts
throughout the United States and internationally.
Victor's insolvency practice encompasses all aspects of the bankruptcy process, including
contested and competing plan confirmation hearings, asset sales and objections, contested relief
from stay and cash collateral hearings, executive compensation and retention issues, dip
financings and adversary proceedings, including avoidance actions involving fraudulent transfer
and preference litigation, and Chapter 15 ancillary proceedings. Victor has represented federal
court receivers, bankruptcy trustees, and defrauded investors in securities fraud insolvencies and
hedge fund failures. In addition, he represents private equity investors in connection with
acquiring, selling, and reorganizing distressed portfolio companies and fraudulent transfer and
breach of duty litigation arising from investments in distressed companies and in claims relating
to recharacterization and equitable subordination. In his litigation practice, Victor has handled a
broad array of commercial disputes, including cases involving real estate, contract, business
divorces, covenants not to compete, shareholder oppression, and fraud claims.
Victor works with various Nixon Peabody attorneys to counsel investors, collateral agents,
warehousing banks ,and securitization trustees in subprime mortgage company cases. He
counsels lead lenders, administrative agents, and members of syndicated loan participants, has a
broad array of experience in drafting and negotiating forbearance agreements, loan modification
agreements, and lending facilities (debtor-in-possession and otherwise), and has served as the
lead attorney in deals in excess of a billion dollars to date. He advises lenders, investors and
servicers in CMBS (commercial mortgage-backed securities) transactions, CDOs (collateralized
debt obligations), CLOs (collateralized loan obligations), CBO (collateralized bond obligations),
credit default swaps, interest rate swaps, and synthetic collateralized debt obligations. He has
acted as special bankruptcy counsel in various transactions, and in that role he has crafted and
issued true sale and non-consolidation and authority to file opinions in complex and varied deals
involving billions of dollars to date, including TIC (tenant in common) and other 1031 taxdeferred exchange offerings. He is experienced in asset based lending as well as real estate
lending, workouts, and foreclosures.
Victor regularly counsels the nation’s leading real estate financing and investment firms with
multifamily housing and commercial holdings throughout the world in defaulted tax credit, REIT
(real estate investment trusts), and REMIC (real estate mortgage investment conduits)
investments. He represents all aspects of such transactions including equity and debt positions
for market rate multifamily housing developments and for affordable multifamily housing
developments involving LIHTC (low income housing tax credits) partnerships and revenue
bonds and/or contributions from sponsored investment funds. He regularly advises on
bankruptcy issues involving HAP (housing assistance payment) contracts, RULPA (Revised
Uniform Limited Partnership Act), ULPA (Uniform Limited Partnership Act), LURAs (land use
restriction agreements), and partnership interests.
Victor consistently has been ranked as one of the top 25 bankruptcy lawyers in the country by
The Deal. He has also been recognized as a “Super Lawyer” in Bankruptcy & Creditor/Debtor
Rights based on a peer-review survey by Boston Magazine. Victor has frequently written and
lectured to lawyer and non-lawyer groups on litigation and bankruptcy matters and is a
contributing author for Massachusetts Continuing Legal Education. Victor is frequently quoted
as an authority on bankruptcy and litigation issues in print media nationwide. He has taught
courses on business law and bankruptcy law for area colleges and he is a frequent guest lecturer
on distressed real estate finance at Boston College. He regularly writes about and speaks on
bankruptcy and commercial law subjects around the country.
Education
Suffolk University Law School, J.D.
University of Connecticut, B.S.
Admissions
Victor is admitted to practice in New York, the United States District Court of New York, the
State of New York Appellate Division, the Supreme Judicial Court of Massachusetts, the U.S.
District Court for the District of Massachusetts, the Supreme Court for the United States, and the
U.S. courts of appeals of the First and Second circuits.
Affiliations
Victor is also actively engaged in charitable and community organizations. He has served as a
prior past president and current board member of the Newton Schools Foundation. He is also a
trustee for Hebrew Senior Life, Boston, MA, and volunteers his time on behalf of the United
Way, the YMCA, and the Dana Farber Cancer Institute.
He is a member of the American, Massachusetts, and Boston bar associations, the American
Trial Lawyers Association, the American Bankruptcy Institute, and the Risk Management
Association.
© 2010 Nixon Peabody LLP
Debra Miller
Chapter 13 Bankruptcy Trustee
Debra Miller is the appointed Standing Chapter 13 Bankruptcy Trustee for the Northern District
of Indiana, Fort Wayne and South Bend Divisions. She is active in the National Association of
Chapter Thirteen Trustees, serves as Vice President of the NACTT executive board and chairs
the NACTT Mortgage Committee.
Prior to her appointment in 2000, she served as the staff attorney for Gary D. Boyn, Chapter 7
panel Trustee at Warrick and Boyn LLP in Elkhart and as a Law Clerk for the Honorable
Sanford Brook.
She has two children and in a prior life, Debra served as a Special Agent for the United States
Secret Service in the Cleveland Field Office where she specialized in Credit Card and White
Collar Fraud.
John Rao
National Consumer Law Center
John Rao is an attorney with the National Consumer Law Center, Inc. Mr.
Rao focuses on consumer credit and bankruptcy issues and has served as a
panelist and instructor at numerous bankruptcy and consumer law trainings
and conferences. He is a contributing author and editor of NCLC's Consumer
Bankruptcy Law and Practice; co-author of NCLC’s Foreclosures and Guide to
Surviving Debt; and contributing author to NCLC’s Student Loan Law, Stop
Predatory Lending, and NCLC Reports: Bankruptcy and Foreclosures Edition.
He is also a contributing author to Collier on Bankruptcy and the Collier
Bankruptcy Practice Guide. Mr. Rao serves as a member of the federal
Judicial Conference Advisory Committee on Bankruptcy Rules, appointed by
Chief Justice John Roberts in 2006. He is a member of the board of directors
for the National Association of Consumer Bankruptcy Attorneys and the
American Bankruptcy Institute.
Mr. Rao is a graduate of Boston University and received his J.D. in 1982 from
the University of California (Hastings).
Hon. Elizabeth S. Stong Judge Elizabeth S. Stong was appointed as a U.S. Bankruptcy Judge for the Eastern District of New York on September 2, 2003. Before taking the bench, Judge Stong was an associate and partner at Willkie Farr & Gallagher in New York from 1987 and an associate at Cravath, Swaine & Moore in New York from 1983 to 1987, concentrating in complex federal and state civil litigation. She also was a mediator and arbitrator for the NASD, the Eastern District of New York, and New York Supreme Court’s Commercial Division. Judge Stong is Vice President of the Board of the Federal Bar Council and a trustee and member of the Executive Committee of the Practising Law Institute. She is a member of the Council of the American Law Institute and International Adviser to its joint project with the International Insolvency Institute on Transnational Insolvency. She is an advisor to the U.S. Department of Commerce Commercial Law Development Program and has trained judges in Algeria, Tunisia, Jordan, and the Arabian Peninsula in business reorganization and liquidation issues, business dispute adjudication, and alternative dispute resolution. Judge Stong is a member of the National Conference of Bankruptcy Judges, Chair of its International Judicial Relations Committee, and a member of its Liaison Committee to the American Bar Association, as well as a member of the American Bankruptcy Institute and International Insolvency Institute. She is a member of the ABA House of Delegates and Commission on Homelessness and Poverty, and was a member of the Commission on Women in the Profession. She is an officer of the ABA Business Law Section, chaired its Business and Corporate Litigation Committee, chairs its Business Law Advisors Committee, co‐chairs the ABA’s Judicial Division Bench‐Bar Bankruptcy Council, and serves on the National Conference of Federal Trial Judges Executive Committee. Judge Stong is a member of the New York City Bar’s Committee to Encourage Judicial Service, and chaired the City Bar’s Alternative Dispute Resolution Committee. She also served as Vice Chair and a member of the City Bar’s Judiciary Committee, and was a member of its Committee on Bankruptcy and Corporate Reorganization and Public Service and Education Committee. She is a member of the New York State and Brooklyn Bar Associations. Judge Stong previously served as President of the Harvard Law School Association, Vice President of the Board of Directors of New York City Bar Fund Inc. and the City Bar Justice Center, and was a member of the board of MFY Legal Services, Inc., one of the largest providers of free civil legal services to low‐income residents of New York City. Judge Stong is an adjunct professor of law at St. John’s University School of Law and Brooklyn Law School, and an occasional speaker at Harvard Law School. She has authored articles and contributed chapters to several practice manuals and treatises on bankruptcy law, securities law, trial strategy, and alternative dispute resolution. She is a frequent speaker on bankruptcy law and procedure, securities law, settlement strategy and damages assessment, discovery techniques, ADR, and public service. She is a fellow of the American and New York Bar Foundations. Judge Stong graduated from Harvard University magna cum laude with an A.B. in History and Science in 1978 and from Harvard Law School in 1982. She was a law clerk to Hon. A. David Mazzone of the U.S. District Court for the District of Massachusetts from 1982 to 1983. June 2009 UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re:
:
:
Adoption of Loss Mitigation Program Procedures :
:
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GENERAL ORDER #M-364
By resolution of the Board of Judges of the United States Bankruptcy Court for
the Southern District of New York, it is decided that a uniform, comprehensive, courtsupervised loss mitigation program will facilitate consensual resolutions for individual
debtors whose residential real property is at risk of loss to foreclosure. A loss mitigation
program will avoid the need for various types of bankruptcy litigation, reduce costs to
debtors and secured creditors, and enable debtors to reorganize or otherwise address their
most significant debts and assets under the United States Bankruptcy Code. Accordingly,
the “Loss Mitigation Program Procedures” annexed to this order are adopted, pursuant to
11 U.S.C. § 105(a).
It is also decided that the Loss Mitigation Program Procedures and forms for
requesting loss mitigation shall be available in the clerk’s office and on the court’s web
site. The Court may modify the Loss Mitigation Program Procedures from time to time
by duly adopted General Order, making the revised Loss Mitigation Program Procedures
available in the clerk’s office and on the court’s web site immediately.
NOW, THEREFORE, IT IS ORDERED that the Loss Mitigation Program
Procedures are adopted, effective January 5, 2009.
Dated: New York, New York
December 18, 2008
/s/
Stuart M. Bernstein
STUART M. BERNSTEIN
Chief Bankruptcy Judge
.
LOSS MITIGATION PROGRAM PROCEDURES
I. PURPOSE
The Loss Mitigation Program is designed to function as a forum for debtors and
lenders to reach consensual resolution whenever a debtor’s residential property is at risk
of foreclosure. The Loss Mitigation Program aims to facilitate resolution by opening the
lines of communication between the debtors’ and lenders’ decision-makers. While the
Loss Mitigation Program stays certain bankruptcy deadlines that might interfere with the
negotiations or increase costs to the loss mitigation parties, the Loss Mitigation Program
also encourages the parties to finalize any agreement under bankruptcy court protection,
instead of seeking dismissal of the bankruptcy case.
II. LOSS MITIGATION DEFINED
The term “loss mitigation” is intended to describe the full range of solutions that
may avert either the loss of a debtor’s property to foreclosure, increased costs to the
lender, or both. Loss mitigation commonly consists of the following general types of
agreements, or a combination of them: loan modification, loan refinance, forbearance,
short sale, or surrender of the property in full satisfaction. The terms of a loss mitigation
solution will vary in each case according to the particular needs and goals of the parties.
III. ELIGIBILITY
The following definitions are used to describe the types of parties, properties and
loans that are eligible for participation in the Loss Mitigation Program:
A. DEBTOR
The term “Debtor” means any individual debtor in a case filed under Chapter 7,
11, 12 or 13 of the Bankruptcy Code, including joint debtors.
B. PROPERTY
The term “Property” means any real property or cooperative apartment used as a
principal residence in which an eligible Debtor holds an interest.
C. LOAN
The term “Loan” means any mortgage, lien or extension of money or credit
secured by eligible Property or stock shares in a residential cooperative, regardless of
whether or not the Loan (1) is considered to be “subprime” or “non-traditional,” (2) was
in foreclosure prior to the bankruptcy filing, (3) is the first or junior mortgage or lien on
the Property, or (4) has been “pooled,” “securitized,” or assigned to a servicer or to a
trustee.
D. CREDITOR
The term “Creditor” refers to any holder, mortgage servicer or trustee of an
eligible Loan.
IV. ADDITIONAL PARTIES
A. OTHER CREDITORS
Where it may be necessary or desirable to obtain a global resolution, any party
may request, or the bankruptcy court may direct, that multiple Creditors participate in
loss mitigation.
B. CO-DEBTORS AND THIRD PARTIES
Where the participation of a co-debtor or other third party may be necessary or
desirable, any party may request, or the bankruptcy court may direct, that such party
participate in loss mitigation, to the extent that the bankruptcy court has jurisdiction over
the party, or if the party consents to participation in loss mitigation.
C. CHAPTER 13 TRUSTEE
The Chapter 13 Trustee has the duty in Section 1302(b)(4) of the Bankruptcy
Code to “advise, other than on legal matters, and assist the debtor in performance under
the plan.” Any party may request, or the bankruptcy court may direct, the Chapter 13
Trustee to participate in loss mitigation to the extent that such participation would be
consistent with the Chapter 13 Trustee’s duty under the Bankruptcy Code.
D. MEDIATOR
At any time, a Debtor or Creditor participating in the Loss Mitigation Program
may request, or the bankruptcy court may order, the appointment of an independent
mediator from the United States Bankruptcy Court for the Southern District of New
York’s Register of Mediators, which may be viewed at
http://www.nysb.uscourts.gov/mediators.html. A mediator will assist in loss mitigation
in accordance with these Procedures and with the United States Bankruptcy Court of the
Southern District of New York Amended General Order for the Adoption of Procedures
Governing Mediation of Matters in Bankruptcy Cases and Adversary Proceedings dated
January 17, 1995 (General Order M-143), as amended on October 20, 1999 (General
Order M-211).
V. COMMENCEMENT OF LOSS MITIGATION
Parties are encouraged to request loss mitigation as early in the case as possible,
but loss mitigation may be initiated at any time, by any of the following methods:
A. BY THE DEBTOR
1. In Section C of the Model Chapter 13 Plan, a Chapter 13 Debtor may indicate an
interest in discussing loss mitigation with a particular Creditor The Creditor shall
have 21 days to object. If no objection is filed, the bankruptcy court may enter an
order (a “Loss Mitigation Order”).
2. A Debtor may file a request for loss mitigation with a particular Creditor. The
Creditor shall have 14 days to object. If no objection is filed, the bankruptcy
court may enter a Loss Mitigation Order.
-2-
3. If a Creditor has filed a motion requesting relief from the automatic stay pursuant
to Section 362 of the Bankruptcy Code (a “Lift-Stay Motion”), at any time prior
to the conclusion of the hearing on the Lift-Stay Motion, the Debtor may file a
request for loss mitigation. The Debtor and Creditor shall appear at the scheduled
hearing on the Lift-Stay Motion, and the bankruptcy court will consider the loss
mitigation request and any opposition by the Creditor.
B. BY A CREDITOR
A Creditor may file a request for loss mitigation. The Debtor shall have 7 days to
object. If no objection is filed, the bankruptcy court may enter a Loss Mitigation Order.
C. BY THE BANKRUPTCY COURT
The bankruptcy court may enter a Loss Mitigation Order at any time, provided
that the parties that will be bound by the Loss Mitigation Order (the “Loss Mitigation
Parties”) have had notice and an opportunity to object.
D. OPPORTUNITY TO OBJECT
Where any party files an objection, a Loss Mitigation Order shall not be entered
until the bankruptcy court has held a hearing to consider the objection. At the hearing, a
party objecting to loss mitigation must present specific reasons why it believes that loss
mitigation would not be successful. If a party objects on the grounds that loss mitigation
has been requested in bad faith, the assertion must be supported by objective reasons.
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VI. LOSS MITIGATION ORDER
A. DEADLINES
A Loss Mitigation Order shall contain deadlines for all of the following:
1. The date by which the Loss Mitigation Parties shall designate contact persons and
disclose contact information, if this information has not been previously provided.
2. The date by which each Creditor must initially contact the Debtor.
3. The date by which each Creditor must transmit any information request to the
Debtor.
4. The date by which the Debtor must transmit any information request to each
Creditor.
5. The date by which a written report must be filed or the date and time set for a
status conference at which a verbal report must be provided. Whenever possible,
in a Chapter 13 case the status conference will coincide with the first date set for
confirmation of the Chapter 13 plan, or an adjourned confirmation hearing.
Where a written report is required, it should generally be filed not later than 7
days after the conclusion of the initial loss mitigation session.
6. The date when the loss mitigation period will terminate, unless extended.
B. EFFECT
Whenever a Loss Mitigation Order is entered, the following shall apply to the
Loss Mitigation Parties:
1. Each Creditor is authorized to contact the Debtor directly. It shall be presumed
that such communications do not violate the automatic stay.
2. Except where necessary to prevent irreparable injury, loss or damage, a Creditor
shall not file a Lift-Stay Motion during the loss mitigation period. Any Lift-Stay
Motion filed by the Creditor prior to the entry of the Loss Mitigation Order shall
be adjourned to a date after the last day of the loss mitigation period, and the stay
shall be extended pursuant to Section 362(e) of the Bankruptcy Code.
3. In a Chapter 13 case, the deadline by which a Creditor must object to
confirmation of the Chapter 13 plan shall be extended to permit the Creditor an
additional 14 days after the termination of loss mitigation, including any
extension of the loss mitigation period.
4. All communications and information exchanged by the Loss Mitigation Parties
during loss mitigation will be inadmissible in any subsequent proceeding pursuant
to Federal Rule of Evidence 408.
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VII. DUTIES UPON COMMENCEMENT OF LOSS MITIGATION
Upon entry of a Loss Mitigation Order, the Loss Mitigation Parties shall have the
following duties:
A. GOOD FAITH
The Loss Mitigation Parties shall negotiate in good faith. A party that fails to
participate in loss mitigation in good faith may be subject to sanctions.
B. CONTACT INFORMATION
1. The Debtor: Unless the Debtor has already done so in the Chapter 13 plan or as
part of a request for loss mitigation, the Debtor shall provide written notice to
each Creditor, indicating the manner in which the Creditor should contact the
Debtor.
2. The Creditor: Unless a Creditor has already done so as part of a request for loss
mitigation, each Creditor shall provide written notice to the Debtor, identifying
the name, address and direct telephone number of the contact person who has full
settlement authority.
C. STATUS REPORT
The Loss Mitigation Parties shall provide either a written or verbal report to the
bankruptcy court regarding the status of loss mitigation within the time set by the
bankruptcy court in the Loss Mitigation Order. The status report shall state whether one
or more loss mitigation sessions have been conducted, whether a resolution was reached,
and whether one or more of the Loss Mitigation Parties believe that additional loss
mitigation sessions would be likely to result in either a partial or complete resolution. A
status report may include a request for an extension of the loss mitigation period.
D. BANKRUPTCY COURT APPROVAL
The Loss Mitigation Parties shall seek bankruptcy court approval of any
resolution or settlement reached during loss mitigation.
VIII. LOSS MITIGATION PROCESS
A. INITIAL CONTACT
Following entry of a loss mitigation order, the contact person designated by each
Creditor shall contact the Debtor and any other Loss Mitigation Party within the time set
by the bankruptcy court. The Debtor may contact any other Loss Mitigation Party at any
time. The purpose of the initial contact is to create a framework for the discussion at the
loss mitigation session and to ensure that each of the Loss Mitigation Parties will be
prepared to participate in the loss mitigation session – it is not intended to limit additional
issues or proposals that may arise during the session. During the initial contact phase, the
Loss Mitigation Parties should discuss the following:
1. The time and method for conducting the loss mitigation sessions.
2. The types of loss mitigation solutions under consideration by each party.
-5-
3. A plan for the exchange of required information prior to the loss mitigation
session, including the due date for the Debtor to complete and return any
information request or other loss mitigation paperwork that each Creditor may
require. All information should be provided at least 7 days prior to the loss
mitigation session.
B. LOSS MITIGATION SESSIONS
Loss mitigation sessions may be conducted in person, telephonically or via video
conference. At the conclusion of each loss mitigation session, the Loss Mitigation Parties
should discuss whether additional sessions are necessary and set the time and method for
conducting any additional sessions, including a schedule for the exchange of any further
information or documentation that may be required.
C. BANKRUPTCY COURT ASSISTANCE
At any time during the loss-mitigation period, a Loss Mitigation Party may
request a settlement conference or status conference with the bankruptcy court.
D. SETTLEMENT AUTHORITY
Each Loss Mitigation Party must have a person with full settlement authority
present during a loss mitigation session. During a status conference or settlement
conference with the bankruptcy court, the person with full settlement authority must
either attend the conference in person or be available by telephone or video conference
beginning 30 minutes prior to the start of the conference.
IX. DURATION, EXTENSION AND EARLY TERMINATION
A. INITIAL PERIOD
The initial loss mitigation period shall be set by the bankruptcy court in the Loss
Mitigation Order.
B. EXTENSION
1. Agreement: The Loss Mitigation Parties may agree to an extension of the loss
mitigation period. The Loss Mitigation Parties shall request an extension in
writing, filed on the docket in the main bankruptcy case and served on all parties
in interest, who shall have three days to object to a request for extension of the
loss mitigation period. The bankruptcy court may grant a request for extension of
the loss mitigation period for cause.
2. No Agreement: Where a Loss Mitigation Party does not consent to the request for
an extension of the loss mitigation period, the bankruptcy court shall schedule a
hearing to consider whether further loss mitigation sessions are likely to be
successful. The bankruptcy court may order a reasonable extension if it appears
that (1) a further loss mitigation session is likely to result in a complete or partial
resolution that will provide a substantial benefit to a Loss Mitigation Party, (2) the
party opposing the extension has not participated in good faith or has failed in a
material way to comply with these Procedures, or (3) the party opposing the
extension would not be prejudiced.
-6-
C. EARLY TERMINATION
1. Upon Request of a Loss Mitigation Party: A Loss Mitigation Party may request
that the loss mitigation period be terminated and shall state the reasons for the
request. Except where immediate termination is necessary to prevent irreparable
injury, loss or damage, the request shall be made on notice to all other Loss
Mitigation Parties, and the bankruptcy court may schedule a hearing to consider
the termination request.
2. Dismissal of the Bankruptcy Case:
a. Other than at the request of a Chapter 13 Debtor, or the motion of the
United States Trustee or Trustee for failure to comply with requirements
under the Bankruptcy Code: Except where a Chapter 13 Debtor requests
voluntary dismissal, or upon motion, a case shall not be dismissed during
the loss mitigation period unless the Loss Mitigation Parties have provided
the bankruptcy court with a status report that is satisfactory to the court.
The bankruptcy court may schedule a further status conference with the
Loss Mitigation Parties prior to dismissal of the case.
b. Upon the request of a Chapter 13 Debtor: A Debtor is not required to
request dismissal of the bankruptcy case as part of any resolution or
settlement that is offered or agreed to during the loss mitigation
period. Where a Chapter 13 Debtor requests voluntary dismissal of the
bankruptcy case during the loss mitigation period, the Debtor’s dismissal
request shall indicate whether the Debtor agreed to any settlement or
resolution from a Loss Mitigation Party during the loss mitigation period
or intends to accept an offer of settlement made by a Loss Mitigation Party
during the loss mitigation period.
c. Notice: If a bankruptcy case is dismissed for any reason during the lossmitigation period, the Clerk of the Court shall file a notice on the docket
indicating that loss mitigation efforts were ongoing at the time the
bankruptcy case was dismissed.
X. SETTLEMENT
The bankruptcy court will consider any agreement or resolution reached during
loss mitigation (a “Settlement”) and may approve the Settlement, subject to the following
provisions:
1. Implementation: A Settlement may be noticed and implemented in any manner
permitted by the Bankruptcy Code and Federal Rules of Bankruptcy Procedure
(“Bankruptcy Rules”), including, but not limited to, a stipulation, sale, plan of
reorganization or amended plan of reorganization.
2. Fees, Costs or Charges: If a Settlement provides for a Creditor to receive payment
or reimbursement of any fee, cost or charge that arose from loss mitigation, such
fees, costs or charges shall be disclosed to the Debtor and to the bankruptcy court
prior to approval of the Settlement.
-7-
3. Signatures: Consent to the Settlement shall be acknowledged in writing by (1) the
Creditor representative who participated in loss mitigation, (2) the Debtor, and (3)
the Debtor’s attorney, if applicable.
4. Hearing: Where a Debtor is represented by counsel, a Settlement may be
approved by the bankruptcy court without further notice, or upon such notice as
the bankruptcy court directs, unless additional notice or a hearing is required by
the Bankruptcy Code or Bankruptcy Rules. Where a Debtor is not represented by
counsel, a Settlement shall not be approved until after the bankruptcy court has
conducted a hearing at which the Debtor shall appear in person.
5. Dismissal Not Required: A Debtor is not required to request dismissal of the
bankruptcy case in order to effectuate a Settlement. In order to ensure that the
Settlement is enforceable, the Loss Mitigation Parties should seek bankruptcy
court approval of the Settlement. Where the Debtor requests or consents to
dismissal of the bankruptcy case as part of the Settlement, the bankruptcy court
may approve the Settlement as a “structured dismissal,” if such relief complies
with the Bankruptcy Code and Bankruptcy Rules.
XI. COORDINATION WITH OTHER PROGRAMS
[Provision may be added in the future to provide for coordination with other loss
mitigation programs, including programs in the New York State Unified Court System.]
-8-
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------------x
In re:
Chapter
,
Case No.
-
(
)
Debtor(s).
---------------------------------------------------------x
LOSS-MITIGATION REQUEST – BY THE DEBTOR
I am a Debtor in this case. I hereby request loss mitigation with respect to [Identify the property,
loan and creditor(s) for which you are requesting loss mitigation]:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
SIGNATURE
I understand that if the Court orders loss mitigation in this case, I will be expected to comply
with the Loss Mitigation Procedures. I agree to comply with the Loss Mitigation Procedures,
and I will participate in loss mitigation in good faith. I understand that loss mitigation is
voluntary for all parties, and that I am not required to enter into any agreement or settlement with
any other party as part of this loss mitigation. I also understand that no other party is required to
enter into any agreement or settlement with me. I understand that I am not required to request
dismissal of this case as part of any resolution or settlement that is offered or agreed to during
the loss mitigation period.
Sign:
. Date: __________________, 2008
Print Name:
.
Telephone Number:
.
E-mail address (if any):
.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------------x
In re:
Chapter
,
Case No.
-
(
)
Debtor(s).
---------------------------------------------------------x
LOSS-MITIGATION REQUEST – BY A CREDITOR
I am a creditor (including a holder, servicer or trustee of a mortgage or lien secured by property
used by the Debtor as a principal residence) of the Debtor in this case. I hereby request loss
mitigation with respect to [Identify the property, loan and creditor(s) for which you are
requesting loss mitigation]:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
SIGNATURE
I have reviewed the Loss Mitigation Procedures, and I understand that if the Court orders loss
mitigation in this case, I will be bound by the Loss Mitigation Procedures. I agree to comply
with the Loss Mitigation Procedures, and I will participate in loss mitigation in good faith. If
loss mitigation is ordered, I agree to provide the Court with a written or verbal status report
stating whether or not the parties participated in one or more loss mitigation sessions, whether or
not a settlement was reached, and whether negotiations are ongoing. I agree that I will not
require the Debtor to request or cause dismissal of this case as part of any resolution or
settlement that is offered or agreed to during the loss mitigation period.
Sign:
. Date: __________________, 2008
Print Name:
.
Title:
.
Firm or Company:
.
Telephone Number:
.
E-mail address (if any):
.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------------x
In re:
,
Chapter
Case No.
-
(
)
Debtor(s).
---------------------------------------------------------x
LOSS-MITIGATION ORDER
A Loss Mitigation Request 1 was filed by the debtor on [Date]
A Loss Mitigation Request was filed by a creditor on [Date]
, 2009.
, 2009.
The Court raised the possibility of loss mitigation, and the parties have had notice and an
opportunity to object.
Upon the foregoing, it is hereby
ORDERED, that the following parties (collectively, the “Loss Mitigation Parties”) are
directed to participate in loss mitigation:
1. The Debtor
2.
, the Creditor with respect to
[describe Loan and/or Property].
3. [Additional parties, if any]
It is further ORDERED, that the Loss Mitigation Parties shall comply with the Loss
Mitigation Procedures annexed to this Order; and it is further
ORDERED, that the Loss Mitigation Parties shall observe the following deadlines:
1. Each Loss Mitigation Party shall designate contact persons and disclose contact
[suggested time is 7 days], unless this
information by
information has been previously provided. As part of this obligation, a Creditor
shall furnish each Loss Mitigation Party with written notice of the name, address
and direct telephone number of the person who has full settlement authority.
2. Each Creditor that is a Loss Mitigation Party shall contact the Debtor within 14 days
of the date of this Order.
3. Each Loss Mitigation Party must make their information request, if any, within 14
days of the date of this Order.
4. Each Loss Mitigation Party shall respond to an information request within 14 days
after an information request is made, or 7 days prior to the Loss Mitigation
Session, whichever is earlier.
1
All capitalized terms have the meanings defined in the Loss Mitigation Procedures.
5. The Loss Mitigation Session shall be scheduled not later than
[suggested time is within 35 days of the date of the order].
6. The loss mitigation period shall terminate on
[suggested
time is within 42 days of the date of the order], unless extended as provided in the
Loss Mitigation Procedures.
It is further ORDERED, that a status conference will be held in this case on
[suggested time is within 42 days of the date of the order] (the “Status
Conference”). The Loss Mitigation Parties shall appear at the Status Conference and provide the
Court with a verbal Status Report unless a written Status Report that is satisfactory to the Court
has been filed not later than 7 days prior to the date of the Status Conference and requests that
the Status Conference be adjourned or cancelled; and it is further
ORDERED, that at the Status Conference, the Court may consider a Settlement reached
by the Loss Mitigation Parties, or may adjourn the Status Conference if necessary to allow for
adequate notice of a request for approval of a Settlement; and it is further
ORDERED, that any matters that are currently pending between the Loss Mitigation
Parties (such as motions or applications, and any objection, opposition or response thereto) are
hereby adjourned to the date of the Status Conference to the extent those matters concern (1)
relief from the automatic stay, (2) objection to the allowance of a proof of claim, (3) reduction,
reclassification or avoidance of a lien, (4) valuation of a Loan or Property, or (5) objection to
confirmation of a plan of reorganization; and it is further.
ORDERED, that the time for each Creditor that is a Loss Mitigation Party in this case to
file an objection to a plan of reorganization in this case shall be extended until 14 days after the
termination of the loss mitigation period, including any extension of the Loss Mitigation period.
Dated: Poughkeepsie, New York
, 2009
BY THE COURT
.
United States Bankruptcy Judge
-2-
INSTRUCTIONS FOR COMMENCEMENT OF LOSS MITIGATION
WHERE DEBTOR REQUESTS LOSS MITIGATION IN CHAPTER 13 PLAN:
The debtor must file and serve the Notice of Loss-Mitigation Request on the creditor and must file
an affidavit of service (attorneys should do so electronically on the Court’s ECF system). The Notice of
Loss-Mitigation Request form is available on the Court’s website.
The creditor has 21 days to object from the date of mailing (service) of the notice.
If no objection is filed, the debtor shall submit an order as soon as possible. The order may be
submitted: 1) after the expiration of the 21 days or 2) with the Notice of Loss-Mitigation Request on
Notice of Presentment on the 22nd day.
DEBTOR’S REQUEST FOR LOSS MITIGATION:
Where a debtor does not make the request in a chapter 13 plan but does so separately, the debtor
must file and serve the request, Loss -Mitigation Request – By the Debtor, on the creditor and must file an
affidavit of service (attorneys should do so electronically on the Court’s ECF system). The form for
making the request is available on the Court’s website [please use the form, Loss -Mitigation Request –
By the Debtor].
The creditor has 14 days to object from the date of mailing (service) of the notice.
If no objection is filed, the debtor shall submit an order as soon as possible. The order may be
submitted: 1) after the expiration of the 14 days or 2) with the request [Loss -Mitigation Request – By the
Debtor] on Notice of Presentment on the 15th day.
WHERE DEBTOR REQUESTS LOSS MITIGATION DURING PENDENCY OF SECTION 362
MOTION FOR RELIEF FROM THE AUTOMATIC STAY:
Where the debtor’s request for loss mitigation is related to a pending section 362 motion (for
relief from the automatic stay), the debtor must file and serve the request, Loss -Mitigation Request – By
the Debtor, on the creditor and must file an affidavit of service (attorneys should do so electronically on
the Court’s ECF system). The form for making the request is available on the Court’s website [please use
the form, Loss -Mitigation Request – By the Debtor].
The debtor and creditor must appear at the hearing on the Lift-Stay Motion and the court will
consider the loss mitigation request and any opposition thereto by the creditor. If the court approves the
request, the debtor shall submit an order as soon as possible.
CREDITOR’S REQUEST FOR LOSS MITIGATION:
The creditor must file and serve the request, Loss -Mitigation Request – By the Creditor, on the
debtor and debtor’s attorney and must file an affidavit of service (attorneys and those with limited-access
passwords to the Court’s ECF system should do so electronically). The form for making the request is
available on the Court’s website [please use the form, Loss -Mitigation Request – By the Creditor].
The debtor has 7 days to object from the date of mailing (service) of the notice.
If no objection is filed, the creditor shall submit an order as soon as possible. The order may be
submitted: 1) after the expiration of the 7 days or 2) with the request [Loss -Mitigation Request – By the
Creditor] on Notice of Presentment on the 8th day.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------------x
In re:
Chapter 13
Case No.
-
(
)
Debtor(s).
---------------------------------------------------------x
NOTICE OF LOSS-MITIGATION REQUEST
I am a Debtor in this case. On
[date] I requested loss mitigation in my Chapter 13 Plan
with respect to [Identify the property, loan and creditor(s) for which you are requesting loss
mitigation]:
Date of this Notice:
DEBTOR INFORMATION
Name:
Mailing Address:
Telephone Number:
.
E-mail address (if any):
Attorney Information (if any):
Name:
Address:
Telephone Number:
Fax Number:
E-mail address:
.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------------x
In re:
Chapter 7
Case No.
-
(
)
Debtor(s).
---------------------------------------------------------x
LOSS-MITIGATION ORDER
A Loss Mitigation Request1 was filed by the debtor on [Date]
A Loss Mitigation Request was filed by a creditor on [Date]
, 2009.
, 2009.
The Court raised the possibility of loss mitigation, and the parties have had notice and an
opportunity to object.
Upon the foregoing, it is hereby
ORDERED, that the following parties (collectively, the “Loss Mitigation Parties”) are
directed to participate in loss mitigation:
1. The Debtor
2.
, the Creditor with respect to
[describe Loan and/or Property].
3. [Additional parties, if any]
It is further ORDERED, that the Loss Mitigation Parties shall comply with the Loss
Mitigation Procedures annexed to this Order; and it is further
ORDERED, that the Loss Mitigation Parties shall observe the following deadlines:
1. Each Loss Mitigation Party shall designate contact persons and disclose contact
information by
[suggested time is 7 days], unless this information has been
previously provided. As part of this obligation, a Creditor shall furnish each Loss
Mitigation Party with written notice of the name, address and direct telephone
number of the person who has full settlement authority.
2. Each Creditor that is a Loss Mitigation Party shall contact the Debtor within 14 days
of the date of this Order.
3. Each Loss Mitigation Party must make their information request, if any, within 14
days of the date of this Order.
4. Each Loss Mitigation Party shall respond to an information request within 14 days
after an information request is made, or 7 days prior to the Loss Mitigation
Session, whichever is earlier.
1
All capitalized terms have the meanings defined in the Loss Mitigation Procedures.
5. The Loss Mitigation Session shall be scheduled not later than
is within 35 days of the date of the order].
[suggested time
6. The loss mitigation period shall terminate on
[suggested time is within 42 days
of the date of the order], unless extended as provided in the Loss Mitigation
Procedures.
It is further ORDERED, that a status conference will be held in this case on
at
10:00 a.m. [suggested time is within 42 days of the date of the order] before the undersigned
at the United States Bankruptcy Court, Courtroom 610, One Bowling Green, New York,
New York 10004, (the “Status Conference”). The Loss Mitigation Parties shall appear at the
Status Conference and provide the Court with a verbal Status Report unless a written Status
Report that is satisfactory to the Court has been filed not later than 7 days prior to the date of the
Status Conference and requests that the Status Conference be adjourned or cancelled; and it is
further
ORDERED, that at the Status Conference, the Court may consider a Settlement reached
by the Loss Mitigation Parties, or may adjourn the Status Conference if necessary to allow for
adequate notice of a request for approval of a Settlement; and it is further
ORDERED, that any matters that are currently pending between the Loss Mitigation
Parties (such as motions or applications, and any objection, opposition or response thereto) are
hereby adjourned to the date of the Status Conference to the extent those matters concern (1)
relief from the automatic stay, (2) objection to the allowance of a proof of claim, (3) reduction,
reclassification or avoidance of a lien, (4) valuation of a Loan or Property, or (5) objection to
confirmation of a plan of reorganization; and it is further.
ORDERED, that the time for each Creditor that is a Loss Mitigation Party in this case to
file an objection to a plan of reorganization in this case shall be extended until 14 days after the
termination of the loss mitigation period, including any extension of the Loss Mitigation period.
Dated:
, New York
, 2009
.
United States Bankruptcy Judge
-2-
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------------x
In re:
Chapter 13
Case No.
-
(
)
Debtor(s).
---------------------------------------------------------x
LOSS-MITIGATION ORDER
A Loss Mitigation Request1 was filed by the debtor on [Date]
A Loss Mitigation Request was filed by a creditor on [Date]
, 2009.
, 2009.
The Court raised the possibility of loss mitigation, and the parties have had notice and an
opportunity to object.
Upon the foregoing, it is hereby
ORDERED, that the following parties (collectively, the “Loss Mitigation Parties”) are
directed to participate in loss mitigation:
1. The Debtor
2.
, the Creditor with respect to
[describe Loan and/or Property].
3. [Additional parties, if any]
It is further ORDERED, that the Loss Mitigation Parties shall comply with the Loss
Mitigation Procedures annexed to this Order; and it is further
ORDERED, that the Loss Mitigation Parties shall observe the following deadlines:
1. Each Loss Mitigation Party shall designate contact persons and disclose contact
information by
[suggested time is 7 days], unless this information has been
previously provided. As part of this obligation, a Creditor shall furnish each Loss
Mitigation Party with written notice of the name, address and direct telephone
number of the person who has full settlement authority.
2. Each Creditor that is a Loss Mitigation Party shall contact the Debtor within 14 days
of the date of this Order.
3. Each Loss Mitigation Party must make their information request, if any, within 14
days of the date of this Order.
4. Each Loss Mitigation Party shall respond to an information request within 14 days
after an information request is made, or 7 days prior to the Loss Mitigation
Session, whichever is earlier.
1
All capitalized terms have the meanings defined in the Loss Mitigation Procedures.
5. The Loss Mitigation Session shall be scheduled not later than
is within 35 days of the date of the order].
[suggested time
6. The loss mitigation period shall terminate on
[suggested time is within 42 days
of the date of the order], unless extended as provided in the Loss Mitigation
Procedures.
It is further ORDERED, that a status conference will be held in this case on
at
AM [suggested time is within 42 days of the date of the order] before the undersigned
at the United States Bankruptcy Court, 300 Quarropas Street, White Plains, New York
10601, Courtroom to be assigned (the “Status Conference”). The Loss Mitigation Parties shall
appear at the Status Conference and provide the Court with a verbal Status Report unless a
written Status Report that is satisfactory to the Court has been filed not later than 7 days prior to
the date of the Status Conference and requests that the Status Conference be adjourned or
cancelled; and it is further
ORDERED, that at the Status Conference, the Court may consider a Settlement reached
by the Loss Mitigation Parties, or may adjourn the Status Conference if necessary to allow for
adequate notice of a request for approval of a Settlement; and it is further
ORDERED, that any matters that are currently pending between the Loss Mitigation
Parties (such as motions or applications, and any objection, opposition or response thereto) are
hereby adjourned to the date of the Status Conference to the extent those matters concern (1)
relief from the automatic stay, (2) objection to the allowance of a proof of claim, (3) reduction,
reclassification or avoidance of a lien, (4) valuation of a Loan or Property, or (5) objection to
confirmation of a plan of reorganization; and it is further.
ORDERED, that the time for each Creditor that is a Loss Mitigation Party in this case to
file an objection to a plan of reorganization in this case shall be extended until 14 days after the
termination of the loss mitigation period, including any extension of the Loss Mitigation period.
Dated:
, New York
, 2009
.
United States Bankruptcy Judge
-2-
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
_____________________________________________
In re:
Case No.: 09-24438-rdd
(Chapter 13)
LAMAR MCNABB,
Debtor.
_____________________________________________
ORDER EXTENDING LOSS MITIGATION PERIOD AND ADJOURNING STATUS
CONFERENCE
It appearing that the above debtor, LAMAR MCNABB has requested Loss Mitigation; and it further
appearing that an order was entered by this Court on or about March 24, 2010 granting such request; and it further
appearing that the parties have been cooperating with respect to the Loss Mitigation request and, through their
counsel, have agreed to extend the Loss Mitigation period and adjourn the Status Conference originally scheduled
for July 14, 2010; and good cause appearing therefor, it is hereby
ORDERED, that the Loss Mitigation period is extended to September 9, 2010 and the Status Conference
will now be held on September 8, 2010 at 10:00 a.m.
DATED:
White Plains, New York
July 13, 2010
________________________________________
Hon. ROBERT D. DRAIN
United States Bankruptcy Judge
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------x
In re
Chapter 7
Jean Touzin and Marie Clotaire,
Case No. 09-23953(RDD)
Debtors
-------------------------------------------------x
ORDER TO SHOW CAUSE DIRECTING HSBC MORTGAGE
CORPORATION TO COMPLY WITH ORDER DIRECTING LOSS
MITIGATION AND TO APPEAR AT MARCH 11, 2010 CONFERENCE
The above debtors (the “Debtors”) filed for relief under Chapter 7 of the
Bankruptcy Code on October 16, 2009. On November 11, 2009, the Debtors filed a
request to engage in loss mitigation with HSBC Mortgage Corporation under the
procedures established by the United States Bankruptcy Court for the Southern District of
New York pursuant to the Administrative Order signed by the Honorable Stuart M.
Bernstein, Chief Bankruptcy Judge on December 18, 2008 (“Loss Mitigation”). On
December 10, 2009, the Court entered an order directing Loss Mitigation and subjecting
the parties to the deadlines therein (the “Loss Mitigation Order”). On January 25, 2010 at
the regularly scheduled Loss Mitigation conference, Debtor’s counsel appeared; no
representative of HSBC Mortgage Corporation appeared. Debtor’s counsel represented
at the conference that HSBC Mortgage Corporation had not responded to any notice or
overtures made by or on behalf of the Debtors regarding the pending Loss Mitigation.
Such delay materially impairs the effectiveness of Loss Mitigation and the Loss
Mitigation Order. Accordingly, it is hereby
ORDERED that HSBC Mortgage Corporation promptly comply with the Loss
Mitigation Order; and it is further
ORDERED that, absent parties’ joint request for additional time in light of good
faith efforts to comply with the Loss Mitigation Order, a representative with authority on
behalf of HSBC Mortgage Corporation and counsel appear at the Loss Mitigation
conference to be held before the Honorable Robert D. Drain, United States Bankruptcy
Judge, on March 11, 2010 at 10:00 a.m. in Courtroom 118, at the United States
1
Bankruptcy Court, 300 Quarropas Street, White Plains, New York 10601 to report on the
progress of the instant Loss Mitigation. Failure to appear may result in the imposition of
sanctions, including the Debtors’ costs and expenses, including reasonable attorneys’ fees
and expenses, relating to the adjourned conference; and it is further
ORDERED that the Loss Mitigation period is extended through May 11, 2010;
and it is further
ORDERED that counsel for the Debtors promptly serve a copy of this order on
HSBC, including at the address that appears on the Debtors’ most recent mortgage
statement.
Dated White Plains, New York
February 1, 2010
____________________
Honorable Robert D. Drain
United States Bankruptcy Judge
2
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------x
In re:
Chapter 7
Pablo Roberto Pazmino
Case No. 09-24440(rdd)
Debtor.
-----------------------------------------------------------x
ORDER TO SHOW CAUSE DIRECTING A REPRESENTATIVE OF
HOUSEHOLD FINANCE REALTY CORPORATION OF NEW YORK (i) TO COMPLY WITH
ORDER DIRECTING LOSS MITIGATION; (ii) TO APPEAR AT A HEARING ON AUGUST 18,
2010; (iii) TO PAY DEBTORS’ ATTORNEYS FEES AND (iv) TO PAY A DAILY PENALTY
UNTIL IT COMPLIES HEREWITH
The above-named debtor (the “Debtor”) filed for relief under Chapter 7 of the Bankruptcy
Code on December 31, 2009. On January 18, 2010, the Debtor filed a request to engage in
loss mitigation with Household Finance Realty Corporation of New York (“HFRC”) under the
procedures established by the U.S. Bankruptcy Code for the Southern District of New York
pursuant to the Administrative Order signed by the Honorable Stuart M. Bernstein, Chief
Bankruptcy Judge on December 18, 2008. On February 9, 2010, the Court entered an Order
directing loss mitigation and subjecting the parties to the deadlines therein (the “Loss Mitigation
Order”). On March 23, 2010 at a regularly scheduled loss mitigation status conference,
Debtor’s counsel represented that HFRC had been unresponsive to all overtures made by or on
behalf of the Debtor regarding the pending loss mitigation. The failure to so respond violated the
Loss Mitigation Order and adversely affected this Chapter 7 case.
On March 26, 2010, by Order to Show Cause, this Court therefore directed (i) that HFRC
comply with the directives of the Loss Mitigation Order; and (ii) that a representative with
authority on behalf of HFRC and counsel appear at a hearing to be held before the Honorable
Robert D. Drain, on May 4, 2010 at 10:00 a.m. to report on the progress of the instant loss
mitigation. In conformity therewith, a hearing was held on May 4, 2010, at which Debtor’s
counsel appeared and represented that HFRC has continued to be unresponsive to the Loss
Mitigation Order and Order to Show Cause. No appearance was made on behalf of HFRC.
On May 7, 2010, by Order to Show Cause, this Court directed (i) that HFRC comply with
the directives of the Loss Mitigation Order; and (ii) that a representative with authority on behalf
of HFRC and counsel appear at a hearing to be held before the Honorable Robert D. Drain, on
July 1, 2010 at 10:00 a.m. to report on the progress of the instant loss mitigation and (iii) that
HFRC pay Debtor’s attorneys fees in the amount of $553.00 as a sanction for failure to obey the
Court’s Loss Mitigation Order and the March 26, 2010 Order to Show Cause. In accordance
therewith, a hearing was held on July 1, 2010, at which Debtor’s counsel appeared and
represented that HFRC has continued to be unresponsive to the Loss Mitigation Order and
Orders to Show Cause. No appearance was made on behalf of HFRC. HFRC has wholly and
contemptuously failed to comply with the Court’s Loss Mitigation Order, March 26, 2010 Order
to Show Cause and May 7, 2010 Order to Show Cause. This prolonged failure has continued to
adversely affect this Chapter 7 case.
Accordingly, it is hereby
1
ORDERED that the Loss Mitigation Period is extended to August 19, 2010; and it is
further
ORDERED that HFRC comply with the directives of the Loss Mitigation Order; and it is
further
ORDERED that a representative with authority on behalf of HFRC and counsel appear
at a hearing to be held before the Honorable Robert D. Drain, United States Bankruptcy Judge,
on August 18, 2010 at 10:00 a.m. in Courtroom 118, at the United States Bankruptcy Court, 300
Quarropas Street, White Plains, New York 10601 to report on the progress of the instant loss
mitigation, unless (a) HFRC is participating in good faith in loss mitigation with the Debtor and
has otherwise complied with this Order to Show Cause and (b) the August 18, 2010 status
conference is adjourned by further Order of this Court. The failure of HFRC to comply with this
Order and the Court’s prior Orders may result in the imposition of additional sanctions on HFRC;
and it is further
ORDERED that HFRC shall immediately pay the legal fees of Debtor’s counsel, Alter,
Goldman & Brescia, LLP, from May 4, 2010 through the date of this Order, in the amount of
$1,328.49, as set forth in the Affidavit of Dana P. Brescia, Esq., dated July 7, 2010; and it is
further
ORDERED that HFRC shall incur a daily sanction in the amount of $57.82 (Monthly
Principal and Interest Payment of $1,734.59 divided by 30), commencing July 1, 2010 until such
time as HFRC complies with this Order and the Court’s prior Orders, which sum shall be
deducted from the principal balance owed to HFRC by the Debtor in connection with account
number ending 5299; and it is further
ORDERED that on or before July 12, 2010, counsel to Debtor serve this Order to Show
Cause on HFRC and the Chapter 7 trustee at the addresses listed below.
Dated: White Plains, New York
July 7, 2010
____________________________________
Honorable Robert D. Drain
United States Bankruptcy Judge
To:
Household Finance Realty Corporation of New York
Attn: Bankruptcy Dept./Loss Mitigation
636 Grand Regency Blvd.
Brandon, FL 33510
Dana P. Brescia, Esq.
Alter, Goldman & Brescia, LLP
550 Mamaroneck Avenue, Suite 510
Harrison, New York 10528
Marianne T. O’Toole, LLC
20 Valley Road, Suite One
Katonah, NY 10536
2
Attn: Marianne O’Toole, Esq.
3
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------------- x
In re:
:
:
Adoption of Loss Mitigation Program Procedures
:
:
----------------------------------------------------------------- X
GENERAL ORDER # 543
WHEREAS, a uniform, comprehensive, court-supervised loss mitigation program
may facilitate consensual resolutions for individual debtors whose residential real
property is at risk of loss to foreclosure; and
WHEREAS, a loss mitigation program may avoid the need for various types of
bankruptcy litigation, reduce costs to debtors and secured creditors, and enable debtors to
reorganize or otherwise address their most significant debts and assets under the United
States Bankruptcy Code; now, therefore, it is hereby
ORDERED, that the “Loss Mitigation Program Procedures” annexed to this
General Order and the “Loss Mitigation Program” described therein are adopted,
pursuant to 11 U.S.C. § 105(a); and it is further
ORDERED, that effective immediately, the Loss Mitigation Program Procedures
shall apply in all individual cases assigned under Chapter 7, 11, 12, or 13 of the
Bankruptcy Code, to Chief Judge Carla E. Craig, Judge Dorothy T. Eisenberg, and Judge
Elizabeth S. Stong, and any other Judge of this Court who may elect to participate in the
Loss Mitigation Program; and it is further
ORDERED, that the Loss Mitigation Program Procedures and forms for
requesting loss mitigation shall be available in the Clerk’s Office and on the Court’s web
site. The Court may modify the Loss Mitigation Program Procedures from time to time
by General Order, and in that event, shall make the revised Loss Mitigation Program
Procedures available in the Clerk’s Office and on the Court’s web site immediately.
Dated:
Brooklyn, New York
December 8, 2009
/s/Carla E. Craig______________
CARLA E. CRAIG
Chief U.S. Bankruptcy Judge
_
LOSS MITIGATION PROGRAM PROCEDURES
I.
PURPOSE
The Loss Mitigation Program is designed to function as a forum in individual bankruptcy
cases for debtors and lenders to reach consensual resolution whenever a debtor’s residential
property is at risk of foreclosure. The Loss Mitigation Program aims to facilitate resolution by
opening the lines of communication between the debtors’ and lenders’ decision-makers. While
the Loss Mitigation Program stays certain bankruptcy deadlines that might interfere with the
negotiations or increase costs to the loss mitigation parties, the Loss Mitigation Program also
encourages the parties to finalize any Settlement (as defined below) under bankruptcy court
protection, instead of seeking dismissal of the bankruptcy case.
II.
LOSS MITIGATION DEFINED
The term “loss mitigation” is intended to describe the full range of solutions that may
avert the loss of a debtor’s property to foreclosure, increased costs to the lender, or both. Loss
mitigation commonly consists of the following general types of agreements, or a combination of
them: loan modification, loan refinance, forbearance, short sale, or surrender of the property in
full satisfaction. The terms of a loss mitigation solution will vary in each case according to the
particular needs, interests, and goals of the parties.
III.
ELIGIBILITY
The following definitions are used to describe the types of parties, properties, and loans
that are eligible for participation in the Loss Mitigation Program:
A.
DEBTOR
The term “Debtor” means any individual debtor in a case filed any Chapter 7, 11, 12, or
13 of the Bankruptcy Code, including joint debtors, whose case is assigned to Chief Judge Carla
E. Craig, Judge Dorothy T. Eisenberg, or Judge Elizabeth S. Stong, or any other judge who elects
to participate in the Loss Mitigation Program.
B.
PROPERTY
The term “Property” means any real property, including condominiums or cooperative
apartments, used as the Debtor’s principal residence, in which the Debtor holds an interest.
C.
LOAN
The term “Loan” means any mortgage, lien, or extension of money or credit secured by
eligible Property or stock shares in a residential cooperative, regardless of whether the Loan (1)
is considered to be “subprime” or “non-traditional;” (2) was in foreclosure prior to the
bankruptcy filing; (3) is the first or junior mortgage or lien on the Property; or (4) has been
“pooled,” “securitized,” or assigned to a servicer or to a trustee.
D.
CREDITOR
The term “Creditor” means any holder, mortgage servicer, or trustee of an eligible Loan.
IV.
A.
ADDITIONAL PARTIES
OTHER CREDITORS
Any party may request, or the bankruptcy court may direct, more than one Creditor to
participate in the Loss Mitigation Program, where it may be of assistance to obtain a global
resolution.
B.
CO-DEBTORS AND THIRD PARTIES
Any party may request, or the bankruptcy court may direct, a co-debtor or other third
party to participate in the Loss Mitigation Program, where the participation of such party may be
of assistance, to the extent that the bankruptcy court has jurisdiction over the party or the party
consents.
C.
CHAPTER 13 TRUSTEE
Any party may request, or the bankruptcy court may direct, the Chapter 13 Trustee to
participate in the Loss Mitigation Program to the extent that such participation is consistent with
the Chapter 13 Trustee’s duty under Bankruptcy Code Section 1302(b)(4) to “advise, other than
on legal matters, and assist the debtor in performance under the Chapter 13 plan.”
D.
MEDIATOR
Any party may request, or the bankruptcy court may direct, a mediator from the
Mediation Register maintained by the United States Bankruptcy Court for the Eastern District of
New York to participate in the Loss Mitigation Program.
V.
COMMENCEMENT OF LOSS MITIGATION
Parties are encouraged to request to enter into the Loss Mitigation Program as early in the
case as possible, but a request may be made at any time as follows.
A.
BY THE DEBTOR (click here for printable form)
1.
In a case under Chapter 13, the Debtor may request to enter into the Loss
Mitigation Program with a particular Creditor in the Chapter 13 plan, and shall note the making
of the request in the docket entry for the plan. The Creditor shall have 21 days to object. If no
objection is filed, the bankruptcy court may enter an order referring the parties to the Loss
Mitigation Program (a “Loss Mitigation Order”).
2.
A Debtor may serve and file a request to enter into the Loss Mitigation Program
with a particular Creditor. The Creditor shall have 14 days to object. If no objection is filed, the
bankruptcy court may enter a Loss Mitigation Order.
-2-
3.
If a Creditor has filed a motion for relief from the automatic stay pursuant to
Bankruptcy Code Section 362 (a “Lift-Stay Motion”), the Debtor may serve and file a request to
enter into the Loss Mitigation Program at any time before the conclusion of the hearing on the
Lift-Stay Motion. The bankruptcy court will consider the Debtor’s request and any opposition
by the Creditor at the hearing on the Lift-Stay Motion.
B.
BY A CREDITOR (click here for printable form)
A Creditor may serve and file a request to enter into the Loss Mitigation Program. The
Debtor shall have 14 days to object. If no objection is filed, the bankruptcy court may enter a
Loss Mitigation Order.
C.
BY THE BANKRUPTCY COURT
The bankruptcy court may enter a Loss Mitigation Order at any time after notice to the
parties to be bound (the “Loss Mitigation Parties”) and an opportunity to object.
D.
HEARING ON OBJECTION
If any party files an objection, the bankruptcy court shall hold a hearing on the request to
enter the Loss Mitigation Program and the objection, and shall not enter a Loss Mitigation Order
until the objection has been heard.
VI.
A.
LOSS MITIGATION ORDER (click here for form)
DEADLINES
A Loss Mitigation Order shall contain:
1.
The date by which contact persons and telephone contact information shall be
provided by the Loss Mitigation Parties.
2.
The date by which each Creditor shall initially contact the Debtor.
3.
The date by which each Creditor shall transmit any request for information or
documents to the Debtor.
4.
The date by which the Debtor shall transmit any request for information or
documents to each Creditor.
5.
The date by which a written status report shall be filed, or the date and time for a
status conference and oral status report (whether written or oral, a “Status Report”). In a Chapter
13 case, the status conference shall coincide, if possible, with a hearing on confirmation of the
Chapter 13 plan. A date to file a written report shall be, if possible, not later than 7 days after the
initial loss mitigation session.
6.
The date when the loss mitigation process (the “Loss Mitigation Period”) shall
terminate, unless extended.
-3-
B.
EFFECT
During the Loss Mitigation Period:
1.
A Creditor may contact the Debtor directly, and it shall be presumed that such
contact does not violate the automatic stay.
2.
A Creditor may not file a Lift-Stay Motion, except where necessary to prevent
irreparable injury. A Lift-Stay Motion filed by the Creditor before the entry of the Loss
Mitigation Order shall be adjourned to a date following the Loss Mitigation Period, and the stay
shall be extended pursuant to Bankruptcy Code Section 362(e).
3.
In a Chapter 13 case, the date by which a Creditor must object to confirmation of
the Chapter 13 plan shall be extended to a date that is at least 14 days following the Loss
Mitigation Period.
4.
Federal Rule of Evidence 408 shall apply to communications, information and
documents exchanged by the Loss Mitigation Parties in connection with the Loss Mitigation
Program.
VII.
A.
DUTIES UPON COMMENCEMENT OF LOSS MITIGATION
GOOD FAITH
The Loss Mitigation Parties shall negotiate in good faith. A party that does not
participate in the Loss Mitigation Program in good faith may be subject to sanctions.
B.
CONTACT INFORMATION
1.
The Debtor: The Debtor shall provide written notice to each Loss Mitigation
Party of the manner in which the Creditor shall contact the Debtor or the Debtor’s attorney. This
may be done in the request to enter the Loss Mitigation Program.
2.
The Creditor: Each Creditor shall provide written notice to the Debtor of the
name, address and direct telephone number of the contact person with authority to act on the
Creditor’s behalf. This may be done in the request to enter the Loss Mitigation Program.
C.
STATUS REPORT
The Loss Mitigation Parties shall provide a written or oral Status Report to the
bankruptcy court within the period set in the Loss Mitigation Order. The Status Report shall
indicate how many loss mitigation sessions have occurred, whether a resolution has been
reached, and whether a Loss Mitigation Party believes that additional sessions may result in
partial or complete resolution. A Status Report may include a request for an extension of the
Loss Mitigation Period.
-4-
D.
BANKRUPTCY COURT APPROVAL
The Loss Mitigation Parties shall seek bankruptcy court approval of any Settlement
reached during loss mitigation.
VIII.
A.
LOSS MITIGATION PROCESS
INITIAL CONTACT
Following entry of a Loss Mitigation Order, the contact person designated by each
Creditor shall contact the Debtor and any other Loss Mitigation Party within the time set by the
bankruptcy court. The Debtor may contact any Loss Mitigation Party at any time. The purpose
of the initial contact is to create a framework for the loss mitigation session and to ensure that the
Loss Mitigation Parties are prepared. The initial contact is not intended to limit the issues or
proposals that may arise during the loss mitigation session.
During the initial contact, the Loss Mitigation Parties shall discuss:
1.
The time and method for conducting the loss mitigation sessions.
2.
The loss mitigation alternatives that each party is considering.
3.
The exchange of information and documents before the loss mitigation session,
including the date by when the Creditor shall request information and documents from the
Debtor and the date by when the Debtor shall respond. All information and documents shall be
provided at least seven days before the first loss mitigation session.
B.
LOSS MITIGATION SESSIONS
Loss mitigation sessions may be conducted in person, by telephone, or by video
conference. At the conclusion of each loss mitigation session, the Loss Mitigation Parties shall
discuss whether and when to hold a further session, and whether any additional information or
documents should be exchanged.
C.
BANKRUPTCY COURT ASSISTANCE
At any time during the Loss Mitigation Period, a Loss Mitigation Party may request a
settlement conference or status conference with the bankruptcy judge.
D.
SETTLEMENT AUTHORITY
At a loss mitigation session, each Loss Mitigation Party shall have a person with full
settlement authority present. At a status conference or settlement conference with the
bankruptcy court, each Loss Mitigation Party shall have a person with full settlement authority
present. If a Loss Mitigation Party is appearing by telephone or video conference, that party
shall be available beginning thirty minutes before the conference.
-5-
IX.
A.
DURATION, EXTENSION AND EARLY TERMINATION
INITIAL PERIOD
The initial Loss Mitigation Period shall be set by the bankruptcy court in the Loss
Mitigation Order.
B.
EXTENSION
1.
By Agreement: The Loss Mitigation Parties may agree to extend the Loss
Mitigation Period by stipulation to be filed not less than one business day before the Loss
Mitigation Period ends.
2.
In the Absence of Agreement: A Loss Mitigation Party may request to extend the
Loss Mitigation Period in the absence of agreement by filing and serving a request to extend the
Loss Mitigation Period on the other Loss Mitigation Parties, who shall have seven days to object.
If the request to extend the Loss Mitigation Period is opposed, then the bankruptcy court shall
schedule a hearing on the request. The bankruptcy court may consider whether (1) an extension
of the Loss Mitigation Period may result in a complete or partial resolution that provides a
substantial benefit to a Loss Mitigation Party; (2) the party opposing the extension has
participated in good faith and complied with these Loss Mitigation Procedures; and (3) the Loss
party opposing the extension will be prejudiced.
C.
EARLY TERMINATION
1.
Upon Request of a Loss Mitigation Party: A Loss Mitigation Party may request to
terminate the Loss Mitigation Period by filing and serving a request to terminate the Loss
Mitigation Period on the other Loss Mitigation Parties, who shall have seven days to object. If
the request to terminate the Loss Mitigation Period is opposed, then the bankruptcy court shall
schedule a hearing on the request. Notice may be modified for cause if necessary to prevent
irreparable injury.
2.
Dismissal of the Bankruptcy Case: A Chapter 13 bankruptcy case shall not be
dismissed during the pendency of a Loss Mitigation Period, except (1) upon motion of the
Chapter 13 Trustee or the United States Trustee for failure to comply with the requirements of
the Bankruptcy Code; or (2) upon the voluntary request of the Chapter 13 Debtor. A Chapter 13
Debtor may not be required to request dismissal of the bankruptcy case as part of a
Settlement during the Loss Mitigation Period. If a Chapter 13 Debtor requests voluntary
dismissal during the Loss Mitigation Period, the Debtor shall indicate whether the Debtor agreed
or intends to enter into a Settlement with a Loss Mitigation Party.
D.
DISCHARGE
The Clerk of the Court shall not enter a discharge during the pendency of a Loss
Mitigation Period.
-6-
X.
SETTLEMENT
The bankruptcy court shall consider any agreement or resolution (a “Settlement”) reached
during loss mitigation and may approve the Settlement, subject to the following provisions:
1.
Implementation: A Settlement may be noticed and implemented in any manner
permitted by the Bankruptcy Code and Federal Rules of Bankruptcy Procedure (the “Bankruptcy
Rules”), including but not limited to a stipulation, sale, Chapter 11 plan of reorganization, or
Chapter 13 plan.
2.
Fees, Costs, or Charges: If a Settlement provides for a Creditor to receive
payment or reimbursement of any expense arising from the Creditor’s participation in the Loss
Mitigation Program, that expense shall be disclosed to the Debtor and the bankruptcy court
before the Settlement is approved.
3.
Signatures: Consent to the Settlement shall be acknowledged in writing by the
Creditor representative who participated in the loss mitigation session, the Debtor, and the
Debtor’s attorney, if applicable.
4.
Hearing: Where a Debtor is represented by an attorney, a Settlement may be
approved by the bankruptcy court without further notice, or upon such notice as the bankruptcy
court directs, unless additional notice or a hearing is required by the Bankruptcy Code or
Bankruptcy Rules. Where a Debtor is not represented by counsel, a Settlement shall not be
approved until the bankruptcy court conducts a hearing at which the Debtor shall appear in
person.
5.
Dismissal Not Required: A Debtor shall not be required to request dismissal
of the bankruptcy case in order to effectuate a Settlement. In order to ensure that the
Settlement is enforceable, the Loss Mitigation Parties shall seek bankruptcy court approval of the
Settlement. Where the Debtor requests or consents to dismissal of the bankruptcy case as part of
the Settlement, the bankruptcy court may approve the Settlement as a “structured dismissal,” if
such relief complies with the Bankruptcy Code and Bankruptcy Rules.
XI.
COORDINATION WITH OTHER PROGRAMS
[Provision may be added in the future to provide for coordination with other loss mitigation
programs, including programs in the New York State Unified Court System.]
-7-
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------------- x
In re:
Chapter
_______________________,
__
Case No. __-____ (___)
Debtor(s).
----------------------------------------------------------------- X
LOSS-MITIGATION REQUEST – BY THE DEBTOR
I am a Debtor in this case. I hereby request to enter into the Loss Mitigation Program
with respect to [Identify the property, loan and creditor(s) for which you are requesting
loss mitigation]:
SIGNATURE
I understand that if the Court orders loss mitigation in this case, I will be expected to
comply with the Loss Mitigation Procedures. I agree to comply with the Loss Mitigation
Procedures, and I will participate in the Loss Mitigation Program in good faith. I
understand that loss mitigation is voluntary for all parties, and that I am not required to
enter into any agreement or settlement with any other party as part of entry into the Loss
Mitigation Program. I also understand that no other party is required to enter into any
agreement or settlement with me. I understand that I am not required to request
dismissal of this case as part of any resolution or settlement that is offered or agreed to
during the Loss Mitigation Period.
Sign:
Print Name:
Telephone Number:
E-mail address (if any):
Date:
, 20__
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------------- x
In re:
Chapter
_______________________,
__
Case No. __-____ (___)
Debtor(s).
----------------------------------------------------------------- X
LOSS-MITIGATION REQUEST – BY A CREDITOR
I am a creditor (including a holder, servicer or trustee of a mortgage or lien secured by
property used by the Debtor as a principal residence) of the Debtor in this case. I hereby
request to enter into the Loss Mitigation Program with respect to [Identify the property,
loan and creditor(s) for which you are requesting loss mitigation]:
SIGNATURE
I have reviewed the Loss Mitigation Procedures, and I understand that if the Court orders
loss mitigation in this case, I will be bound by the Loss Mitigation Procedures. I agree to
comply with the Loss Mitigation Procedures, and I will participate in the Loss Mitigation
Program in good faith. If loss mitigation is ordered, I agree to provide the Court with a
written or oral Status Report stating whether the parties participated in one or more loss
mitigation sessions, whether or not a settlement was reached, and whether negotiations
are ongoing. I agree that I will not ask the Debtor to request or cause dismissal of this
case as part of any resolution or settlement that is offered or agreed to during the Loss
Mitigation Period.
Sign:
Print Name:
Telephone Number:
E-mail address (if any):
Date:
, 20__
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------------- x
In re:
Chapter
_______________________,
__
Case No. __-____ (___)
Debtor(s).
----------------------------------------------------------------- X
LOSS-MITIGATION ORDER



A Loss Mitigation Request1 was filed by the debtor on [Date] ________, 2010.
A Loss Mitigation Request was filed by a creditor on [Date] _________, 2010.
The Court raised the possibility of loss mitigation, and the parties have had
notice and an opportunity to object.
Upon the foregoing, it is hereby
ORDERED, that the following parties (the “Loss Mitigation Parties”) are
directed to participate in the Loss Mitigation Program:
1.
The Debtor
2.
_______________, the Creditor with respect to
_______________ [describe Loan and/or Property].
3.
[Additional parties, if any]
It is further ORDERED, that the Loss Mitigation Parties shall comply with the
Loss Mitigation Procedures annexed to this Order; and it is further
ORDERED, that the Loss Mitigation Parties shall observe the following
deadlines:
1.
Each Loss Mitigation Party shall designate contact persons and disclose
contact information by [suggested time is 7 days], unless this information has been
previously provided. As part of this obligation, a Creditor shall furnish each Loss
Mitigation Party with written notice of the name, address and direct telephone
number of the person who has full settlement authority.
2.
Each Creditor that is a Loss Mitigation Party shall contact the Debtor
within 14 days of the date of this Order.
1
All capitalized terms have the meanings defined in the Loss Mitigation Procedures.
3.
Each Loss Mitigation Party shall make its request for information and
documents, if any, within 14 days of the date of this Order.
4.
Each Loss Mitigation Party shall respond to a request for information and
documents within 14 days after a request is made, or 7 days prior to the Loss
Mitigation Session, whichever is earlier.
5.
The Loss Mitigation Session shall be scheduled not later than
____________________ [suggested time is within 35 days of the date of the order].
6.
The Loss Mitigation Period shall terminate on ______________________
[suggested time is within 42 days of the date of the order], unless extended as provided in
the Loss Mitigation Procedures.
It is further ORDERED, that a status conference will be held in this case on
______________________ [suggested time is within 42 days of the date of the order]
(the “Status Conference”). The Loss Mitigation Parties shall appear at the Status
Conference and provide the Court with an oral Status Report unless a written Status
Report that is satisfactory to the Court has been filed not later than 7 days prior to the
date of the Status Conference and requests that the Status Conference be adjourned or
cancelled; and it is further
ORDERED, that at the Status Conference, the Court may consider a Settlement
reached by the Loss Mitigation Parties, or may adjourn the Status Conference if
necessary to allow for adequate notice of a request for approval of a Settlement; and it is
further
ORDERED, that any matters that are currently pending between the Loss
Mitigation Parties (such as motions or applications, and any objection, opposition or
response thereto) are hereby adjourned to the date of the Status Conference to the extent
those matters concern (1) relief from the automatic stay, (2) objection to the allowance of
a proof of claim, (3) reduction, reclassification or avoidance of a lien, (4) valuation of a
Loan or Property, or (5) objection to confirmation of a plan of reorganization; and it is
further.
ORDERED, that the time for each Creditor that is a Loss Mitigation Party in this
case to file an objection to a plan of reorganization in this case shall be extended until 14
days after the termination of the Loss Mitigation Period, including any extension of the
Loss Mitigation Period.
Dated:
Brooklyn, New York
______________, 2010
BY THE COURT
United States Bankruptcy Judge
-2-
Case 1-10-43892-ess
Doc 20
Filed 06/08/10
Entered 06/08/10 11:36:22
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------------- x
In re:
Chapter 13
CELINA MOROCHO,
Case No. 10-43892-ess
Debtor.
----------------------------------------------------------------- X
LOSS-MITIGATION ORDER
X
A Loss Mitigation Request was filed by the debtor on May 14, 2010.
A Loss Mitigation Request was filed by a creditor on [Date] _________, 2010.
The Court raised the possibility of loss mitigation, and the parties have had
notice and an opportunity to object.
Upon the foregoing, it is hereby
ORDERED, that the following parties (the “Loss Mitigation Parties”) are
directed to participate in the Loss Mitigation Program:
1.
The Debtor
2.
3.
HSBC Mortgage Corp., the Creditor with respect to
two home equity lines of credit ending in numbers 1288 and 1342,
secured by property located at 3122 104th Street, East Elmhurst, NY 11369.
[Additional parties, if any]
It is further ORDERED, that the Loss Mitigation Parties shall comply with the
Loss Mitigation Procedures annexed to this Order; and it is further
ORDERED, that the Loss Mitigation Parties shall observe the following
deadlines:
1.
Each Loss Mitigation Party shall designate contact persons and disclose
contact information by June 11, 2010, unless this information has been
previously provided. As part of this obligation, a Creditor shall furnish each Loss
Mitigation Party with written notice of the name, address and direct telephone
number of the person who has full settlement authority.
2.
Each Creditor that is a Loss Mitigation Party shall contact the Debtor
within 14 days of the date of this Order.1
3.
Each Loss Mitigation Party shall make its request for information and
documents, if any, within 14 days of the date of this Order.
4.
Each Loss Mitigation Party shall respond to a request for information and
documents within 14 days after a request is made, or 7 days prior to the Loss
1
All capitalized terms have the meanings defined in the Loss Mitigation Procedures.
Case 1-10-43892-ess
Doc 20
Filed 06/08/10
Entered 06/08/10 11:36:22
Mitigation Session, whichever is earlier.
5.
July 9, 2010.
The Loss Mitigation Session shall be scheduled not later than
6.
The Loss Mitigation Period shall terminate on July 16, 2010, unless extended as
provided in the Loss Mitigation Procedures.
It is further ORDERED, that a status conference will be held in this case on
July 16, 2010 at 10:00 AM (the “Status Conference”). The Loss Mitigation Parties shall appear at the
Status Conference and provide the Court with an oral Status Report unless a written Status
Report that is satisfactory to the Court has been filed not later than 7 days prior to the
date of the Status Conference and requests that the Status Conference be adjourned or
cancelled; and it is further
ORDERED, that at the Status Conference, the Court may consider a Settlement
reached by the Loss Mitigation Parties, or may adjourn the Status Conference if
necessary to allow for adequate notice of a request for approval of a Settlement; and it is
further
ORDERED, that any matters that are currently pending between the Loss
Mitigation Parties (such as motions or applications, and any objection, opposition or
response thereto) are hereby adjourned to the date of the Status Conference to the extent
those matters concern (1) relief from the automatic stay, (2) objection to the allowance of
a proof of claim, (3) reduction, reclassification or avoidance of a lien, (4) valuation of a
Loan or Property, or (5) objection to confirmation of a plan of reorganization; and it is
further.
ORDERED, that the time for each Creditor that is a Loss Mitigation Party in this
case to file an objection to a plan of reorganization in this case shall be extended until 14
days after the termination of the Loss Mitigation Period, including any extension of the
Loss Mitigation Period.
Dated: Brooklyn, New York
June 8, 2010
____________________________
Elizabeth S. Stong
United States Bankruptcy Judge
Case 1-10-40241-ess
Doc 27
Filed 04/09/10
Entered 04/13/10 10:56:03
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------------- x
In re:
ATENOGENES BAEZ,
Chapter 11
Case No. 10-40241-ess
Debtor.
----------------------------------------------------------------- x
ORDER EXTENDING LOSS-MITIGATION PERIOD AND SCHEDULING
ADJOURNED LOSS-MITIGATION STATUS CONFERENCE
WHEREAS, by Order dated February 10, 2010, the Court scheduled a Loss-Mitigation
Status Conference in this Chapter 11 case on April 9, 2010, at 11:30 a.m. (the “Status
Conference”); and
WHEREAS, neither the Debtor nor Fairway Fund I LLC, the creditor with respect to the
real property located at 11-44 Welling Court, Astoria, NY (collectively, the “Loss Mitigation
Parties”), appeared at the Status Conference.
NOW, THEREFORE, it is hereby
ORDERED, that the Loss-Mitigation Period is extended until May 28, 2010; and it is
further
ORDERED, that an Adjourned Status Conference will be held in this case on May 28,
2010, at 11:30 a.m. The Loss Mitigation Parties shall appear at the Adjourned Status Conference
and provide the Court with an oral Status Report unless a written Status Report that is
satisfactory to the Court has been filed not later than 7 days prior to the date of the Adjourned
Status Conference and requests that the Adjourned Status Conference be further adjourned or
cancelled; and it is further
ORDERED, that at the Adjourned Status Conference, the Court may consider a
Settlement reached by the Loss Mitigation Parties, or may further adjourn the status conference
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Entered 04/13/10 10:56:03
if necessary to allow for adequate notice of a request for approval of a Settlement; and it is
further
ORDERED, that any matters that are currently pending between the Loss
Mitigation Parties (such as motions or applications, and any objection, opposition or
response thereto) are hereby adjourned to the date of the Adjourned Status Conference to the
extent those matters concern (1) relief from the automatic stay, (2) objection to the allowance of
a proof of claim, (3) reduction, reclassification or avoidance of a lien, (4) valuation of a
Loan or Property, or (5) objection to confirmation of a plan of reorganization; and it is
further
ORDERED, that the time for each Creditor that is a Loss Mitigation Party in this
case to file an objection to a plan of reorganization in this case shall be extended until 14
days after the termination of the Loss Mitigation Period, including any extension of the
Loss Mitigation Period.
Dated: Brooklyn, New York
April 9, 2010
____________________________
Elizabeth S. Stong
United States Bankruptcy Judge
Case 1-10-40241-ess
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SERVICE LIST:
Atenogenes Baez
11-44 Welling Court
Astoria, NY 11102
Richard S Feinsilver, Esq.
One Old Country Road
Suite 125
Carle Place, NY 11514
Kenneth P. Horowitz, Esq.
Kriss & Feuerstein LLP
360 Lexington Avenue, 12th Floor
New York, NY 10017
Filed 04/09/10
Entered 04/13/10 10:56:03
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
IN RE
Jude Jacques
CHAPTER 13
CASE NO. : 08-42279
JUDGE: Elizabeth S. Stong
DEBTOR
STIPULATION AND ORDER APPROVING LOAN MODIFICATION
WHEREAS, Ocwen Loan Servicing LLC (“Secured Creditor”) is the loan servicing
agent for U.S. Bank National Association in its capacity as Trustee for the registered holders of
MASTR Asset Backed Securities Trust 2005-NC2, Mortgage Pass-Through Certificates, Series
2005-NC2 holder of a note and mortgage secured by real property owned by Jude Jacques (the
“Debtor”) known as 969 East 103rd Street, Brooklyn, New York 11236 and
WHEREAS, on the 30th day of December, 2009, the Debtors filed a Loss Mitigation
Request; and
WHEREAS, on the 25th day of January, 2010, an Order Granting Loss Mitigation
Request was signed by the Court; and
WHEREAS, on the 11th day of January, 2010, counsel for the Secured Creditor sent a
letter to counsel for the Debtors disclosing Secured Creditor’s contact information and requesting
Debtor’s financial information; and
WHEREAS, Debtors and Secured Creditor have agreed to modify the existing loan
terms as outlined below, it is hereby
STIPULATED AND AGREED AS FOLLOWS:
1.
Secured Creditor has agreed to modify the existing mortgage loan under the terms
outlined more fully on the Payment Agreement Plan letter, annexed hereto as Exhibit “A”.
2.
The terms of the loan modification are as follows: the new principal balance is
$393,691.25 with an interest rate of 6.000% until May 1, 2013 when the interest rate will
increase to 7.5% until the maturity date of the loan on September 1, 2030; Debtor will make an
initial payment of $3,156.45 on or before May 6, 2010 after which the debtor will commence
new principal and interest payments in the amount of $2,796.62 commencing June 1, 2010.
3.
The Stipulation and the Loan Modification Agreement shall be binding upon the
heirs, successors and assigns of Secured Creditor and of the Debtor.
4.
The automatic stay shall be lifted for the sole purpose of modifying the Debtor’s
mortgage loan as outlined above and attached hereto, and said modification is approved by the
Bankruptcy Court upon the signature of the Court on this Stipulation and Order.
5.
It is further agreed that a fully executed copy of this Stipulation shall be deemed
the original for the purposes of filing the same with the Court and that facsimile signatures shall
have the same force and effect as the original signatures.
6.
The foregoing represents the entire agreement of the parties and no modification
amendment or extension thereof shall be valid, unless in writing, signed by all signatories to this
agreement.
Dated: July 8 , 2010
Attorney for Debtor
/s/ Joshua Bleichman
Joshua Bleichman, Esq.
268 Route 59
Spring Valley, NY 10097
Attorney for Ocwen Loan Servicing, LLC
/s/ Anne E. Miller Hulbert
Anne E. Miller-Hulbert
Shapiro & DiCaro, LLP
250 Mile Crossing Boulevard
Suite One
Rochester, NY 14624
(585) 247-9000
SO ORDERED:
Dated: Brooklyn, New York
July 14, 2010
____________________________
Elizabeth S. Stong
United States Bankruptcy Judge
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Entered 06/30/10 08:22:55
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
_____________________________________________
ORDER
In Re:
Case No.: 10-41445-ess
(Chapter 13)
DANNY A PALMER
Assigned to:
Hon. ELIZABETH S. STONG
Bankruptcy Judge
Debtor
_____________________________________________
ORDER TERMINATING LOSS MITIGATION PERIOD
WHEREAS, on March 16, 2010, Danny A. Palmer, the Debtor in this Chapter 13 case,
requested to participate in the Loss Mitigation Program with Home Loan Services, Inc., with respect
to real property located at 179-26 142nd Street, Jamaica, NY, 11434; and
WHEREAS, on March 31, 2010, the Court entered an Order directing the parties to
participate in the Loss Mitigation Program (the “Loss Mitigation Order”); and
WHEREAS, on June 17, 2010, Home Loan Services, Inc. filed a status report requesting that
the Loss Mitigation period be terminated; and
WHEREAS, on June 18, 2010, the Debtor filed a letter stating that he had no objection to the
termination of the loss mitigation period; and
WHEREAS, on June 18, 2010, the Court held a Loss Mitigation Status Conference at which
Home Loan Services, Inc. appeared and was heard, and the Court terminated the loss mitigation
period, and marked the loss mitigation status conference off the calendar.
NOW, THEREFORE, it is hereby
Case 1-10-41445-ess
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ORDERED, that the loss mitigation period is terminated with respect to Home Loan Services,
Inc.
Danny A Palmer (the “Debtor”) having requested loss mitigation on March 16, 2010; pursuant to the
General Order; and
A Loss Mitigation Order having been granted by this Court on March 31, 2010; and
A Status Conference having been held on June 18, 2010 and due deliberation having been given to the
matters raised by the Parties; it is hereby
ORDERED, that the loss mitigation period is hereby terminated as to Home Loan Services.
Dated: Brooklyn, New York
June 29, 2010
____________________________
Elizabeth S. Stong
United States Bankruptcy Judge
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF RHODE ISLAND
- - - - - - - - - - - - - - - - - - - x
In re:
: BANKRUPTCY GENERAL ORDER
Adoption of Loss Mitigation Program
and Procedures
:
No. 09-003
:
- - - - - - - - - - - - - - - - - - - x
ORDER ADOPTING LOSS MITIGATION PROGRAM AND PROCEDURES
Pursuant to 11. U.S.C. §105(a), this Court deems it
advisable and in the public interest to provide a uniform,
comprehensive, court-supervised Loss Mitigation Program in order
to facilitate and assist in the consensual resolution of issues
involving debtors and creditors with joint contractual interests
in residential real property at risk of loss to foreclosure.
This loss mitigation program is intended to avoid or reduce
unnecessary bankruptcy litigation and cost to debtors and secured
creditors, and to enable debtors to reorganize or otherwise
address their significant debt and asset structure under the
Bankruptcy Code. The need for such a program is evident in light
of the various government sponsored loss mitigation programs
(Making Homes Affordable) introduced to address the systemic
mortgage defaults and the decline in the current residential
housing economy nationwide, including the District of Rhode
Island. Accordingly, the “Loss Mitigation Program” annexed to
this order is hereby adopted.
The Loss Mitigation Program (“LMP”) and forms for initiating
loss mitigation shall be available at the clerk’s office and on
the court’s web site. The Court may modify the LMP from time to
time by duly adopted General Orders, with any such revisions
available in the clerk’s office and on the court’s web site,
immediately upon their adoption.
NOW, THEREFORE, IT IS ORDERED that this Court’s Loss
Mitigation Program is adopted, effective November 1, 2009.
ORDER:
ENTER:
Susan M. Thurston
Clerk of Court
Dated: October 22, 2009
Arthur N. Votolato
U.S. Bankruptcy Judge
UNITED STATES BANKRUPTCY COURT
DISTRICT OF RHODE ISLAND
LOSS MITIGATION PROGRAM AND PROCEDURES
I. PURPOSE
The Loss Mitigation Program (LMP) is designed to function as
a forum for debtors and lenders to reach consensual resolution when
a debtor’s residential property is at risk of foreclosure. The LMP
aims to facilitate such resolution by opening communications
between the debtors’ and lenders’ decision-makers. While the LMP
stays certain bankruptcy deadlines that may have the effect of
delaying the normal progress of bankruptcy administration, more
importantly, the LMP encourages the parties to finalize a feasible
and beneficial agreement under Bankruptcy Court protection, instead
of seeking dismissal of the bankruptcy case.
II. LOSS MITIGATION DEFINED
The “loss mitigation” process is intended to include the full
range of solutions that may prevent either the loss of a debtor’s
property to foreclosure, increased costs to the lender, or both.
Loss mitigation commonly consists of several general types of
agreements, or a combination of them: loan modification, loan
refinance, forbearance, short sale, or surrender of the property in
full satisfaction1. The terms of a loss mitigation solution will
vary in each case according to the particular needs and goals of
the parties.
III. ELIGIBILITY
The following definitions describe the types of parties,
properties and loans that are eligible for participation in the
Loss Mitigation Program:
A. DEBTOR
The term “Debtor” means any individual debtor in a case filed
under Chapter 7, 11, 12 or 13 of the Bankruptcy Code, including
joint debtors. If the Debtor is represented by counsel, the term
“Debtor” is to be interpreted to include both the Debtor and the
Debtor’s attorney, unless the Debtor, with the approval of Debtor’s
1
This is not intended to be an exclusive list of loss
mitigation solutions.
counsel, has expressly requested and authorized direct involvement
without counsel.
B. PROPERTY
The term “Property” means any real property used as a
principal residence in which an eligible Debtor holds an interest.
C. LOAN
The term “Loan” means any mortgage, lien or extension of money
or credit secured by eligible Property, regardless of whether the
Loan (1) is considered to be “subprime” or “non-traditional,” (2)
was in foreclosure prior to the bankruptcy filing, (3) is the first
or junior mortgage or lien on the Property, or (4) has been
“pooled,” “securitized,” or assigned to a servicer or to a trustee.
D. CREDITOR
The term “Creditor” refers to any mortgage holder, assignee,
servicer or trustee of an eligible Loan.
IV.
ADDITIONAL PARTIES
A. OTHER CREDITORS
Where necessary or desirable to obtain a global (i.e. more
than a two party) resolution, any party may request, or the
bankruptcy court may direct that multiple Creditors participate in
the loss mitigation process.
B. CO-DEBTORS AND THIRD PARTIES
Where the participation of a co-debtor or other third party is
necessary or desirable, any party may request, or the Bankruptcy
Court may direct that such party participate in loss mitigation, to
the extent that the Bankruptcy Court has jurisdiction over the
party, or if the party consents to such participation.
C. CHAPTER 13 TRUSTEE
It is the duty of the Chapter 13 Trustee under Section
1302(b)(4) of the Bankruptcy Code to “advise, other than on legal
matters, and assist the debtor in performance under the plan.” Any
party may request, or the Bankruptcy Court may direct the Chapter
13 Trustee to participate in loss mitigation to the extent that
2
such participation would be consistent with
Trustee’s duties under the Bankruptcy Code.
the
Chapter
13
V. COMMENCEMENT OF LOSS MITIGATION
Parties are encouraged to request loss mitigation as early in
the case as possible, but loss mitigation may be initiated at any
time, by any of the following methods:
A. BY THE DEBTOR
1.
In Section XIII of the Model Chapter 13 Plan
(RI Local Form W.1), a Chapter 13 Debtor may
indicate an interest in discussing loss
mitigation with a particular Creditor. If the
box in Section XIII is checked, within seven
(7) days of filing the Plan, the Debtor shall
serve on the Creditor and its counsel, if
known, and file with the Court, a Notice
and/or Request for Loss Mitigation (Form A to
G.O. 09-003), together with a Proposed Loss
Mitigation
Order
with
applicable
dates
supplied (Form C to G.O. 09-003).
The
Creditor shall have fourteen (14) days to
object.
If no objection is filed, the
Bankruptcy Court may enter the proposed order
“Loss Mitigation Order”.
2.
Alternatively, a Debtor may file with the
Court and serve on the Creditor and its
counsel, if known, a Notice and/or Request for
Loss Mitigation (Form A to G.O. 09-003),
together with a Proposed Loss Mitigation Order
with applicable dates supplied (Form C to G.O.
09-003). The Creditor shall have fourteen (14)
days to object. If no objection is filed, the
Bankruptcy Court may enter a Loss Mitigation
Order.
3.
If a Creditor has filed a motion for relief
from the automatic stay pursuant to Section
362 of the Bankruptcy Code (a “Lift-Stay
Motion”), at any time prior to the conclusion
of the hearing on the Lift-Stay Motion, the
Debtor may file a Notice and/or Request for
Loss Mitigation (Form A to G.O. 09-003). The
Debtor and Creditor shall appear at the
scheduled hearing on the Lift-Stay Motion, at
3
which time the Bankruptcy Court will consider
the loss mitigation request and any opposition
by the Creditor.
B. BY A CREDITOR
A Creditor may file with the Court and serve on the Debtor
and Debtor’s counsel, if any, a Request for Loss Mitigation (Form
B to G.O. 09-003), together with a Proposed Loss Mitigation Order
with applicable dates supplied (Form C to G.O. 09-003). The Debtor
shall have seven (7) days to object. If no objection is filed, the
Bankruptcy Court may enter a Loss Mitigation Order.
C. BY THE BANKRUPTCY COURT
The Bankruptcy Court may enter a Loss Mitigation Order at any
time, provided that the parties bound by said Order (the “Loss
Mitigation Parties”) have had notice and opportunity to object and
be heard.
D. OPPORTUNITY TO OBJECT
Where any party files an objection, a Loss Mitigation Order
shall not be entered until the Bankruptcy Court, after adequate
notice, has held a hearing to consider the objection. At least 2
days prior to the hearing, a party objecting to loss mitigation
must present to the Court and parties, specific reasons why it
believes that loss mitigation would not be successful. If a party
objects on the ground that loss mitigation has been requested in
bad faith, the assertion must be supported by objective reasons,
and by sworn testimony, if necessary.
VI. LOSS MITIGATION ORDER
A. DEADLINES
A Loss Mitigation Order shall contain deadlines for the
following:
1.
2.
3.
The date by which the Loss Mitigation Parties
shall designate contact persons and disclose
contact information, if this information has
not been previously provided.
The date by which each Creditor must initially
contact the Debtor.
The date by which each Creditor must transmit
information requests to the Debtor.
4
4.
5.
6.
The date by which the Debtor must transmit
information requests to each Creditor.
The date by which a written report must be
filed, or the date and time set for a status
conference at which verbal reports must be
provided by the parties. Whenever possible,
in Chapter 13 cases, the status conference
will coincide with the first date set for
confirmation of the Chapter 13 plan, or any
continued confirmation hearing.
Where a
written report is required, it should be filed
not later than 7 days after the conclusion of
the initial loss mitigation session.
The date when the loss mitigation period will
terminate, unless duly extended.
B. EFFECT
Upon the entry of a Loss Mitigation Order, the following shall
apply to the Loss Mitigation Parties:
1.
2.
3.
4.
Except where necessary to prevent irreparable
injury, loss or damage, the LM Party Creditor
shall not file a Lift-Stay Motion during the
loss mitigation period. Any Lift-Stay Motion
filed by such LM Party Creditor prior to the
entry of the Loss Mitigation Order shall be
continued to a date after the last day of the
loss mitigation period, and the stay shall be
extended pursuant to Section 362(e) of the
Bankruptcy Code.
In a Chapter 13 case, the hearing date for
confirmation of the plan shall be continued to
a date after the last day of the loss
mitigation period. The deadline by which a
Creditor must object to confirmation shall be
extended to permit the Creditor an additional
fourteen (14) days after the conclusion or
termination of loss mitigation.
During the Loss Mitigation period,
Debtors must stay current with their Chapter
13 plan payments in order to remain eligible
for the program.
Pursuant to Federal Rule of Evidence 408, all
communications and information exchanged by
the Loss Mitigation Parties during the loss
mitigation procedure will be inadmissible in
any subsequent proceeding.
5
VII. DUTIES UPON COMMENCEMENT OF LOSS MITIGATION
Upon entry of a Loss Mitigation Order, the Loss Mitigation
parties shall have the following obligations:
A. GOOD FAITH
The Loss Mitigation Parties shall negotiate in good faith. A
party failing or refusing to participate in loss mitigation in good
faith may be subject to sanctions.
B. CONTACT INFORMATION
1.
The Debtor: The Debtor shall provide written
notice to each Creditor, indicating the manner
in which the Creditor should contact the
Debtor, unless the Debtor has already done so
in the Chapter 13 plan or as part of a request
for loss mitigation,
2.
The Creditor: Each Creditor shall provide
written notice to the Debtor, identifying the
name, address, and direct telephone number of
the contact person with settlement authority,
unless a Creditor has already done so as part
of a prior request for loss mitigation.
C. STATUS REPORT
The Loss Mitigation Parties shall provide either a written or
verbal report to the Bankruptcy Court regarding the status of the
loss mitigation, within the time set by the Bankruptcy Court in the
Loss Mitigation Order. The status report shall include whether one
or more loss mitigation sessions have been conducted, whether a
resolution was reached, and whether one or more of the Loss
Mitigation Parties believe that additional loss mitigation sessions
would be likely to result in either a partial or complete
resolution. A status report may include a request for an extension
of the loss mitigation period.
D. BANKRUPTCY COURT APPROVAL
The Loss Mitigation Parties shall file a written request for
Bankruptcy Court approval of any resolution or settlement reached
during loss mitigation.
6
VIII. THE LOSS MITIGATION PROCESS
A. INITIAL CONTACT
Within seven (7) days following entry of a Loss Mitigation
Order, the contact person designated by each Creditor shall contact
the Debtor’s attorney, or Debtor, if specifically authorized, and
any other Loss Mitigation Party, unless a different deadline is set
by the Bankruptcy Court.
The Debtor may contact any Loss
Mitigation Party at any time. The purpose of the initial contact
is to create a framework for the discussion at the loss mitigation
session and to ensure that each of the Loss Mitigation Parties will
be prepared to participate meaningfully in the loss mitigation
session – it is not intended to limit additional issues or
proposals that may arise during the session. During the initial
contact phase, the Loss Mitigation Parties should discuss the
following:
1.
2.
3.
The time, place and method for conducting the
loss mitigation sessions.
The types of loss mitigation solutions under
consideration by each party.
A plan for the exchange of requested
information prior to the loss mitigation
session, including the due date for the Debtor
to complete and return any information request
or other loss mitigation paperwork that each
Creditor may require. All information shall
be provided at least 7 days prior to the loss
mitigation session.
B. LOSS MITIGATION SESSIONS
Loss mitigation sessions may be conducted in person,
telephonically, or via video conference. At the conclusion of each
loss mitigation session, the Loss Mitigation Parties should discuss
whether additional sessions are necessary and set the time and
method for conducting any additional sessions, including a schedule
for the exchange of any further information or documentation that
may be required.
C. BANKRUPTCY COURT ASSISTANCE
At any time during the loss mitigation period, a Loss
Mitigation Party may request a settlement conference or status
conference with the Bankruptcy Court.
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D. SETTLEMENT AUTHORITY
Each Loss Mitigation Party must have a person with full
settlement authority present during the loss mitigation session.
During a status conference or settlement conference with the
Bankruptcy Court, a person with full settlement authority must
either attend the conference in person or be available by telephone
or video conference 30 minutes prior to the start of the
conference.
IX. DURATION, EXTENSION AND EARLY TERMINATION
A. INITIAL PERIOD
The initial loss mitigation period shall be set by the
Bankruptcy Court in the Loss Mitigation Order.
B. EXTENSION
1.
2.
Agreement: The Loss Mitigation Parties may
agree to an extension of the loss mitigation
period by filing an extension in writing on
the docket in the main bankruptcy case and
served on all parties in interest, who shall
have three (3) days to object to said
extension.
No Agreement: Where a Loss Mitigation Party
does not consent to the request for an
extension of the loss mitigation period, the
Bankruptcy Court shall schedule a hearing to
consider whether further loss mitigation
sessions are appropriate.
The Bankruptcy
Court may order an extension if it appears
that (1) a further loss mitigation session is
likely to provide a substantial benefit to a
Loss Mitigation Party, (2) the party opposing
the extension has not participated in good
faith or has failed in a material way to
comply with these Procedures, (3) the party
opposing
the
extension
would
not
be
prejudiced, or (4) for other cause shown.
C. EARLY TERMINATION
1.
Upon Request of
Loss Mitigation
loss mitigation
shall state the
a Loss Mitigation Party: A
Party may request that the
period be terminated, and
reasons for the request.
8
2.
Except
where
immediate
termination
is
necessary to prevent irreparable injury, loss
or damage, the request shall be made on notice
to all other Loss Mitigation Parties, and if
it is deemed appropriate or necessary, the
Bankruptcy Court may schedule a hearing to
consider said request.
Dismissal of the Bankruptcy Case:
a.
Other than at the request of a
Chapter 13 Debtor, or on the motion
of the United States Trustee, case
trustee, or the Court acting sua
sponte, for failure to comply with
requirements under the Bankruptcy
Code, a case shall not be dismissed
during the loss mitigation period
unless the Loss Mitigation Parties
have provided the Bankruptcy Court
with a status report that is
approved by the Court.
b.
Upon the request of a Chapter 13
Debtor: A Debtor shall not be
required to request dismissal of the
bankruptcy case as part of any
resolution or settlement that is
offered or agreed to during the loss
mitigation period. Where a Chapter
13
Debtor
requests
voluntary
dismissal of the bankruptcy case
during the loss mitigation period,
the Debtor’s dismissal request shall
indicate whether the Debtor agreed
to any settlement or resolution from
a Loss Mitigation Party during the
loss mitigation period or intends to
accept an offer of settlement made
by a Loss Mitigation Party during
the loss mitigation period.
c.
Notice: If a bankruptcy case is
dismissed for any reason during the
loss mitigation period, the Clerk of
the Court shall note on the docket
that loss mitigation efforts were
ongoing at the time the bankruptcy
case was dismissed.
9
X. SETTLEMENT
The Bankruptcy Court will consider any agreement or resolution
reached during loss mitigation (a “Settlement”) and may approve the
Settlement, subject to the following provisions:
1.
2.
3.
4.
5.
6.
Implementation: A Settlement may be noticed
and implemented in any manner permitted by the
Bankruptcy
Code
and
Federal
Rules
of
Bankruptcy Procedure (“Bankruptcy Rules”),
including, but not limited to, a stipulation,
sale, plan of reorganization or amended plan
of reorganization.
Fees, Costs or Charges: If a Settlement
provides for a Creditor to receive payment or
reimbursement of any fee, cost or charge that
arose from loss mitigation, all such fees,
costs or charges shall be disclosed to the
Debtor and to the Bankruptcy Court prior to
approval of the Settlement.
Signatures: Consent to the Settlement shall be
acknowledged in writing by (1) an authorized
representative of the Creditor, (2) the
Debtor, and (3) the Debtor’s attorney, if
applicable.
Hearing: Where a Debtor is represented by
counsel, a Settlement may be approved by the
Bankruptcy Court without further notice, or
upon such notice as the Bankruptcy Court
directs, unless additional notice or a hearing
is required by the Bankruptcy Code or
Bankruptcy Rules.
Where a Debtor is not
represented by counsel, a Settlement shall not
be approved until after the Bankruptcy Court
has conducted a hearing at which the Debtor
shall appear in person.
Amended Schedules I and J and Amended Chapter
13 Plan, if applicable:
Within fourteen (14) days after Court approval
of a Settlement, the Debtor shall file amended
Schedules I and J, and an amended Chapter 13
Plan, if applicable.
Dismissal Not Required: A Debtor is not
required
to
request
dismissal
of
the
bankruptcy case in order to effectuate a
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Settlement. To ensure that the Settlement is
enforceable, the Loss Mitigation Parties must
request Bankruptcy Court approval of the
Settlement.
Where the Debtor requests or
consents to dismissal of the bankruptcy case
as part of the Settlement, the Bankruptcy
Court may approve the Settlement as a
“structured dismissal,” if such action
complies with the Bankruptcy Code and the
Bankruptcy Rules, and does substantial justice
between the parties.
XI. COORDINATION WITH OTHER PROGRAMS
[Provision may be added in the future to provide for coordination
with other loss mitigation programs.]
XII.
EFFECTIVE DATE
Pursuant to General Order 09-003, this LMP shall become effective
on November 1, 2009.
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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF RHODE ISLAND
- - - - - - - - - - - - - - - - - - x
In re:
:
Debtor(s)
Form A to G.O. 09-003
TWO PAGE DOCUMENT
BK No.
Chapter
:
- - - - - - - - - - - - - - - - - - x
NOTICE AND/OR REQUEST FOR LOSS MITIGATION – BY THE DEBTOR
I am a Debtor in this case, and hereby request loss mitigation with
respect to [Identify the property, loan and creditor(s) for which
loss mitigation is requested]:
NAME OF CREDITOR:
PROPERTY ADDRESS:
SIGNATURE
I understand that if the Court orders loss mitigation in this case,
I am required to comply with the Loss Mitigation Procedures, and
will participate in loss mitigation in good faith. I understand
that loss mitigation is voluntary, and that I am not required to
enter into any agreement or settlement with any other party as part
of this loss mitigation, and understand that no other party is
required to enter into any agreement or settlement with me. I also
understand that I am not required to request dismissal of this case
as part of any resolution or settlement that is offered or agreed
to during the loss mitigation period.
Sign:
Date:
DEBTOR INFORMATION:
Print Full Name:
Mailing Address:
Telephone Number:
Email Address (if any)
1
, 2009
In re:
, Debtor
Page Two
Notice/Request for Loss Mitigation
BK No.
Attorney Information (if any):
Name:
Address:
Telephone Number:
Fax Number:
Email Address (if any)
Preferred Method of Contact:
Debtor’s Attorney
Debtor
Pursuant to Section V of the Loss Mitigation Program, the
above named Creditor has fourteen (14) Days to file with the
Court and serve on the Debtor and Debtor’s attorney, any
objection to this Request at:
U.S. Bankruptcy Court, District of Rhode Island
The Federal Center, 380 Westminster Street,
Providence, Rhode Island 02903
2
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF RHODE ISLAND
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In re:
:
:
Form B to G.O. 09-003
BK No.
Chapter
Debtor(s)
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LOSS MITIGATION REQUEST – BY A CREDITOR
I am a creditor (including a holder, assignee, servicer or trustee of
a mortgage or lien secured by property used by the Debtor as a
principal residence) of the Debtor. I hereby request loss mitigation
with respect to [Identify the property and loan for which you are
requesting loss mitigation]:
SIGNATURE
I have reviewed the Loss Mitigation Procedures, and understand that if the
Court orders loss mitigation in this case, I will be bound by the Loss
Mitigation Procedures, and will participate in loss mitigation in good faith.
If loss mitigation is ordered, I agree to provide the Court with a written or
verbal status report stating whether or not the parties participated in one or
more loss mitigation sessions, whether or not a settlement was reached, and
whether negotiations are ongoing, and I will not require the Debtor to request
or cause dismissal of this case as part of any resolution or settlement that
is offered or agreed to during the loss mitigation period.
Sign:
Date:
, 2009
Print Name:
Title:
Firm or Company:
Telephone Number:
E-mail address (if any):
Pursuant to Section V of the Loss Mitigation Program, the above
named Debtor has seven (7) Days to file any objection to this
Request at:
U.S. Bankruptcy Court, District of Rhode Island
The Federal Center, 380 Westminster Street,
Providence, Rhode Island 02903.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF RHODE ISLAND
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Form C to G.O. 09-003
In re:
BK No.
Chapter
:
:
Debtor(s)
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LOSS MITIGATION ORDER
G
A Loss Mitigation Request2 was filed by the Debtor on
, 200
.
G
A Loss Mitigation Request was filed by a creditor on
, 200
.
G
The Court raised the possibility of loss mitigation, and the
parties have had notice and an opportunity to object.
Accordingly, it is ORDERED, that the following parties
(collectively, the “Loss Mitigation Parties”) are directed to
participate in loss mitigation:
1. The Debtor
, the Creditor with respect to
2.
[describe Loan and/or Property].
3.
[Additional parties, if any.]
It is further ORDERED, that the Loss Mitigation Parties shall
comply with the Loss Mitigation Procedures annexed to this Order; and
it is further
2
All capitalized terms have the meanings defined in the section
on Loss Mitigation Procedures.
1
ORDERED, that the Loss Mitigation Parties shall observe the
following deadlines:
1. Each Loss Mitigation Party shall designate contact
persons and disclose contact information by
[suggested time is 7 days], unless this information
has been previously provided. As part of this obligation, A
creditor shall furnish each Loss Mitigation Party with
written notice of the name, address, and direct telephone
number of the person who has full settlement authority, and
shall file such Loss Mitigation Contact Information with the
Court.
2. Each Creditor that is a Loss Mitigation Party shall
contact the Debtor’s Attorney, or Debtor, if pro se, within
fourteen (14) days of the date of this Order.
3. Each Loss Mitigation Party must make its information
request, if any, within fourteen (14) days of the date of
this Order.
4. Each Loss Mitigation Party shall respond to an
information request within fourteen (14) days after such
request is made, or seven (7) days prior to the Loss
Mitigation Session, whichever is earlier.
5. The Loss Mitigation Session shall be scheduled not later
than
[suggested time is
within 45 days of the date of the Order].
6. The loss mitigation period shall terminate on
[suggested time is within 60
days of the date of the Order], unless extended as provided
in the Loss Mitigation Procedures.
It is further ORDERED, that a status conference will be held in
[within 60 days
this proceeding on
unless extended by Court Order] (the “Status Conference”).
The Loss
Mitigation Parties shall appear at the Status Conference and provide
the Court with a verbal Status Report, unless a detailed joint Status
Report has been filed at least seven (7) days prior to the date of the
2
Status Conference with a request that the Status Conference be
dispensed with in lieu of the report; and it is further
ORDERED, that at the Status Conference, the Court may consider a
proposed Settlement by the Loss Mitigation Parties, or may continue
the Status Conference to allow more time to complete the loss
mitigation session, or for time to provide adequate notice of a
request for approval of a Settlement; and it is further
ORDERED, that any other pending matters between the Loss
Mitigation Parties are hereby continued to the date of the Status
Conference, to the extent those matters concern (1) relief from the
automatic stay, (2) objection to the allowance of a proof of claim,
(3) reduction, reclassification or avoidance of a lien, (4) valuation
of a Loan or Property, or (5) objection to confirmation of a plan of
reorganization; and it is further
ORDERED, that the time for each Loss Mitigation Creditor to file
an objection to a plan of reorganization in this case shall be
extended until fourteen (14) days after the termination of the loss
mitigation period, or any extension thereof.
Entered as an Order of this Court.
Dated at Providence, Rhode Island, this
, 2009.
Arthur N. Votolato
U.S. Bankruptcy Judge
Entered on docket:
3
day of
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF RHODE ISLAND
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In re:
:
First Amended Loss Mitigation
Program and Procedures
:
Debtor(s)
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BANKRUPTCY GENERAL ORDER
No. 10-001
GENERAL ORDER ADOPTING FIRST AMENDED LOSS
MITIGATION PROGRAM AND PROCEDURES
WHEREAS on October 22, 2009, this Court issued General Order 09003, adopting Loss Mitigation Program and Procedures, effective
November 1, 2009, and
WHEREAS in the two months since the program has been in effect,
better practices have been identified for improving the program
procedures and its forms,
NOW THEREFORE, it is hereby ORDERED that the First Amended Loss
Mitigation Program and Procedures is adopted, and shall replace
the October 22, 2009 version, effective January 15, 2010. The
specific provisions and forms being amended include:

Sections V.(A)(2)-- amended to clarify that only one
creditor/property may be included on each LM Request
 Section V.(A)(3) -- amended to remove from hearing any
unopposed loss mitigation requests
 Section V.(D) -- amended to require that an objection to a
loss mitigation request contain specific reasons why loss
mitigation would not be successful, or the objection will
be overruled without hearing
 Section II.(D)-- amended to provide that whenever the Court
or the parties jointly continue the status conference date,
the loss mitigation period will automatically be extended
to that date
 Form A – amended to certify that the subject property of
the request is real property used as a principal residence
and to include an intended payment amount
 Form C – amended to use number of days rather than
specific dates in the order
ORDER
ENTER:
Susan M. Thurston
Clerk of Court
Dated: January 14, 2010
Arthur N. Votolato
U.S. Bankruptcy Judge
UNITED STATES BANKRUPTCY COURT
DISTRICT OF RHODE ISLAND
FIRST AMENDED LOSS MITIGATION PROGRAM AND PROCEDURES
I. PURPOSE
The Loss Mitigation Program (LMP) is designed to function
as a forum for debtors and lenders to reach consensual
resolution when a debtor’s residential property is at risk of
foreclosure.
The LMP aims to facilitate such resolution by
opening communications between the debtors’ and lenders’
decision-makers.
While the LMP stays certain bankruptcy
deadlines that may have the effect of delaying the normal
progress of bankruptcy administration, more importantly, the LMP
encourages the parties to finalize a feasible and beneficial
agreement under Bankruptcy Court protection, instead of seeking
dismissal of the bankruptcy case.
II. LOSS MITIGATION DEFINED
The “loss mitigation” process is intended to include the
full range of solutions that may prevent either the loss of a
debtor’s property to foreclosure, increased costs to the lender,
or both.
Loss mitigation commonly consists of several general
types
of
agreements,
or
a
combination
of
them:
loan
modification, loan refinance, forbearance, short sale, or
surrender of the property in full satisfaction1. The terms of a
loss mitigation solution will vary in each case according to the
particular needs and goals of the parties.
III. ELIGIBILITY
The following definitions describe the types of parties,
properties and loans that are eligible for participation in the
Loss Mitigation Program:
1
This is not intended to be an exclusive list of loss mitigation
solutions.
1
A. DEBTOR
The term “Debtor” means any individual debtor in a case
filed under Chapter 7, 11, 12 or 13 of the Bankruptcy Code,
including joint debtors.
If the Debtor is represented by
counsel, the term “Debtor” is to be interpreted to include both
the Debtor and the Debtor’s attorney, unless the Debtor, with
the approval of Debtor’s counsel, has expressly requested and
authorized direct involvement without counsel.
B. PROPERTY
The term “Property” means any real property used as a
principal residence in which an eligible Debtor holds an
interest.
C. LOAN
The term “Loan” means any mortgage, lien or extension of
money or credit secured by eligible Property, regardless of
whether the Loan (1) is considered to be “subprime” or “nontraditional,” (2) was in foreclosure prior to the bankruptcy
filing, (3) is the first or junior mortgage or lien on the
Property, or (4) has been “pooled,” “securitized,” or assigned
to a servicer or to a trustee.
D. CREDITOR
The term “Creditor” refers to any mortgage
assignee, servicer or trustee of an eligible Loan.
holder,
IV. ADDITIONAL PARTIES
A. OTHER CREDITORS
Where necessary or desirable to obtain a global (i.e. more
than a two party) resolution, any party may request, or the
bankruptcy court may direct that multiple Creditors participate
in the loss mitigation process.
B. CO-DEBTORS AND THIRD PARTIES
Where the participation of a co-debtor or other third party
is necessary or desirable, any party may request, or the
Bankruptcy Court may direct that such party participate in loss
2
mitigation, to the extent that the Bankruptcy Court has
jurisdiction over the party, or if the party consents to such
participation.
C.CHAPTER 13 TRUSTEE
It is the duty of the Chapter 13 Trustee under Section
1302(b)(4) of the Bankruptcy Code to “advise, other than on
legal matters, and assist the debtor in performance under the
plan.”
Any party may request, or the Bankruptcy Court may
direct the Chapter 13 Trustee to participate in loss mitigation
to the extent that such participation would be consistent with
the Chapter 13 Trustee’s duties under the Bankruptcy Code.
V. COMMENCEMENT OF LOSS MITIGATION
Parties are encouraged to request loss mitigation as early
in the case as possible, but loss mitigation may be initiated at
any time, by any of the following methods:
A. BY THE DEBTOR
1.
In Section XIII of the Model Chapter 13 Plan
(RI Local Form W.1), a Chapter 13 Debtor may
indicate an interest in discussing loss
mitigation with a particular Creditor.
If
the box in Section XIII is checked, within
seven (7) days of filing the Plan, the
Debtor shall serve on the Creditor and its
counsel, if known, and file with the Court,
a Notice and/or Request for Loss Mitigation
(Amended Form A to G.O. 10-001), together
with a Proposed Loss Mitigation Order with
applicable deadlines supplied (Amended Form
C to G.O. 10-001). The Creditor shall have
fourteen
(14)
days
to
object.
If
no
objection is filed, the Bankruptcy Court may
enter the proposed order “Loss Mitigation
Order”.
2.
Alternatively, a Debtor may file with the
Court and serve on the Creditor and its
counsel, if known, a Notice and/or Request
for Loss Mitigation (Amended Form A to G.O.
10-001), together with a Proposed Loss
3
Mitigation Order with applicable deadlines
supplied (Amended Form C to G.O. 10-001).
The Creditor shall have fourteen (14) days
to object. If no objection is filed, the
Bankruptcy Court may enter a Loss Mitigation
Order. Only one creditor/property may be
included on a Request form. Use separate
forms for additional creditors (liens).
3.
If a Creditor has filed a motion for relief
from the automatic stay pursuant to Section
362 of the Bankruptcy Code (a “Lift-Stay
Motion”),
at
any
time
prior
to
the
conclusion of the hearing on the Lift-Stay
Motion, the Debtor may file a Notice and/or
Request for Loss Mitigation (Amended Form A
to G.O. 10-001).
The Debtor and Creditor
shall appear at the scheduled hearing on the
Lift-Stay
Motion,
at
which
time
the
Bankruptcy Court will consider the loss
mitigation request and any opposition by the
Creditor. If the objection deadline in the
Loss Mitigation Request expires before the
scheduled hearing and no objection is filed,
the matter will be automatically removed
from the calendar and the parties will be so
notified and all pending matters will be
continued to the status conference date.
B. BY A CREDITOR
A Creditor may file with the Court and serve on the Debtor
and Debtor’s counsel, if any, a Request for Loss Mitigation
(Form B to G.O. 09-003), together with a Proposed Loss
Mitigation Order with applicable dates supplied (Amended Form C
to G.O. 10-003).
The Debtor shall have seven (7) days to
object.
If no objection is filed, the Bankruptcy Court may
enter a Loss Mitigation Order.
C. BY THE BANKRUPTCY COURT
The Bankruptcy Court may enter a Loss Mitigation Order at
any time, provided that the parties bound by said Order (the
“Loss Mitigation Parties”) have had notice and opportunity to
object and be heard.
4
D. OPPORTUNITY TO OBJECT
Where any party files an objection, a Loss Mitigation Order
shall not be entered until the Bankruptcy Court, after adequate
notice, has held a hearing to consider the objection. An
objection to the loss mitigation request must include specific
reasons why loss mitigation would not be successful, or it will
be overruled without hearing. If a party objects on the ground
that loss mitigation has been requested in bad faith, the
assertion must be supported by objective reasons, and by sworn
testimony, if necessary.
VI. LOSS MITIGATION ORDER
A. DEADLINES
A Loss Mitigation Order shall contain deadlines for the
following:
1.
2.
3.
4.
5.
6.
The date by which the Loss Mitigation
Parties shall designate contact persons and
disclose
contact
information,
if
this
information
has
not
been
previously
provided.
The date by which each Creditor must
initially contact the Debtor.
The date by which each Creditor must
transmit information requests to the Debtor.
The date by which the Debtor must transmit
information requests to each Creditor.
The date by which a written report must be
filed, or the date and time set for a status
conference at which verbal reports must be
provided by the parties. Whenever possible,
in Chapter 13 cases, the status conference
will coincide with the first date set for
confirmation of the Chapter 13 plan, or any
continued confirmation hearing.
Where a
written report is required, it should be
filed not later than 7 days after the
conclusion of the initial loss mitigation
session.
The date when the loss mitigation period
will terminate, unless duly extended.
5
B. EFFECT
Upon the entry of a Loss Mitigation Order, the following
shall apply to the Loss Mitigation Parties:
1.
2.
3.
4.
Except
where
necessary
to
prevent
irreparable injury, loss or damage, the LM
Party Creditor shall not file a Lift-Stay
Motion during the loss mitigation period.
Any Lift-Stay Motion filed by such LM Party
Creditor prior to the entry of the Loss
Mitigation Order shall be continued to a
date after the last day of the loss
mitigation period, and the stay shall be
extended pursuant to Section 362(e) of the
Bankruptcy Code.
In a Chapter 13 case, the hearing date for
confirmation of the plan shall be continued
to a date after the last day of the loss
mitigation period. The deadline by which a
Creditor must object to confirmation shall
be extended to permit the Creditor an
additional fourteen (14) days after the
conclusion
or
termination
of
loss
mitigation.
During the Loss Mitigation period, Debtors
must stay current with their Chapter 13 plan
payments in order to remain eligible for the
program.
Pursuant to Federal Rule of Evidence 408,
all communications and information exchanged
by the Loss Mitigation Parties during the
loss
mitigation
procedure
will
be
inadmissible in any subsequent proceeding.
6
II. DUTIES UPON COMMENCEMENT OF LOSS MITIGATION
Upon entry of a Loss Mitigation Order, the Loss Mitigation
parties shall have the following obligations:
A. GOOD FAITH
The Loss Mitigation Parties shall negotiate in good faith.
A party failing or refusing to participate in loss mitigation in
good faith may be subject to sanctions.
B. CONTACT INFORMATION
1.
The Debtor: The Debtor shall provide written
notice to each Creditor, indicating the
manner in which the Creditor should contact
the Debtor, unless the Debtor has already
done so in the Chapter 13 plan or as part of
a request for loss mitigation,
2.
The Creditor: Each Creditor shall provide
written notice to the Debtor, identifying
the name, address, and direct telephone
number of the contact person with settlement
authority, unless a Creditor has already
done so as part of a prior request for loss
mitigation.
C. STATUS REPORT
The Loss Mitigation Parties shall provide either a written
or verbal report to the Bankruptcy Court regarding the status of
the loss mitigation, within the time set by the Bankruptcy Court
in the Loss Mitigation Order.
The status report shall include
whether one or more loss mitigation sessions have been
conducted, whether a resolution was reached, and whether one or
more of the Loss Mitigation Parties believe that additional loss
mitigation sessions would be likely to result in either a
partial or complete resolution.
A status report may include a
request for an extension of the loss mitigation period. Whenever
the Court or the parties jointly continue the status conference
date, the Loss Mitigation period will automatically be continued
to that date.
7
D. BANKRUPTCY COURT APPROVAL
The Loss Mitigation Parties shall file a written request
for Bankruptcy Court approval of any resolution or settlement
reached during loss mitigation.
VIII. THE LOSS MITIGATION PROCESS
A. INITIAL CONTACT
Within seven (7) days following entry of a Loss Mitigation
Order, the contact person designated by each Creditor shall
contact the Debtor’s attorney, or Debtor, if specifically
authorized, and any other Loss Mitigation Party, unless a
different deadline is set by the Bankruptcy Court.
The Debtor
may contact any Loss Mitigation Party at any time. The purpose
of the initial contact is to create a framework for the
discussion at the loss mitigation session and to ensure that
each of the Loss Mitigation Parties will be prepared to
participate meaningfully in the loss mitigation session – it is
not intended to limit additional issues or proposals that may
arise during the session. During the initial contact phase, the
Loss Mitigation Parties should discuss the following:
1.
2.
3.
The time, place and method for conducting
the loss mitigation sessions.
The types of loss mitigation solutions under
consideration by each party.
A plan for the exchange of requested
information prior to the loss mitigation
session, including the due date for the
Debtor
to
complete
and
return
any
information request or other loss mitigation
paperwork that each Creditor may require.
All information shall be provided at least 7
days prior to the loss mitigation session.
B. LOSS MITIGATION SESSIONS
Loss mitigation sessions may be conducted in person,
telephonically, or via video conference.
At the conclusion of
each loss mitigation session, the Loss Mitigation Parties should
discuss whether additional sessions are necessary and set the
time and method for conducting any additional sessions,
8
including a schedule for the exchange of any further information
or documentation that may be required.
C. BANKRUPTCY COURT ASSISTANCE
At any time during the loss mitigation period, a Loss
Mitigation Party may request a settlement conference or status
conference with the Bankruptcy Court.
D. SETTLEMENT AUTHORITY
Each Loss Mitigation Party must have a person with full
settlement authority present during the loss mitigation session.
During a status conference or settlement conference with the
Bankruptcy Court, a person with full settlement authority must
either attend the conference in person or be available by
telephone or video conference 30 minutes prior to the start of
the conference.
IX. DURATION, EXTENSION AND EARLY TERMINATION
A. INITIAL PERIOD
The initial loss mitigation period shall be set by the
Bankruptcy Court in the Loss Mitigation Order.
B. EXTENSION
1.
2.
Agreement: The Loss Mitigation Parties may
agree to an extension of the loss mitigation
period by filing an extension in writing on
the docket in the main bankruptcy case and
served on all parties in interest, who shall
have three (3) days to object to said
extension.
No Agreement: Where a Loss Mitigation Party
does not consent to the request for an
extension of the loss mitigation period, the
Bankruptcy Court shall schedule a hearing to
consider whether further loss mitigation
sessions are appropriate.
The Bankruptcy
Court may order an extension if it appears
that (1) a further loss mitigation session
is likely to provide a substantial benefit
to a Loss Mitigation Party, (2) the party
opposing the extension has not participated
9
in good faith or has failed in a material
way to comply with these Procedures, (3) the
party opposing the extension would not be
prejudiced, or (4) for other cause shown.
C. EARLY TERMINATION
1.
2.
Upon Request of a Loss Mitigation Party: A
Loss Mitigation Party may request that the
loss mitigation period be terminated, and
shall state the reasons for the request.
Except
where
immediate
termination
is
necessary to prevent irreparable injury,
loss or damage, the request shall be made on
notice to all other Loss Mitigation Parties,
and
if
it
is
deemed
appropriate
or
necessary, the Bankruptcy Court may schedule
a hearing to consider said request.
Dismissal of the Bankruptcy Case:
a.
Other than at the request of a
Chapter 13 Debtor, or on the
motion
of
the
United
States
Trustee, case trustee, or the
Court
acting
sua
sponte,
for
failure
to
comply
with
requirements under the Bankruptcy
Code,
a
case
shall
not
be
dismissed
during
the
loss
mitigation period unless the Loss
Mitigation Parties have provided
the Bankruptcy Court with a status
report that is approved by the
Court.
b.
Upon the request of a Chapter 13
Debtor: A Debtor shall not be
required to request dismissal of
the bankruptcy case as part of any
resolution or settlement that is
offered or agreed to during the
loss mitigation period.
Where a
Chapter
13
Debtor
requests
voluntary
dismissal
of
the
bankruptcy case during the loss
mitigation period, the Debtor’s
dismissal request shall indicate
10
c.
whether the Debtor agreed to any
settlement or resolution from a
Loss Mitigation Party during the
loss mitigation period or intends
to accept an offer of settlement
made by a Loss Mitigation Party
during the loss mitigation period.
Notice: If a bankruptcy case is
dismissed for any reason during
the loss mitigation period, the
Clerk of the Court shall note on
the docket that loss mitigation
efforts were ongoing at the time
the bankruptcy case was dismissed.
X. SETTLEMENT
The Bankruptcy Court will consider any agreement or
resolution reached during loss mitigation (a “Settlement”) and
may approve the Settlement, subject to the following provisions:
1.
2.
3.
4.
Implementation: A Settlement may be noticed
and implemented in any manner permitted by
the Bankruptcy Code and Federal Rules of
Bankruptcy Procedure (“Bankruptcy Rules”),
including,
but
not
limited
to,
a
stipulation, sale, plan of reorganization or
amended plan of reorganization.
Fees, Costs or Charges: If a Settlement
provides for a Creditor to receive payment
or reimbursement of any fee, cost or charge
that arose from loss mitigation, all such
fees, costs or charges shall be disclosed to
the Debtor and to the Bankruptcy Court prior
to approval of the Settlement.
Signatures: Consent to the Settlement shall
be acknowledged in writing by (1) an
authorized representative of the Creditor,
(2) the Debtor, and (3) the Debtor’s
attorney, if applicable.
Hearing: Where a Debtor is represented by
counsel, a Settlement may be approved by the
Bankruptcy Court without further notice, or
upon such notice as the Bankruptcy Court
directs, unless additional notice or a
11
5.
6.
hearing is required by the Bankruptcy Code
or Bankruptcy Rules. Where a Debtor is not
represented by counsel, a Settlement shall
not be approved until after the Bankruptcy
Court has conducted a hearing at which the
Debtor shall appear in person.
Amended Schedules I and J and Amended Chapter
13 Plan, if applicable:
Within
fourteen
(14)
days
after
Court
approval of a Settlement, the Debtor shall
file amended Schedules I and J, and an
amended Chapter 13 Plan, if applicable.
Dismissal Not Required: A Debtor is not
required
to
request
dismissal
of
the
bankruptcy case in order to effectuate a
Settlement.
To ensure that the Settlement
is enforceable, the Loss Mitigation Parties
must request Bankruptcy Court approval of
the Settlement.
Where the Debtor requests
or consents to dismissal of the bankruptcy
case
as
part
of
the
Settlement,
the
Bankruptcy Court may approve the Settlement
as a “structured dismissal,” if such action
complies with the Bankruptcy Code and the
Bankruptcy
Rules,
and
does
substantial
justice between the parties.
XI. COORDINATION WITH OTHER PROGRAMS
[Provision may be added in the future to
coordination with other loss mitigation programs.]
provide
for
XII. EFFECTIVE DATE
Pursuant to General Order 09-003, the Court’s LMP first became
effective on November 1, 2009.
By General Order 10-001, this
Court amended Sections V.(A)(2),(3) and (D), and Section II.(C)
as reflected herein.
Rev.011410
12
UNITED STATES BANKRUPTCY COURT
Amended Form A to G.O. 10-001
FOR THE DISTRICT OF RHODE ISLAND
TWO PAGE DOCUMENT
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In re:
:
BK No.
Chapter
Debtor(s)
:
- - - - - - - - - - - - - - - - - x
NOTICE AND/OR REQUEST FOR LOSS MITIGATION – BY THE DEBTOR
I am a Debtor in this case, and hereby request loss mitigation
(LM) with respect to [Identify the property, loan and
creditor(s) for which loss mitigation is requested]:
NAME OF CREDITOR:_______________________________________________
________________________________________________________________
PROPERTY ADDRESS:_______________________________________________
________________________________________________________________
SIGNATURE
I understand that if the Court orders loss mitigation in this
case, I am required to comply with the LM Procedures, and will
participate in LM in good faith. I understand that LM is
voluntary, and that I am not required to enter into any
agreement or settlement with any other party as part of this LM,
and understand that no other party is required to enter into any
agreement or settlement with me. I also understand that I am
not required to request dismissal of this case as part of any
resolution or settlement that is offered or agreed to during the
LM period. I also certify that the property in question
consists only of real property used as a principal residence in
which I hold an interest.
I further certify as follows:
(
) I will make my regular current monthly mortgage payments
during the LM
beginning with the payment due on
period.
(
) I propose to make my monthly mortgage payments as follows
during the LM period, but I agree that I am still
obligated to pay the original amount until modified:
_______________________________________________________.
(
) I propose to make the following monthly payment during the
LM period based on my projected loan modification: ___ ____
Sign:
Date:
DEBTOR INFORMATION:
Print Full Name:________________________________________________
Mailing Address:________________________________________________
Telephone Number:_______________________________________________
Email Address (if any):_________________________________________
Attorney Information (if any):
Name:___________________________________________________________
Address:________________________________________________________
Telephone Number:
Fax Number:__________________
Email Address (if any):_________________________________________
Debtor’s Attorney
Debtor
Preferred Method of Contact:
Pursuant to Section V of the Loss Mitigation Program, the above
named Creditor has fourteen (14) Days to file with the Court and
serve on the Debtor and Debtor’s attorney, any objection to this
Request at:
U.S. Bankruptcy Court, District of Rhode Island
The Federal Center, 380 Westminster Street,
Providence, Rhode Island 02903
Rev. 011410
2
UNITED STATES BANKRUPTCY COURT
DISTRICT OF RHODE ISLAND
INSTRUCTIONS RE: LOSS MITIGATION PROGRAM AND PROCEDURES
General Order 10-001
I. Effective Date, Chapters Affected, Eligibility, and Deadlines:
1. Effective Date: November 1, 2009
2. Chapters Affected: 7, 11, 12 or 13
3. Eligibility: Individual debtors with real property used as a principal residence
4. Deadlines:
(A). Initiation of Loss Mitigation (LM): Debtor or Creditor may initiate loss
mitigation at any time during the pendency of the case by filing a Notice and/or
Request for Loss Mitigation (Amended Form A or Form B). See, Section V of
LM Program.
(B). Opportunity to Object: A Creditor has fourteen (14) days to object to LM.
A Debtor has seven (7) days to object to LM.
(C). Other Deadlines: Upon entry of a Loss Mitigation Order, the remaining
deadlines – for designating contact persons; initial contact; document production
requests; conducting the LM sessions; and filing status reports with the Court –
will be set forth in the LM Order.
II. New Events – All Located Under new “Loss Mitigation” Events Category in
Bankruptcy Menu:
1. Loss Mitigation Notice/Request: To be used by either Debtor or Creditor. Sets a
LossMit Flag in the case to notify parties that LM is in effect.
2. Loss Mitigation Contact Information: To be used by either Debtor or Creditor to
provide contact information for participating in LM.
3. Loss Mitigation Status Report: To be used to update the Court on status of the LM
process.
4. Loss Mitigation Request for Continuance: To be used when additional time is
needed to complete LM process.
5. Objection to Loss Mitigation Request: To be used when filing an objection to a LM
request.
6. Motion to Compel Compliance with LM Order: To be used when seeking to
compel compliance with the LM Order.
7. Motion to Approve LM Agreement: To be used for court approval of a loss
mitigation settlement agreement.
8. Chapter 13 Plan Event to be modified (Located Under “Plan”): To include
selection box indicating whether LM is being requested in the Plan document. Selection
of LM in the Plan will also set the LossMit Flag in CM/ECF.
III. New Forms:
1. Notice and/or Request for Loss Mitigation-By the Debtor (Amended Form A):
To be filed by Debtor and served on the Creditor to request LM, or within 7 days of
indicating such interest in the Chapter 13 Plan.
2. Request for Loss Mitigation-By the Creditor (Form B): To be filed by Creditor
and served on Debtor to request LM.
3. Loss Mitigation Order (Amended Form C): Form of order to be used by the Court
to commence LM between the parties once the objection period expires or any filed
objection is overruled.
 The party initiating a LM request must prepare a proposed LM Order using the
court’s PDF fillable form (the status conference date will be filled in by the court).
The order and deadlines contained therein inform the lender of anticipated time frames
involved and helps to gain involvement in the process.
 The proposed order shall be filed as an attachment to the Notice/Request in ECF,
and served with the Notice/Request on the Creditor.
IV. New Clerk’s Office Form: Order extending LM period and continuing status conference.
This order will also reflect that in Chapter 13 cases, the confirmation hearing will also be
continued to the date of the next status conference, and any motion for relief from stay between
the LM parties is also continued to that date.
V. New Flag:
1. LossMit Flag: Will be automatically set by filing of either: (1) Chapter 13 Plan
indicating LM interest; or (2) Notice and/or Request for Loss Mitigation. Visual aid to
notify parties that LM is in effect.
2 VI. Website Enhancements:
1. A Loss Mitigation Page has been added to the Court’s website, located on the left
vertical column and includes links to the General Order and Loss Mitigation
Program and Procedures document, the new forms and instructions, and FAQ’s and Best
Practices.
2. Links to the Government sponsored Loss Mitigation Programs (Making Homes
Affordable) materials and the Home Affordable Modification Plan (HAMP) website will
be included on the Court’s new LM Page, including the HAMP document checklist.
Rev. 021110
3 UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF RHODE ISLAND
- - - - - - - - - - - - - - - - x
In re:
:
Second Amended Loss Mitigation :
Program and Procedures
:
:
- - - - - - - - - - - - - - - - x
BANKRUPTCY GENERAL ORDER
No. 10-002
GENERAL ORDER ADOPTING SECOND AMENDED LOSS
MITIGATION PROGRAM AND PROCEDURES
On January 14, 2010, this Court issued General Order 10-001,
adopting First Amended Loss Mitigation Program and Procedures,
effective January 15, 2010, and
During the first four months of the Program, four areas have
been identified that require clarification and/or explanation in
order to further facilitate the implementation of the Program.
THEREFORE,
It is hereby
ORDERED that the Second Amended Loss Mitigation
Program and Procedures is adopted and shall replace the January
15, 2010 version, effective on April
2, 2010. The provisions
herein substantively amended are:
 Sections III.(A) – that the entry of a discharge and/or the
granting of relief from stay does not prevent a debtor from
requesting loss mitigation or preclude the entry of a loss
mitigation order, nor does it prevent a creditor from
pursuing their state court rights.
 Section V.(D) – objections that fail to address: the
success standard will be overruled without hearing, and the
Court’s position regarding the payment of regular mortgage
payments as a condition to participation in the Loss
Mitigation Program.
 Section VI.(A) – requiring the order to specify the date
for the submission of written status reports; and
continuing the hearing date for confirmation of Chapter 13
plans to a date after the last day of the loss mitigation
period.
 Section VI.(B) – in order that the automatic stay not
expire during Loss Mitigation, a chapter 7 debtor may seek
to extend the entry of discharge during the Loss Mitigation
period.
 Section VII.(A) — the procedures for seeking compliance


ORDER
with deadlines in a Loss Mitigation Order.
Section VII.(C) – eliminating the scheduling of a routine
status conference and requiring instead, the submission of
written status reports to update the Court on the status of
loss mitigation.
Section IX. (B) limiting requests for extensions to 60
days.
ENTER:
Susan M. Thurston
Clerk of Court
Dated: April 1, 2010
Rev’d 04/01/2010
Arthur N. Votolato
U.S. Bankruptcy Judge
UNITED STATES BANKRUPTCY COURT
DISTRICT OF RHODE ISLAND
SECOND AMENDED LOSS MITIGATION PROGRAM AND PROCEDURES
I. PURPOSE
The Loss Mitigation Program (LMP) is designed to function
as a forum for debtors and lenders to reach consensual
resolution when a debtor’s residential property is at risk of
foreclosure.
The LMP aims to facilitate such resolution by
opening communications between the debtors’ and lenders’
decision-makers.
While the LMP stays certain bankruptcy
deadlines that may delay the normal progress of bankruptcy
administration, more importantly, the LMP encourages the parties
to finalize a feasible and beneficial agreement under Bankruptcy
Court protection, instead of seeking dismissal of the bankruptcy
case.
II. LOSS MITIGATION DEFINED
The “loss mitigation” process is intended to include the
full range of solutions that may prevent either the loss of a
debtor’s property to foreclosure, increased costs to the lender,
or both.
Loss mitigation commonly consists of several general
types
of
agreements,
or
a
combination
of
them:
loan
modification, loan refinance, forbearance, short sale, or
surrender of the property in full satisfaction.1 The terms of a
loss mitigation solution will vary in each case according to the
particular needs and goals of the parties.
III. ELIGIBILITY
The following definitions describe the types of parties,
properties and loans that are eligible for participation in the
Loss Mitigation Program:
1
This is not intended to be an exclusive list of loss mitigation
solutions.
1
A. DEBTOR
The term “Debtor” means any individual debtor in a case
filed under Chapter 7, 11, 12 or 13 of the Bankruptcy Code,
including joint debtors.
If the Debtor is represented by
counsel, the term “Debtor” is to be interpreted to include both
the Debtor and the Debtor’s attorney, unless the Debtor, with
the approval of Debtor’s counsel, has expressly requested and
authorized direct involvement without counsel. The fact that a
discharge has entered or that relief from stay has been granted
does not prevent a Debtor from requesting Loss Mitigation or
prevent the Court from entering a Loss Mitigation Order.
However, neither do these actions prevent such Creditors from
pursuing their state court rights during the Loss Mitigation
period, if they so elect.
B. PROPERTY
The term “Property” means any real property used as a
principal residence in which an eligible Debtor holds an
interest.
C. LOAN
The term “Loan” means any mortgage, lien or extension of
money or credit secured by eligible Property, regardless of
whether the Loan (1) is considered to be “subprime” or “nontraditional,” (2) was in foreclosure prior to the bankruptcy
filing, (3) is the first or junior mortgage or lien on the
Property, or (4) has been “pooled,” “securitized,” or assigned
to a servicer or to a trustee.
D. CREDITOR
The term “Creditor” refers to any mortgage
assignee, servicer or trustee of an eligible Loan.
holder,
IV. ADDITIONAL PARTIES
A. OTHER CREDITORS
Where necessary or desirable to obtain a global (i.e., more
than a two party) resolution, any party may request, or the
bankruptcy court may direct that multiple Creditors participate
in the loss mitigation process.
2
B. CO-DEBTORS AND THIRD PARTIES
Where the participation of a co-debtor or other third party
is necessary or desirable, any party may request, or the
Bankruptcy Court may direct that such party participate in loss
mitigation, to the extent that the Bankruptcy Court has
jurisdiction over the party, or if the party consents to such
participation.
C. CHAPTER 13 TRUSTEE
It is the duty of the Chapter 13 Trustee under Section
1302(b)(4) of the Bankruptcy Code to “advise, other than on
legal matters, and assist the debtor in performance under the
plan.”
Any party may request, or the Bankruptcy Court may
direct the Chapter 13 Trustee to participate in loss mitigation
to the extent that such participation would be consistent with
the Chapter 13 Trustee’s duties under the Bankruptcy Code.
V. COMMENCEMENT OF LOSS MITIGATION
Parties are encouraged to request loss mitigation as early
in the case as possible, but loss mitigation may be initiated at
any time, by any of the following methods:
A. BY THE DEBTOR
1.
In Section XIII of the Model Chapter 13 Plan
(RI Local Form W.1), a Chapter 13 Debtor may
indicate an interest in discussing loss
mitigation with a particular Creditor.
If
the box in Section XIII is checked, within
seven (7) days of filing the Plan, the
Debtor shall serve on the Creditor and its
counsel, if known, and file with the Court,
a Notice and/or Request for Loss Mitigation
(Amended Form A to G.O. 10-001), together
with a Proposed Loss Mitigation Order with
applicable deadlines supplied (2nd Amended
Form C to G.O. 10-002). The Creditor shall
have fourteen (14) days to object. If no
objection is filed, the Bankruptcy Court may
enter the proposed order “Loss Mitigation
Order”.
3
2.
Alternatively, a Debtor may file with the
Court and serve on the Creditor and its
counsel, if known, a Notice and/or Request
for Loss Mitigation (Amended Form A to G.O.
10-001), together with a Proposed Loss
Mitigation Order with applicable deadlines
supplied (2nd Amended Form C to G.O. 10-002).
The Creditor shall have fourteen (14) days
to object. If no objection is filed, the
Bankruptcy Court may enter a Loss Mitigation
Order. Only one creditor/property may be
included on a Request form. Use separate
forms for additional creditors (liens).
3.
If a Creditor has filed a motion for relief
from the automatic stay pursuant to Section
362 of the Bankruptcy Code (a “Lift-Stay
Motion”),
at
any
time
prior
to
the
conclusion of the hearing on the Lift-Stay
Motion, the Debtor may file a Notice and/or
Request for Loss Mitigation (Amended Form A
to G.O. 10-001).
The Debtor and Creditor
shall appear at the scheduled hearing on the
Lift-Stay
Motion,
at
which
time
the
Bankruptcy Court will consider the loss
mitigation request and any opposition by the
Creditor. If the objection deadline in the
Loss Mitigation Request expires before the
scheduled hearing and no objection is filed,
the matter will be automatically removed
from the calendar and the parties will be so
notified and all pending matters will be
continued to the status conference date.
B. BY A CREDITOR
A Creditor may file with the Court and serve on the Debtor
and Debtor’s counsel, if any, a Request for Loss Mitigation
(Form B to G.O. 09-003), together with a Proposed Loss
Mitigation Order with applicable dates supplied (2nd Amended Form
C to G.O. 10-002).
The Debtor shall have seven (7) days to
object.
If no objection is filed, the Bankruptcy Court may
enter a Loss Mitigation Order.
4
C. BY THE BANKRUPTCY COURT
The Bankruptcy Court may enter a Loss Mitigation Order at
any time, provided that the parties bound by said Order (the
“Loss Mitigation Parties”) have had notice and opportunity to
object and be heard.
D. OPPORTUNITY TO OBJECT
Where any party files an objection, a Loss Mitigation Order
shall not be entered until the Bankruptcy Court, after adequate
notice, has either held a hearing to consider the objection, or
overrules the objection without a hearing for failing to include
specific reasons why loss mitigation would not be successful. If
a party objects on the ground that loss mitigation has been
requested in bad faith, the assertion must be supported by
objective reasons, and/or by sworn testimony.
This Court’s LMP is intended to bring debtors and secured
lenders together, hopefully, to reach consensual and mutually
beneficial resolutions when residential property is at risk of
foreclosure. With this in mind, and consistent with the federal
HAMP eligibility requirements – that homeowners must be in
default or at imminent risk of default, the requirement that
debtors
make
regular
mortgage
payments
during
the
loss
mitigation process will not be automatically imposed as a
condition to participation in the LMP. To do so would likely be
fatal to the viability of most of the federal, state and
municipal programs that have been developed in response to the
residential foreclosure crisis.
To give the Rhode Island Bankruptcy Court Program the best
chance of success, parties are advised that objections to Loss
Mitigation participation shall be filed by the applicable
deadline and must contain specific reasons as to why the secured
lender believes that loss mitigation would not be successful.
5
VI. LOSS MITIGATION ORDER
A. DEADLINES
A Loss Mitigation Order shall contain deadlines for the
following:
1.
2.
3.
4.
5.
6.
The date by which the Loss Mitigation
Parties shall designate contact persons and
disclose
contact
information,
if
this
information
has
not
been
previously
provided.
The date by which each Creditor must
initially contact the Debtor.
The date by which each Creditor must
transmit information requests to the Debtor.
The date by which the Debtor must transmit
information requests to each Creditor.
The date by which a written report must be
filed updating the Court on the status of
the loss mitigation.
The date when the loss mitigation period
will terminate, unless duly extended.
B. EFFECT
Upon the entry of a Loss Mitigation Order, the following
shall apply to the Loss Mitigation Parties:
1.
2.
Except
where
necessary
to
prevent
irreparable injury, loss or damage, LM
Creditors
shall
not
file
a
Lift-Stay
Motions during the loss mitigation period.
Any Lift-Stay Motion filed by such LM Party
Creditor prior to the entry of the Loss
Mitigation Order shall be postponed to a
date after the last day of the loss
mitigation period, and the stay shall be
extended pursuant to Section 362(e) of the
Bankruptcy Code.
In a chapter 7 case, if the Loss Mitigation
period is anticipated to continue more than
80 days from the date the chapter 7 petition
was filed, debtors may seek to extend the
entry
of
discharge
pursuant
to
Fed.R.Bankr.P. 4004(c)(2), in order that the
6
3.
4.
5.
automatic stay not expire under 11 U.S.C. '
362(c)(2)(C).
In Chapter 13 cases, the hearing date for
confirmation of the plan shall be continued
to a date after the last day of the loss
mitigation period. The deadline by which a
Creditor must object to confirmation shall
be governed by local rules 3015-2(c)(3)
and/or 3015-3(b)(2), as applicable, and
calculated from the rescheduled confirmation
date.
During the Loss Mitigation period, Debtors
must stay current with their Chapter 13 plan
payments in order to remain eligible for the
program.
Pursuant to Federal Rule of Evidence 408,
all communications and information exchanged
by the Loss Mitigation Parties during the
loss
mitigation
procedure
will
be
inadmissible in any subsequent judicial
proceedings.
VII. DUTIES UPON COMMENCEMENT OF LOSS MITIGATION
Upon entry of a Loss Mitigation Order, the Loss Mitigation
parties shall have the following obligations:
A. GOOD FAITH
The Loss Mitigation Parties shall negotiate in good faith.
A party failing or refusing to participate in loss mitigation in
good faith may be subject to sanctions. At any time during the
Loss Mitigation Period, a party seeking compliance with
deadlines should file a Motion to Compel compliance with the
Loss Mitigation Order or seek termination of the Loss Mitigation
Order, if appropriate.
If a party, instead, chooses to file a
proposed Order to Show Cause, said proposed order must be
accompanied by an affidavit verifying the facts asserted in the
Order to Show Cause.
B. CONTACT INFORMATION
1.
The Debtor: The Debtor shall provide written
notice to each Creditor, indicating the
manner in which the Creditor should contact
the Debtor, unless the Debtor has already
7
done so in the Chapter 13 plan or as part of
a request for loss mitigation,
2.
The Creditor: Each Creditor shall provide
written notice to the Debtor, identifying
the name, address, and direct telephone
number of the contact person with settlement
authority, unless a Creditor has already
done so as part of a prior request for loss
mitigation.
C. STATUS REPORT
The Loss Mitigation Parties shall provide a written report
to the Bankruptcy Court regarding the status of the loss
mitigation, within the time set by the Bankruptcy Court in the
Loss Mitigation Order. The status report shall include whether
one or more loss mitigation sessions have been conducted,
whether a resolution was reached, and whether one or more of the
Loss Mitigation Parties believe that additional loss mitigation
sessions would be likely to result in either a partial or
complete resolution. A status report may include a request for
an extension of the loss mitigation period. Whenever the Court
or the parties jointly continue the status reporting date, the
Loss Mitigation period will automatically be extended to that
date.
D. BANKRUPTCY COURT APPROVAL
The Loss Mitigation Parties shall file a written request
for Bankruptcy Court approval of any resolution or settlement
reached during the loss mitigation process. See also Section X
infra.
VIII. THE LOSS MITIGATION PROCESS
A. INITIAL CONTACT
Within seven (7) days after entry of a Loss Mitigation
Order, the contact person designated by each Creditor shall
contact the Debtor’s attorney, or Debtor, if specifically
authorized, and any other Loss Mitigation Party, unless a
different deadline is set by the Bankruptcy Court.
The Debtor
may contact any Loss Mitigation Party at any time. The purpose
of the initial contact is to create a framework for the
8
discussion at the loss mitigation session and to ensure that
each of the Loss Mitigation Parties will be prepared to
participate meaningfully in the loss mitigation session – it is
not intended to preclude the introduction of additional issues
or proposals that may arise during the session.
During the
initial contact phase, the Loss Mitigation Parties should
discuss inter alia:
1.
2.
3.
The time, place and method for conducting
the loss mitigation sessions.
The types of loss mitigation solutions under
consideration by each party.
A plan for the exchange of requested
information prior to the loss mitigation
session, including the due date for the
Debtor
to
complete
and
return
any
information request or other loss mitigation
paperwork that each Creditor may require.
All such information shall be provided at
least 7 days prior to the loss mitigation
session.
B. LOSS MITIGATION SESSIONS
Loss mitigation sessions may be conducted in person,
telephonically, or via video conference.
Prior to the
conclusion of each loss mitigation session, the Loss Mitigation
Parties should discuss whether additional sessions are necessary
and set the time and method for conducting any additional
sessions, including a schedule for the exchange of any further
information or documentation that may be required.
C. BANKRUPTCY COURT ASSISTANCE
At any time during the loss mitigation period, a Loss
Mitigation Party may request a settlement conference or status
conference with the Bankruptcy Court, on any subject dealing
with the Loss Mitigation process.
D. SETTLEMENT AUTHORITY
Each Loss Mitigation Party must have a designated person
with
full
settlement
authority
present
during
the
loss
mitigation session.
During a status conference or settlement
conference with the Bankruptcy Court, a person with full
settlement authority must either attend the conference in person
9
or be available by telephone or video conference 30 minutes
prior to the start of the conference.
IX. DURATION, EXTENSION AND EARLY TERMINATION
A. INITIAL PERIOD
The initial loss mitigation period shall be set by the
Bankruptcy Court in the Loss Mitigation Order.
B. EXTENSION
1.
2.
Agreement: The Loss Mitigation Parties may
agree to an extension of the loss mitigation
period, not to exceed 60 days, by filing an
a request for extension in writing on the
docket in the main bankruptcy case and
served on all parties in interest. Any
objection to such request for additional
time shall be filed within three (3) days.
No Agreement: Where a Loss Mitigation Party
does not consent to the request for an
extension of the loss mitigation period, the
Bankruptcy Court shall schedule a hearing to
consider whether further loss mitigation
sessions are appropriate.
The Bankruptcy
Court may order an extension if it appears
that (1) a further loss mitigation session
is likely to provide a substantial benefit
to a Loss Mitigation Party, (2) the party
opposing the extension has not participated
in good faith or has failed in a material
way to comply with these Procedures, (3) the
party opposing the extension would not be
prejudiced, or (4) for other cause shown.
C. EARLY TERMINATION
1.
Upon Request of a Loss Mitigation Party: A
Loss Mitigation Party may request that the
loss mitigation period be terminated for
cause, and shall state the reason(s) for the
request. Except where immediate termination
is necessary to prevent irreparable injury,
loss or damage, the request shall be made on
notice to all other Loss Mitigation Parties,
and
if
it
is
deemed
appropriate
or
10
2.
necessary, the Bankruptcy Court may schedule
a hearing to consider said request.
Dismissal of the Bankruptcy Case:
a.
Other than at the request of a
Chapter 13 Debtor, or on the
motion
of
the
United
States
Trustee, case trustee, or the
Court
acting
sua
sponte,
for
failure
to
comply
with
requirements under the Bankruptcy
Code,
a
case
shall
not
be
dismissed
during
the
loss
mitigation period unless the Loss
Mitigation Parties have provided
the
Bankruptcy
Court
with
an
explanatory status report that is
approved by the Court.
b.
Upon the request of a Chapter 13
Debtor: A Debtor shall not be
required to request dismissal of
the bankruptcy case as part of any
resolution or settlement that is
offered or agreed to during the
loss mitigation period.
Where a
Chapter
13
Debtor
requests
voluntary
dismissal
of
the
bankruptcy case during the loss
mitigation period, the Debtor’s
dismissal request shall indicate
whether the Debtor agreed to any
settlement or resolution with a
Loss Mitigation Party during the
loss mitigation period or intends
to accept an offer of settlement
made by a Loss Mitigation Party
during the loss mitigation period.
c.
Notice: If a bankruptcy case is
dismissed for any reason during
the loss mitigation period, the
Clerk of the Court shall note on
the docket that loss mitigation
efforts were ongoing at the time
the bankruptcy case was dismissed.
11
X. SETTLEMENT
The Bankruptcy Court will consider any agreement or
resolution reached during loss mitigation (a “Settlement”) and
may approve the Settlement, subject to the following provisions:
1.
2.
3.
4.
5.
6.
Implementation: A Settlement may be noticed
and implemented in any manner permitted by
the Bankruptcy Code and Federal Rules of
Bankruptcy Procedure (“Bankruptcy Rules”),
including,
but
not
limited
to,
a
stipulation, sale, plan of reorganization or
amended plan of reorganization.
Fees, Costs or Charges: If a Settlement
provides for a Creditor to receive payment
or reimbursement of any fee, cost or charge
that arose from loss mitigation, all such
fees, costs or charges shall be disclosed to
the Debtor, the Trustee, the U.S. Trustee,
and to the Bankruptcy Court prior to
approval of the Settlement.
Signatures: Consent to the Settlement shall
be acknowledged in writing by (1) an
authorized representative of the Creditor,
(2) the Debtor, and (3) the Debtor’s
attorney, if applicable.
Hearing: Where a Debtor is represented by
counsel, a Settlement may be approved by the
Bankruptcy Court without further notice, or
upon such notice as the Bankruptcy Court
directs, unless additional notice or a
hearing is required by the Bankruptcy Code
or Bankruptcy Rules. Where a Debtor is not
represented by counsel, a Settlement shall
not be approved until after the Bankruptcy
Court has conducted a hearing at which the
Debtor shall appear in person.
Amended Schedules I and J and Amended Chapter
13 Plan, if applicable:
Within
fourteen
(14)
days
after
Court
approval of a Settlement, the Debtor shall
file amended Schedules I and J, and an
amended Chapter 13 Plan, if applicable.
Dismissal Not Required: A Debtor is not
required
to
request
dismissal
of
the
bankruptcy case in order to effectuate a
12
Settlement.
To ensure that the Settlement
is enforceable, the Loss Mitigation Parties
must request Bankruptcy Court approval of
the Settlement.
Where the Debtor requests
or consents to dismissal of the bankruptcy
case
as
part
of
the
Settlement,
the
Bankruptcy Court may approve the Settlement
as a “structured dismissal,” if such action
complies with the Bankruptcy Code and the
Bankruptcy
Rules,
and
does
substantial
justice between the parties.
XI. COORDINATION WITH OTHER PROGRAMS
[Provision may be added in the future to
coordination with other loss mitigation programs.]
provide
for
XII. EFFECTIVE DATE
Pursuant to General Order 09-003, the Court’s LMP first became
effective on November 1, 2009.
By General Order 10-001, the
Court’s First Amended LMP became effective on January 15, 2010.
By General Order 10-002, this Court amended Section III.(A),
Section V.(D), Section VI(A) and (B), Section VII.(A), and
Section VII.(C) as reflected herein, which shall take effect on
April 1, 2010.
Rev.04/01/10
13
UNITED STATES BANKRUPTCY COURT 2nd Amended Form C to G.O. 10-002
FOR THE DISTRICT OF RHODE ISLAND
- - - - - - - - - - - - - - - - - -x
In re:
:
:
BK No.
Chapter
Debtor(s)
- - - - - - - - - - - - - - - - - -x
LOSS MITIGATION ORDER
1
□
A Loss Mitigation Request was filed by the Debtor on ______
___________________________________________________ 2010.
□
A Loss Mitigation Request was filed by a creditor on _____
__________________________________________________,2010.
□
The Court raised the possibility of loss mitigation, and
the parties have had notice and an opportunity to object.
Accordingly, it is ORDERED, that the following parties
(collectively, the “Loss Mitigation Parties”) are directed to
participate in loss mitigation:
1. The Debtor
2.
, the Creditor with respect to
_________________________________________________________________
_________________________________________________________________
[describe Loan and/or Property].
3. ______________________________________________________________
_________________________________________________________________
_________________________________________________________________
[Additional parties, if any.]
1
All capitalized terms have the meanings defined in the section on
Loss Mitigation Procedures.
It is further ORDERED, that the Loss Mitigation Parties shall
comply with the Loss Mitigation Procedures adopted by this Court; and
it is further
ORDERED, that the Loss Mitigation Parties shall observe the
following deadlines:
1. Each Loss Mitigation Party shall designate contact
persons and disclose contact information within 7 days of
the date of this Order, unless this information has been
previously provided. As part of this obligation, a
creditor shall furnish each Loss Mitigation Party with
written notice of the name, address, and direct telephone
number of the person who has full settlement authority, and
shall file such Loss Mitigation Contact Information with
the Court.
2. Each Creditor that is a Loss Mitigation Party shall
contact the Debtor’s Attorney, or Debtor, if pro se, within
fourteen (14) days of the date of this Order.
3. Each Loss Mitigation Party must make its information
request, if any, within fourteen (14) days of the date of
this Order.
4. Each Loss Mitigation Party shall respond to an
information request within fourteen (14) days after such
request is made, or seven (7) days prior to the Loss
Mitigation Session, whichever is earlier.
5. The Loss Mitigation Session shall be conducted not later
than 45 days from the date of the Order.
6. A Loss Mitigation status report shall be filed with the
Court within 60 days of the date of this order. If
additional time is required to complete the loss mitigation
process, the parties shall include a request for additional
time within said status report.
7. The Loss Mitigation Parties may agree to an extension of
the loss mitigation period, not to exceed 60 days, by
filing a request for extension in writing on the docket in
the main bankruptcy case and served on all parties in
interest. Any objection to such request for additional time
shall be filed within three (3) days.
8. The loss mitigation period shall terminate 90 days from
the date of the Order unless extended as provided in the
Loss Mitigation Procedures.
It is further ORDERED, that any other pending matters between the
Loss Mitigation Parties are hereby continued to a date after the last
day of the loss mitigation period, to the extent those matters concern
(1) relief from the automatic stay, (2) objection to the allowance of
a proof of claim, (3) reduction, reclassification or avoidance of a
lien,
(4)
valuation
of
a
Loan
or
Property,
or
(5)
objection
to
confirmation of a plan of reorganization; and it is further
ORDERED, that the time for each Loss Mitigation Creditor to file
an
objection
governed
by
to
a
Local
plan
of
Rules
reorganization
3015-2(c)(3)
in
this
and/or
case
shall
3015-3(b)(2)
be
as
applicable, calculated from the rescheduled confirmation date.
Entered as an Order of this Court.
Dated at Providence, Rhode Island, this
day of
.
________________________________
Arthur N. Votolato
U.S. Bankruptcy Judge
Entered on docket:
Rev. 04/01/10
2
UNITED STATES BANKRUPTCY COURT
DISTRICT OF RHODE ISLAND
INSTRUCTIONS RE: LOSS MITIGATION PROGRAM AND PROCEDURES
General Order 10-002
I. Effective Date, Chapters Affected, Eligibility, and Deadlines:
1. Effective Date: November 1, 2009, amended April 1, 2010
2. Chapters Affected: 7, 11, 12 or 13
3. Eligibility: Individual debtors with real property used as a principal residence
4. Deadlines:
(A). Initiation of Loss Mitigation (LM): Debtor or Creditor may initiate loss
mitigation at any time during the pendency of the case by filing a Notice and/or
Request for Loss Mitigation (Amended Form A or Form B). See, Section V of
LM Program.
(B). Opportunity to Object: A Creditor has fourteen (14) days to object to LM.
A Debtor has seven (7) days to object to LM.
(C). Other Deadlines: Upon entry of a Loss Mitigation Order, the remaining
deadlines – for designating contact persons; initial contact; document production
requests; conducting the LM sessions; and filing status reports with the Court –
will be set forth in the LM Order.
II. New Events – All Located Under new “Loss Mitigation” Events Category in
Bankruptcy Menu:
1. Loss Mitigation Notice/Request: To be used by either Debtor or Creditor. Sets a
LossMit Flag in the case to notify parties that LM is in effect.
2. Loss Mitigation Contact Information: To be used by either Debtor or Creditor to
provide contact information for participating in LM.
3. Loss Mitigation Status Report: To be used to update the Court on status of the LM
process.
4. Loss Mitigation Request for Continuance: To be used when additional time is
needed to complete LM process.
5. Objection to Loss Mitigation Request: To be used when filing an objection to a LM
request.
6. Motion to Compel Compliance with LM Order: To be used when seeking to
compel compliance with the LM Order.
7. Motion to Approve LM Agreement: To be used for court approval of a loss
mitigation settlement agreement.
8. Chapter 13 Plan Event to be modified (Located Under “Plan”): To include
selection box indicating whether LM is being requested in the Plan document. Selection
of LM in the Plan will also set the LossMit Flag in CM/ECF.
III. New Forms:
1. Notice and/or Request for Loss Mitigation-By the Debtor (Amended Form A):
To be filed by Debtor and served on the Creditor to request LM, or within 7 days of
indicating such interest in the Chapter 13 Plan.
2. Request for Loss Mitigation-By the Creditor (Form B): To be filed by Creditor
and served on Debtor to request LM.
3. Loss Mitigation Order (Amended Form C): Form of order to be used by the Court
to commence LM between the parties once the objection period expires or any filed
objection is overruled.
 The party initiating a LM request must prepare a proposed LM Order using the
court’s PDF fillable form (the status conference report date will be filled in by the
court). The order and deadlines contained therein inform the lender of anticipated time
frames involved and helps to gain involvement in the process.
 The proposed order shall be filed as an attachment to the Notice/Request in ECF,
and served with the Notice/Request on the Creditor.
IV. New Clerk’s Office Form: Order extending LM period and continuing status conference
report date. This order will also reflect that in Chapter 13 cases, the confirmation hearing will
also be continued to the a date after the next status conference last day of the loss mitigation
period , and any motion for relief from stay between the LM parties is also continued to that
date.
V. New Flag:
1. LossMit Flag: Will be automatically set by filing of either: (1) Chapter 13 Plan
indicating LM interest; or (2) Notice and/or Request for Loss Mitigation. Visual aid to
notify parties that LM is in effect.
2 VI. Website Enhancements:
1. A Loss Mitigation Page has been added to the Court’s website, located on the left
vertical column and includes links to the General Order and Loss Mitigation
Program and Procedures document, the new forms and instructions, and FAQ’s and Best
Practices.
2. Links to the Government sponsored Loss Mitigation Programs (Making Homes
Affordable) materials and the Home Affordable Modification Plan (HAMP) website will
be included on the Court’s new LM Page, including the HAMP document checklist.
Rev. 041410
3 LOSS MITIGATION BEST PRACTICES
The Loss Mitigation Program in Rhode Island is based on a similar program in place in the New
York Southern Bankruptcy Court. Below are some Best Practice tips learned from that court:
I. SERVICE OF THE LOSS MITIGATION NOTICE/REQUEST:
1. Have a valid address to serve. Should also send a copy to the attorney for the lender
if you know who they are (check proof of claim, notice of appearance, motion for relief).
2. Get service address from: proof of claim; entry of appearance; state corporation
website; look on creditor’s website to find legal department to serve; use bank president’s name
if necessary. Should serve as many related parties/addresses as available.
3. A copy of the proposed Loss Mitigation Order should be served with the
Notice/Request. This order is in PDF fillable format on the court’s website. The initial
deadlines set forth in the order are based on the date the order is entered.
4. It is recommended that where there are 2 mortgages on the property, that debtor’s
attorney request LM to address the 2nd as well as the 1st mortgage.
5. It is also recommended that debtor’s counsel contact lender’s counsel at the outset of
the loan modification process and advise them of the loan and property situation to facilitate a
smoother process.
II. ONCE LM REQUEST IS FILED AND LM ORDER ENTERED WITH DEADLINES:
1. Lender must post LM contact information in ECF once order approved or at
Notice/Request stage.
2. Lenders counsel should immediately send the document requests to debtor’s attorney
once the LM request is filed (if no objection) or order entered.
3. Strongly recommend that debtor’s attorney participate in the entire process and not let
debtors do it themselves. Best Practice: Debtor’s counsel should be the contact person, not the
debtors themselves. A higher probability of success if attorney for the debtor takes the lead.
(Loss mitigation firms fraught with fraud, bankruptcy attorneys should not refer clients to these).
4. Debtor’s attorney should review financial information debtor is submitting to make
sure it makes sense.
5. Debtor’s attorney should review the HAMP document checklist posted on the court’s
website in preparation for assembling the information needed by the lender to consider a loss
mitigation request. There is also a link to the HAMP site on the court’s loss mitigation page.
6. If either party fails to perform according to the terms of the LM Order, the
aggrieved party should file a Motion to Compel compliance with the LM Order, or seek
termination of the LM Order if appropriate. If a party chooses instead to file a proposed order to
show cause, said order must be accompanied by an affidavit verifying the facts asserted in the
order to show cause.
7. Parties are required to participate in a conference (can be done by telephone) or come
to court to explain why no session took place. Suggestions for improving the ability of getting a
representative of lender involved: send any requests to both groups – send documents by fax to
lender and by email to attorneys.
8. HAMP requires an escrow account and this can take a while to figure out the escrow
analysis to implement (working with taxing authorities). This can delay the process.
9. Creditors should give specific reasons for denial. Lender should send denial letter first
to the attorney so they can be sure it’s understandable. Debtors should come back with
counteroffers or to try and keep negotiating.
III. LM STATUS CONFERENCE AND LOSS MITIGATION APPROVAL
1. Status conference will usually be scheduled on date of confirmation in chapter 13
cases, if possible. Debtors have to stay current on their Chapter 13 plan payments to stay in the
program.
2. If the document request process or loan analysis is not completed by the scheduled
status conference date, parties should file a written status report prior to the scheduled
hearing date and the conference will be rescheduled for 30 days. Parties do not need to come
to court to report a status if they have filed a written report. If not, the parties will appear and
present the status in open court.
3. Part of the HAMP program requires a 90 day trial modification. If using this, seek
adjournment of the status until completed.
4. Recommend filing a motion to extend time to continue LM process if the termination
deadline (contained in paragraph 6 of the order) comes up before completing the process.
5. If Debtor does work out a loan modification – Debtor will have to amend schedules I
and J, as necessary, and file an amended Chapter 13 plan.
6. Parties can file stipulation regarding a loss mitigation agreement (application for entry
of proposed order) and the Court can approve. Order should include language that it survives
any dismissal of the case pursuant to §349. Put a lot of detail in the order regarding what
happens in the event of default – which balance to use. Make sure all privacy rules are complied
with.
2
IV. COUNSEL FEES FOR PARTICIPATING IN LM PROGRAM
1. Lenders can get some of their costs paid for under the HAMP program. Other costs
can be factored into the settlement agreement.
2. Debtor’s attorneys have a number of options: (1) determine at the outset of taking the
case if they will request LM and determine their fee appropriately at retention; (2) file a fee
application and/or motion to amend 2016(b); (3) file an administrative proof of claim for
additional fees and seek payment through the plan.
Rev. 021110
3
LOSS MITIGATION FREQUENTLY ASKED QUESTIONS:
1. If a debtor has already participated in a loan modification program (City of
Providence/HUD) and it is denied pre-petition, are they eligible for the bankruptcy court
program?
2. If a debtor has already received a discharge in their pending case, are they eligible to
participate in the bankruptcy court program?
3. Is a debtor under Chapter 7 eligible to participate in the program?
4. Who is served with the loss mitigation request? How and where to?
5. How do I file the notice/request in ECF?
6. Are there any recommended best practices for getting the loss mitigation negotiations
started?
7. Under the federal programs, there is a 90 day period to finalize the modification after
payment of mortgage for 3 months. How will this trial modification period be handled in
bankruptcy?
8. How are the Chapter 13 attorney fees handled for this program?
9. Who pays? Lenders will have costs.
10. What role does the Chapter 13 Trustee have?
11. What happens if the debtor doesn’t provide required documents?
12. What happens if the creditor does not respond to the LM order or provide required
contact information?
13. What happens if we need more time to complete the negotiations for the loss
mitigation?
14. If my Chapter 13 case is dismissed as a result of a successful loss mitigation, will bad
faith be assumed?
1|Page
1. If a debtor has already participated in a loan modification program (City of
Providence/HUD) and it is denied pre-petition, are they eligible for the bankruptcy court
program?
This would be a fact question for the Judge to decide upon a request for loss mitigation. The
program provides an opportunity for a creditor to object to a loss mitigation request and to
present information as to why such a request would not be successful (already attempted).
2. If a debtor has already received a discharge in their pending case, are they eligible to
participate in the bankruptcy court program?
Yes, any individual debtor with real property used as a principal residence is eligible for the
program, whether or not they have received their discharge.
3. Is a debtor under Chapter 7 eligible to participate in the program?
Yes, individual debtors under chapters 7, 11, 12 and 13 are all eligible to participate.
4. Who is served with the loss mitigation request? How and where to?
The Debtor serves its loss mitigation notice/request on the named lender and its attorney, if
known. Service addresses are found: (1) on Proof of claim form; (2) state corporation website;
(3) entry of appearances; (4) lender=s website - legal department, or use Bank President=s name
and address, if necessary; (5) on loan documents or correspondence. Service is by regular mail,
but recommended practice is to also send copy by fax to lender and by email to their counsel, if
known. In addition to the Notice/Request, the debtor must also serve a copy of the proposed loss
mitigation order with deadlines for paragraphs 1, 5 and 6 filled in. For more information, see
the attorney instructions posted on the website.
5. How do I file the notice/request in ECF?
There are several new events in ECF related to the loss mitigation process. Use the event “Loss
Mitigation Notice/Request” under Other to file the document and include the proposed loss
mitigation order as an attachment to the notice/request filing. This is now a PDF fillable form on
the Court’s website.
6. Are there any recommended best practices for getting the loss mitigation negotiations
started?
Attorneys have advised the Court that it has proven helpful at the outset of the loan modification
process for the debtor’s attorney to contact the creditor’s attorney and advise them of the loan
and property situation to facilitate a smoother process.
7. Under the federal programs, there is a 90 day period to finalize the modification after
2|Page
payment of mortgage for 3 months. How will this trial modification period be handled in
bankruptcy?
If using the HAMP program with the trial modification requirement, seek an adjournment of the
status conference until the 3month trial period is complete. This will delay confirmation, but
HAMP happens quickly so may not end up adding a lot more time. This was not found to be a
problem or inhibitor to program success in NYS.
8. How are the Chapter 13 attorney fees handled for this program?
Debtor=s attorneys determine at outset if they will request loss mitigation and determine their fee
appropriately at retention. Also, Debtor=s attorneys can file fee applications or motion to amend
2016(b). Lastly, debtor=s attorneys can file an Administrative POC for additional fees B part up
front and part paid through the plan.
9. Who pays? Lenders will have costs.
Lenders are getting some of their costs paid for by the HAMP program. Other costs can be
factored into the settlement agreement.
10. What role does the Chapter 13 Trustee have?
Because the confirmation of the plan is delayed pending the outcome of the loss mitigation
process, unsecured creditors will not get paid as quickly as they normally would. The Chapter
13 trustee does not have any special role in terms of the LM process, other than to use the new
data from the LM agreement to evaluate any amended plan. Confirmations are continued until
the LM process is completed.
11. What happens if the debtor doesn’t provide required documents?
The Lender can move to terminate the loss mitigation period based on non-cooperation.
12. What happens if the creditor does not respond to the LM order or provide required
contact information?
The debtor should file a motion to compel compliance with the loss mitigation order and its
terms.
13. What happens if we need more time to complete the negotiations for the loss
mitigation?
The parties should file a written status report advising the Court on the progress to date and how
much additional time they need to complete the negotiations. Upon the filing of the status report,
the Court will remove the matter from the hearing calendar.
3|Page
14. If my Chapter 13 case is dismissed as a result of a successful loss mitigation, will bad
faith be assumed?
The program specifically provides that cases do not need to be dismissed if a loan modification
is successful, and that the court can approve a settlement agreement. The suggested practice in
New York is to modify the plan to pay off the debt and get the discharge right away at
confirmation (to rehabilitate credit), rather than dismissing without a discharge.
Rev. 02.11.10
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF RHODE ISLAND
In re. Alberto G. Sosa
Debtor
CHAPTER 7
Case No. 10-11702
OBJECTION OF PHH MORTGAGE CORPORATION D/B/A PHH MORTGAGE SERVICE CENTER TO
DEBTOR’S REQUEST FOR ENTRY OF A LOSS MITIGATION ORDER
Now comes PHH Mortgage Corporation d/b/a PHH Mortgage Service Center (PHH) and
files this objection to the Debtor’s request for entry of a Loss Mitigation Order (No. 13). In
support of its objection PHH refers the Court to its supporting Memorandum of Law filed
herewith.
Wherefore, PHH respectfully requests that the Court:
(1) Deny the Debtor’s request for entry of a loss mitigation order; and
(2) Grant such further relief as the Court deems just.
Date: May 11, 2010
PHH Mortgage Corporation d/b/a PHH
Mortgage Service Center,
By its attorney,
/s/ Lynn Bouvier Kapiskas
Lynn Bouvier Kapiskas, Esquire
RI #3921
Law Offices of Mark L. Smith
176 Eddie Dowling Highway
North Smithfield, RI 02896
Tel: (401) 769-4120
(Local Counsel)
Case 1:10-bk-11702
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Page 2 of 2
/s/ Susan W. Cody
Susan W. Cody, Esquire
RI # 6150
Korde & Associates, P.C.
321 Billerica Road, Suite 210
Chelmsford, MA 02184
(978) 256-1500
[email protected]
(Primary Counsel)
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF RHODE ISLAND
In re. Alberto G. Sosa
Debtor
Chapter 7
Case No. 10-11702
MEMORANDUM OF LAW IN SUPPORT OF PHH MORTGAGE CORPORATION D/B/A PHH
MORTGAGE SERVICE CENTER’S OBJECTION TO DEBTOR’S REQUEST FOR ENTRY
OF A LOSS MITIGATION ORDER
Now comes PHH Mortgage Corporation d/b/a PHH Mortgage Service Center (PHH) and
files this Memorandum of Law in support of its objection to the Debtor’s request for entry of a
Loss Mitigation Order (No. 13). As grounds, PHH states as follows:
1. PHH Mortgage Corporation d/b/a PHH Mortgage Service Center services a first
mortgage in the original principal amount of $177,219.00 encumbering the Debtor’s
residence at 246 Lenox Avenue, Providence, Rhode Island (the “Property”) dated
January 28, 2004 and duly recorded with the City of Providence Land Evidence
Records in Book 6320, Page 211 (the “Mortgage”).
2. According to the City of Providence’s on-line Assessor Date Base, the Property is a
single-family colonial dwelling constructed circa 1930 (See Exhibit A).
3. The Debtor filed the instant Chapter 7 proceeding on April 20, 2010 and the first
scheduled date for the Section 341 meeting of creditors is scheduled for May 18,
2010 according to the pacer docket.
4. According to the Form R Affidavit recently executed by a representative of PHH in
preparation of the filing of a motion for relief from stay in the instant case a copy of
which is annexed hereto as Exhibit B, the Debtor is fourteen (14) months delinquent
in his payments due under the Mortgage and note secured thereby (exclusive of the
May 1, 2010 payment) for a total payment delinquency in excess of $22,000. This
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sum does not include prepetition late charges, foreclosure attorneys fees and costs
and other charges assessed prior the filing of the Debtor’s petition in the instant
case.
5. Pursuant to General Order No. 09-003 dated October 22, 2009 and effective by the
terms thereof on November 1, 2009, as amended on January 14, 2010 by General
Order No. 10-001 effective January 15, 2010, copies of which are annexed hereto as
Exhibits C and D respectively, this Court adopted certain Loss Mitigation Program
and Procedures as set forth in Second Amended Loss Mitigation Program and
Procedures a copy of which is annexed hereto as Exhibit E.
6. Citing 11 U.S.C. Section 105(a) as the sole source of its authority to do so, the Court
concluded in General Order No. 09-003 that it was “advisable and in the public
interest to provide a uniform, comprehensive and court supervised Loss Mitigation
Program (hereinafter “LMR”) in order to facilitate and assist in the consensual
resolution of issues involving debtors and creditors with joint contractual interests in
residential real property at risk of loss to foreclosure.”
7. Neither the Court’s General Orders nor the LMR infer or expressly provide that the
LMR is designed to implement another provision or provisions of the Bankruptcy
Code.
8. Also citing an intent to avoid or reduce “unnecessary court litigation” the court
opined that LMR would “enable debtors to reorganize or otherwise address their
significant debt and asset structure under the Bankruptcy Code.”
9. On April 27, 2010 the Debtor filed his “Chapter 7 Individual Debtor’s Statement of
Intention – Amended” (document no. 12) wherein, as to the Property, he eschewed
the finite list of retention options, i.e., redeem or cure and reaffirm for a creative,
albeit unrecognized, “Other” option in the form of “loss mitigation”. See Statement
of Intention annexed hereto as Exhibit F.
10. Section 521(a)(2)(A) of the Code requires the Debtor to file a “statement of his
intention with respect to the retention or surrender of such property and, if
applicable, specifying that such property is claimed as exempt, that the debtor
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intends to redeem such property, or that the debtor intends to reaffirm debts
secured by such property.”
11. Section 521(a)(2)(B), in turn, mandates that the debtor perform his stated intention
within 30 days of the first date set for the 341(a) meeting of creditors or within such
additional time as the court, for cause, within such 30-day period fixes.
12. The First Circuit is among those Circuits which adhere to the position that the list of
retention options set forth in Section 521(a)(2)(A) is exclusive. In re Burr, 160 F3d
843, 849 (1st Cir. 1998). The Debtor does not claim the Property as exempt on
Schedule C nor has he chosen to redeem the Property or reaffirm the debt
evidenced by the Mortgage and the note which it secures.
13. The 2nd Amended Form C order annexed to the Court’s Second Amended Loss
Mitigation and Procedures (see Exhibit E) as well as the proposed order submitted
by the Debtor in this case contemplate an initial LMR period of 60 days as measured
from the date of the entry of the Loss Mitigation Order.
14. The adoption and implementation of the Court’s Second Amended Loss Mitigation
Program and Procedures and the required participation of secured creditors in
general and PHH in particular in such program necessarily conflicts with the
provisions of Section 521(a)(2)(A) and 521(a)(2)(B) of the Code by effectively
allowing the debtor to elect a retention option not available or provided for under
Section 521(a)(2)(A) and purporting to excuse the debtor from 521(a)(2)(B)’s
requirement of performing such election within 30 days of the first scheduled
meeting of creditors without any showing of sufficient “cause”.
15. The adoption and implementation of the Court’s Second Amended Loss Mitigation
Program and Procedures also conflicts with the Court’s earlier ruling in In re
Rathburn, 275 B.R. 434, 438 wherein the Court, following In re Burr, concluded that
the debtor must elect and perform one of the retention options in Section
521(2)(“i.e., redemption or reaffirmation”). Also at issue in Rathburn was the
remedy available to the mortgage holder (the collateral in Rathburn consisted of a
mortgage on the debtor’s residence as is the case in the instant proceeding), if any,
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in the event that the debtor did not perform his stated intention within the time
period set forth in Section 521(2)(B) [now 521(a)(2)(B)]. The Court, following Judge
Deasy’s earlier decision in In re Donnell, 234 B.R. 567 (Bankr.D.N.H.1999), granted
the mortgage holder relief from stay “based on the debtors’ failure to peform their
stated intention pursuant to Section 521(2)(B).” Rathburn, at 438.
16. If it is true, as pronounced by the court in In re Burr, supra, that Chapter 7 debtors
do not “enjoy a freestanding right under the Bankruptcy Code to retain property
securing a consumer debt merely by keeping current on their payments under old
loan agreements, such debtors certainly do not have the right to eschew the finite
list of retention options provided for in 521(a)(2)(A) by electing “loss mitigation”
while at the same time being relieved by the express terms of the Second Amended
Loss Mitigation Program and Procedures (hereinafter the “Procedure”) from
resuming or maintaining mortgage payments to the secured creditor during the Loss
Mitigation Period (see page 5, 2nd paragraph, under the heading “Opportunity to
Object”).
17. Even if “loss mitigation” were an available option under Section 521(a)(2)(A), the
Procedures will necessarily result in most instances in imposing a Loss Mitigation
Period that extends more than 30 days beyond the first scheduled meeting of
creditors thereby institutionalizing and sanctioning non-compliance with the time
restraints imposed by 521(a)(2)(B) without requiring a showing of sufficient cause.
18. In addition to emasculating the requirements of Section 521(a)(2)(A) and
521(a)(2)(B), the Procedures necessarily conflict with a secured parties’ unfettered
right to file a motion for relief from stay if it can demonstrate sufficient grounds
under 11 U.S.C. Section 362(d)(1) or 362(d)(2) and with the time restraints on
conducting preliminary and final hearings set forth in Section 362(e)(1).
19. Pursuant to Section VI (B)(1) of the Procedures, a LM Creditor “shall not file” a Lift
Stay Motion during the Loss Mitigation Period “except to prevent irreparable injury,
loss or damage.” This language appears to be, in part, derivative of that appearing in
Section 362(f); this section, however, does not provide any license or authority to
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bar the filing of a Motion for Relief by a secured creditor who otherwise has
sufficient grounds to do so under Section 362(d)(1) or Section 362(d)(2) nor does it
excuse conformity with the time limitations for conducting preliminary and final
hearings set forth in Section 362(e)(1).
20. Our First Circuit Court of Appeals has cautioned on the limitations of Section 105(a)
in the case of In re Ludlow Hosp. Soc., Inc., 124 F.3d 22 (1st Cir. 1997):
“Section 105(a) empowers the bankruptcy court to exercise its equitable
powers – where “necessary” or “appropriate” –to facilitate the
implementation of other Bankruptcy Code provisions (citation omitted).
Although expansively phrased, section 105(a) affords bankruptcy courts
considerably less discretion than first meets the eye, and in no sense
constitutes a ‘roving commission to do equity’. . . (citations omitted)
Instead, the equitable discretion conferred upon the bankruptcy court by
section 105(a) ‘is limited and cannot be used in a manner inconsistent
with the commands of the Bankruptcy Code.’ In re Plaza de Diego
Shopping Ctr., Inc., 911 F.2d 820, 824 (1st Cir.1990). . . (. . . under this
section, a court may exercise its equitable power only as a means to fulfill
some specific Code provision); Official Unsecured Creditors’ Comm. v.
Stern (In re SPM Mfg. Corp.), 984 F.2d 1305, 1311 (1st Cir. 1993)(‘Section
105(a) [does not] authorize courts to create substantive rights that are
otherwise unavailable under the Code, or expand the contractual
obligations of the parties.”); In re Dillon, 194 B.R. 533, 536
(Bankr.S.D.Fla.1996).”
Id., at 27, 28.
21. PHH objects to the Debtor’s Request for Loss Mitigation because (a) the Procedures
are inconsistent and conflict with the requirements of Sections 521(a)(2)A),
521(a)(2)(B), 362(d) and 362(e)(1) of the Bankruptcy Code and (b) because they
were not adopted or implemented to facilitate implementation of another section of
the Bankruptcy Code and thus such Procedures are outside the scope of the Court’s
Section 105(a) powers.
Date: May, 11, 2010
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PHH Mortgage Corporation d/b/a PHH
Mortgage Service Center,
By its attorney,
/s/ Lynn Bouvier Kapiskas
Lynn Bouvier Kapiskas, Esquire
RI #3921
Law Offices of Mark L. Smith
176 Eddie Dowling Highway
North Smithfield, RI 02896
Tel: (401) 769-4120
(Local Counsel)
/s/ Susan W. Cody
Susan W. Cody, Esquire
RI # 6150
Korde & Associates, P.C.
321 Billerica Road, Suite 210
Chelmsford, MA 02184
(978) 256-1500
[email protected]
(Primary Counsel)
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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF RHODE ISLAND
In Re:
Alberto G. Sosa
Case Number 10-11702-ANV
Chapter 13
CERTIFICATE OF SERVICE
I, Susan W. Cody, Attorney for PHH Mortgage Corporation d/b/a PHH Mortgage
Service Center hereby certify that on May 11, 2010 I electronically filed the foregoing
Objection to Debtor’s Request for Entry of a Loss Mitigation Order with the United
States Bankruptcy Court for the District of Rhode Island using the CM/ECF System. I
served the forgoing documents on the following CM/ECF participants;
Gary L. Donahue, U.S. Trustee
Stacy B. Ferrara, Trustee
Michael W. Favicchio, Esquire
I certify that I have mailed by first class mail, postage prepaid the documents
electronically filed with the Court on the following non-CM/ECF participants:
Alberto G. Sosa
246 Lenox Avenue
Providence, RI 02907
/s/ Susan W. Cody
Susan W. Cody, Esquire
RI# 6150
Korde & Associates, P.C.
321 Billerica Road, Suite 210
Chelmsford, MA 01824-4100
Tel: (978) 256-1500
UNITED STATES BANKRUPTCY COURT
DISTRICT OF RHODE ISLAND
IN RE:
Jason E. Lawton and
Bridget L. Lawton
Case No. 10-11302
_________________
Alberto G. Sosa
Debtors,
Case No. 10-11702
Chapter 7
BRIEF OF AMICUS COUNSEL JOHN RAO AND THE NATIONAL
CONSUMER LAW CENTER IN RESPONSE TO OBJECTIONS TO
DEBTORS’ REQUEST FOR LOSS MITIGATION ORDERS
Now comes amicus counsel John Rao of the National Consumer Law Center,
Inc.,1 and hereby submits this amicus curiae brief in response to the objections filed by
Ocwen Loan Servicing as servicer for Deutsche Bank National Trust Co. and PHH
Mortgage Corporation (hereinafter the “mortgage creditors”) to the Debtors’ requests for
Loss Mitigation Orders in the above-entitled cases. By Orders entered on July 12, 2010
in these cases, the undersigned counsel was appointed as pro bono amicus counsel to
submit this amicus curiae brief.
1
The National Consumer Law Center, Inc. is a non-profit Massachusetts corporation
specializing in low-income consumer issues with an emphasis on consumer credit.
NCLC is a nationally recognized expert on consumer credit and bankruptcy issues and
has drawn on this expertise to provide information, legal research, policy analyses, and
market insight to Congress and state legislatures, administrative agencies, and courts for
almost forty years. NCLC has a specific expertise in the areas of bankruptcy,
foreclosures and predatory lending practices. NCLC publishes an eighteen-volume
Consumer Credit and Sales Legal Practice Series, including, inter alia, Consumer
Bankruptcy Law and Practice (9th ed. 2009) and Foreclosures (3d ed. 2010). NCLC
frequently is asked to appear as amicus curiae in consumer law cases before courts
around the country and does so in appropriate circumstances.
I.
Introduction
The Loss Mitigation Program (hereinafter “LMP”) for the Bankruptcy Court for
the District of Rhode Island was commenced on November 1, 2009, and was
implemented by General Order 09-003. Amendments to the LMP were made by General
Orders 10-001 and 10-002, which became effective on January 15, 2010 and April 2,
2010. The Court’s LMP is similar to a loss mitigation program implemented by the
Bankruptcy Court for the Southern District of New York (and certain judges in the
Eastern District of New York), as well as numerous programs adopted nationwide by
state and local courts and governments which are described in Part II, Section F of this
brief. The stated purpose of the LMP and similar programs is to “bring debtors and
secured lenders together, to encourage them to discuss mutually beneficial financial
resolution of their home mortgage difficulties, in a climate where both debtors and
creditors are at risk of suffering great pecuniary harm even if they were acting
prudently.” In re Simarra, 2010 WL 2144150 (Bankr. D.R.I. April 14, 2010). Serving
as a case management function, the LMP is intended to “avoid or reduce unnecessary
bankruptcy litigation and cost to debtors and secured creditors.” General Order 09-003.
The backdrop for the Rhode Island LMP is this nation’s worst foreclosure crisis
since the Great Depression. According to the Mortgage Bankers Association National
Delinquency Survey for the fourth quarter of 2009, the combined percentage of loans in
foreclosure or seriously delinquent was 15.02 percent, the highest ever recorded in the
2
MBA delinquency survey.2 Goldman Sachs estimates that, starting at the end of the last
quarter of 2008 through 2014, 13 million foreclosures will be started.3
The situation in Rhode Island is more dire than in most areas of the nation. With
over ten percent of home mortgages in the state past due, Rhode Island ranked highest
among all New England states in the most recent Mortgage Bankers Association National
Delinquency Survey.4 Nationwide, only seven states had a higher rate of delinquent
home loans than Rhode Island. At the end of the First Quarter of 2010 there were 19,869
past-due home mortgage loans in the state.5 With an increase in foreclosures of 123%
from the last quarter of 2009 through the first quarter of 2010, Rhode Island led all fifty
states in the rate of increase in new foreclosure cases.6 It is projected that during the
years 2009 through 2012, a total of 31,192 homes will proceed to foreclosure in Rhode
Island.7 Not surprisingly, Rhode Island is one of the first ten states designated by the
2
Mortgage Bankers Association, National Delinquency Survey Quarter 4 2009 (Feb. 19,
2010).
3
Goldman Sachs Global ECS Research, Home Prices and Credit Losses: Projections and
Policy Options (Jan. 13, 2009), at 16; see also Rod Dubitsky, Larry Yang, Stevan
Stevanovic & Thomas Suehr, Credit Suisse Fixed Income Research, Foreclosure Update:
Over 8 Million Foreclosures Expected (Dec. 4, 2008) (predicting 9 million foreclosures
for the period 2009-2012).
4
Mortgage Bankers Association, National Delinquency Survey Quarter 1 2010 (March
31, 2010).
5
Center for Responsible Lending, Cost of Bad Lending Fact Sheet: Rhode Island:
http://www.responsiblelending.org/mortgage-lending/tools-resources/factsheets/rhodeisland.html.
6
Mortgage Bankers Association, National Delinquency Survey Quarter 1 2010 (March
31, 2010).
7
Center for Responsible Lending, Cost of Bad Lending Fact Sheet: Rhode Island:
http://www.responsiblelending.org/mortgage-lending/tools-resources/factsheets/rhodeisland.html
3
U.S. Treasury Department to receive special foreclosure assistance funds under the
“Hardest Hit Fund” states initiative.8
II.
Argument
A. Congress Added Subsection (d) to Code § 105 in Order to Strengthen
Bankruptcy Courts’ Authority to Establish Settlement Practices in
Bankruptcy Cases.
The objecting mortgage creditors in these cases assert that 11 U.S.C. § 105 cannot
provide a basis for the Court to institute the LMP. In making this argument, the mortgage
creditors focus solely on subsection (a) of § 105. Subsection (a) generally authorizes the
bankruptcy court to issue orders necessary or appropriate to carry out the provisions of
the Code. According to the mortgage creditors, subsection (a) is not specific enough to
authorize this Court to implement the LMP. The mortgage creditors’ argument, however,
ignores subsection (d) of § 105. Subsection (d) specifically addresses the bankruptcy
courts’ case management powers. It provides:
(d)
The court, on is own motion or on the request of a party in
interest
(1) shall hold such status conferences as are necessary to
further the expeditious and economical resolution of the case; and
(2) unless inconsistent with another provision of this title or
with applicable Federal Rules of Bankruptcy Procedure, issue an order
at any such conference prescribing such limitations and conditions as
the court deems appropriate to ensure that the case is handled
expeditiously and economically . . . .
11 U.S.C. § 105(d).
8
United States Department of Treasury Press Release March 29, 2010:
http://www.ustreas.gov/press/releases/tg618.htm.
4
Congress added subsection (d) to § 105 in 1994 in order to clarify that the full
range of settlement and conference procedures authorized under F.R. Civ. P. 16 are
available in bankruptcy cases. The pertinent House Report noted, “Notwithstanding the
adoption of Bankruptcy Rule 7016 (relating to pretrial conferences), some judges have
appeared reluctant to do so without clear and explicit statutory authorization. This
provision clarifies that such authority exists in the Bankruptcy Code in adversary and
nonadversary proceedings.” House Report No. 103-835 (Oct. 4, 1994) reprinted in 1994
U.S. Code Cong. & Admin. News 3340, 3345. The remarks of the 1994 amendment’s
House Sponsor, Representative Brooks, make this same intention clear:
This section makes a number of changes to clarify the powers of
bankruptcy courts in managing bankruptcy cases. Several of these
changes are based on the recommendations of the Federal Courts Study
Commission. Subsection (a) authorizes bankruptcy court judges to hold
status conferences in bankruptcy cases and thereby manage their dockets
in a more efficient and expeditious manner. Notwithstanding the adoption
of Bankruptcy Rule 7016 (relating to pretrial conferences), some judges
have appeared reluctant to do so without clear and explicit statutory
authorization. This provision clarifies that such authority exists in the
Bankruptcy Code in adversary and nonadversary proceedings.
140 Cong. Rec. H 10,764 (daily ed. Oct. 4, 1994).
Thus, Congress gave the bankruptcy courts broad authority to regulate
bankruptcy cases in an efficient and effective manner, and that authority extends to all
aspects of bankruptcy case administration. As originally enacted, subsection (d)
permitted bankruptcy courts to hold status conference in cases generally and in adversary
proceedings. Notably, Congress strengthened the mandate of subsection (d) of § 105 as
part of the 2005 bankruptcy amendments. See Collier, supra ¶ 105.08 (noting that the
2005 amendments to § 105 made such status conferences mandatory to the “extent
5
necessary to further the expeditious and economical resolution of the case.”) (quoting H.
Rep. No. 109-31, 109th Cong , 1st Sess. 93; 2005 U.S. Code Cong. & Admin. News at
158.)
Contrary to the mortgage creditors’ perception that there is no authority in the
Code or Bankruptcy Rules for the LMP, the Code itself directs bankruptcy judges to
establish procedures that promote the goals of the Code and facilitate dispute resolution
promptly and without litigation. In requiring that mortgage servicers and creditors such
as PHH Mortgage and Ocwen review the loss mitigation options that they are bound by
contracts with the federal government to consider, the Court is simply carrying out its
duty as set by Congress in § 105(d). Faced with the alternative of numerous continuances
of plan confirmation and stay relief hearings, and deferrals of entry of discharge in
chapter 7 cases, until decisions are made on requests for loss mitigation, the LMP
program is an appropriate exercise of docket control and the Court’s case management
authority.
The mortgage creditors’ challenge to the court’s authority to direct settlement
conferences in the context of a stay relief motion is particularly without merit. As the
mortgage creditors acknowledge, subsection (a) of § 105 authorizes bankruptcy courts to
issue orders and process necessary to carry out provision of the Code. One of the
objecting mortgage creditors, Deutsche Bank, has chosen to file a motion for relief from
the automatic stay in the Lawtons’ case. In doing so Deutsche Bank imposed on the
court the duty to determine whether it has met its burden of proof to obtain stay relief
under § 362(d). Deutsche Bank, for example, asks the court to make findings consistent
with subsections (d)(1) and (d)(2) of § 362. (Case No. 10-11302, Document #10). In
6
carrying out its duties in interpreting and applying § 362(d), the court may issue orders
and establish procedures as necessary under § 105(a). Thus, given the procedural posture
of the Lawton matter, subsection (a) as well as subsection (d) of § 105 authorize the
court’s regulation of the parties’ conduct to carry out provisions of the Code.
B. The Court Has Authority to Implement Its Loss Mitigation Program
Under F.R. Bankr. P. 7016 and F.R. Bankr. P. 9014.
F.R. Bankr. P. 9014 describes the procedural rules that apply to a “contested
matter” such as a motion for relief from the stay or an objection to chapter 13 plan
conformation. Under Rule 9014’s basic structure, certain enumerated Part VII adversary
proceeding rules apply automatically in contested matters, while the other Part VII rules
do not apply “unless the court directs otherwise.” Subsection (c) of Rule 9014 states that
in adjudicating a contested matter “[t]he court may at any stage in a particular matter
direct that one or more of the other rules in Part VII shall apply.” Rule 9014 thus gives
wide latitude to the bankruptcy courts to direct that any of the adversary rules not
specifically enumerated in the Rule may apply in contested matters. The language of
Rule 9014 does not place any limitations on the bankruptcy courts’ authority to direct that
an adversary rule apply in a contested matter. In speaking of the bankruptcy courts’
authority to direct the use of an otherwise non-applicable adversary rule in a contested
matter, Collier notes, that “[t]he direction otherwise may be by local rule or by a specific
order entered in a particular contested matter.” 10 Collier on Bankruptcy ¶ 9014.05 (Alan
N. Resnick & Henry J. Sommer eds. 15th ed. rev.). A bankruptcy court may thus direct
the application of any adversary rule in any contested matter either on a case by case
basis or by general rule applicable to a class of cases.
7
One of the Part VII adversary rules that the bankruptcy court may designate as
applicable in contested matters is F.R. Bankr. P. 7016. Rule 7016, like its federal rule
counterpart F. R. Civ. P. 16, grants courts broad authority over pre-trial proceedings.
Pursuant to Rule 7016, a bankruptcy court may require any group of litigants in an
adversary proceeding to participate in settlement conferences or in alternative dispute
resolution programs. Rule 9014(c) allows bankruptcy courts to issue similar directives in
contested matters. Concern for judicial economy and the goal of achieving negotiated
settlements can be just as urgent in contested matters as in adversary proceedings. In re
Philbert, 340 B.R. 886, 889 (Bankr. N.D. Ind. 2006) (“Furthermore, the vices that Rule
16 was designed to combat – wasted effort, unnecessary expense, and delay – are just as
real and the goals it seeks to promote – efficient and expeditious management of cases –
are just as important in contested matters as they are in adversary proceedings.”) See also
In re A.T. Reynolds & Sons, Inc., 424 B.R. 76 (Bankr. S.D. N.Y. 2010) (enforcing New
York bankruptcy court’s General Order M-211 authorizing assignment of adversary
actions and contested matters to mediation). In implementing their broad authority to
order parties into settlement conferences at any stage in a proceeding, the bankruptcy
courts may act on a case by case basis or by a local rule applicable to particular classes of
cases. The LMP is a proper exercise of the bankruptcy court’s authority to fashion
appropriate procedures for case management and for regulating bankruptcy proceedings
such as stay relief motions and objections to chapter 13 plan confirmation directed at
residential properties during the current foreclosure crisis.
8
C. The Loss Mitigation Program is a Special Dispute Resolution Procedure
Adopted by Court Rule Consistently With F.R. Bankr. P. 7016 and F.R.
Civ. P. 16.
F.R. Bankr. P. 7016 incorporates verbatim the terms of F.R. Civ. P. 16. The 1983
amendments to Rule 16 expressly recognized settlement of litigation as an objective to be
fostered during the pre-trial conference process. Wright, Miller & Kane, Federal Practice
& Procedure: Civil 2d § 1522. The spirit, intent, and purpose of Rule 16 are “broadly
remedial.” In re Baker, 744 F.2d 1438, 1440 (10th Cir. 1984) (en banc), cert denied 471
U.S. 1014 (1985). Bankruptcy Rule 7016, like its Federal Rule counterpart, authorizes
bankruptcy courts to direct attorneys and parties to comply with scheduling orders.
Under Rule 7016 the bankruptcy courts may direct parties to appear for conferences for
the purpose of “facilitating settlement.” F.R. Bankr. P. 7016(a)(5). In furtherance of their
case management authority the bankruptcy courts may direct parties to use “special
procedures to assist in resolving the dispute when authorized by statute or local rule.”
F.R. Civ. Bankr. P. 7016(c)(2)(I). As Collier notes, Rule 7016 authorizes bankruptcy
courts to promulgate local rules that direct litigants to participate in alternative dispute
resolution:
Rule 7016(c) contemplates the use of procedures other than litigation to
resolve disputes, including extra-judicial measures. Subparagraph
(c)(2)(I) emphasizes that certain statutes and local rules may authorize
the court to order alternative dispute resolution procedures such as
mediation and nonbinding arbitration, even when not agreed to by the
parties.
Collier, supra ¶ 7016.02[2].
In the following section the Collier treatise goes on to report: “Many districts
have adopted local bankruptcy rules specially authorizing conferences at any stage and
for any authorized purpose during a case or proceeding.” Id. at ¶ 7016.03. The LMP
9
program fits squarely within the scope of an appropriate local rule contemplated by Rule
7016. Under the LMP Program the Court approves requests for participation on a case by
case basis. A party may object to participation and the court will rule on the objection.
At the heart of the LMP process is the Court’s Loss Mitigation Order. LMP Part
VI, subpart A, Part VII, subpart C. The Order sets deadlines for initial contacts, the
exchange of documentation, and filing of ongoing updates and reports with the Court.
The parties may request a direct conference with the judge at any time during the process,
to cover any topic related to settlement. Part VIII, subpart C. The Bankruptcy Court
must approve any settlement. Part VII, Subpart D. The rules provide for additional
protections for unrepresented borrowers, including a hearing to approve settlement. Part
X.
Section 362(e)(1) authorizes the Court to continue the final hearing on a stay
relief motion beyond the time frames generally applicable for such motions in the
absence of a court order. When the court issues a loss mitigation order under the LMP,
the Order extends the § 362(e) time frame. LMP Section VI, subpart B. In cases such as
the Lawtons in which a stay relief motion has been filed, the entry of a Loss Mitigation
Order is a proper exercise of the Court’s express authority under § 362(e) and its case
management authority under Rule 7016. In addition to the automatic stay under § 362(a),
the court may also issue an order under § 105 staying a creditor from proceeding. A
party’s request for an LMP order is an appropriate trigger for the court to stay
proceedings using its powers under § 105 even if the stay otherwise terminated under the
time frame of § 362(e). See Collier, supra ¶ 362.08[5] (“The majority of the courts that
10
have considered the issue have held that a lapsed stay may be reimposed provided that
the debtor has properly applied for injunctive relief.”).
D. In Addition to the Authority Described in Rule 16 and in 11 U.S.C. § 105,
the Court Has Inherent Power to Manage the Progress of Litigation.
F.R. Civ. P. 16 and 11 U.S.C. § 105 should not be construed as limitations placed
on the inherent authority of the Court to manage the proceedings in bankruptcy cases.
“[T]he inherent power of the courts is said to be ‘governed not by rule or statute but by
the control necessarily vested in courts to manage their own affairs so as to achieve the
orderly and expeditious disposition of cases.’ ” Brockton Savings Bank v. Peat,
Marwick, Mitchell & Co., 771 F.2d 5, 11 (1st Cir. 1985)(quoting Link v. Wabash
Railroad, 370 U.S. 626, 630 (1985). The civil rules neither completely describe, nor
purport to delimit, the courts’ inherent powers to control litigation. Aoude v. Mobil Oil
Corporation, 892 F.2d 1115, 1119 (1st Cir. 1989). These powers are inherent in the
bankruptcy courts as they are in the district courts. Section 105 merely supplements and
further defines those inherent powers. In re Armstrong, 309 B.R. 799, 805 (B.A.P. 10th
Cir. 2004). Similarly, while F.R. Civ. P. 16 specifies powers of the courts over
settlement and scheduling matters, it does so as an enhancement rather than a limitation
on those powers. Heileman Brewing Co., Inc., v. Joseph Oat Corporation, 871 F.2d 648,
651-52 (7th Cir. 1989) (upholding trial court’s power to compel a represented party’s
appearance at a settlement conference despite the lack of express authorization under
Rule 16 for court to do so).
The courts’ inherent power over the management of their dockets allows them the
flexibility to formulate creative responses to new problems as they arise. It permits the
11
courts to improve and operate more efficiently in meeting an urgent or temporary need.
As will be discussed below, the foreclosure crisis calls out for such measures. This
Court’s response of implementing a loss mitigation conference requirement fits within a
much wider judicial response to the foreclosure crisis and must be viewed within that
context. The Court’s plan is well within the range of what numerous courts around the
country have done over the past two years as procedural steps to mitigate the
unprecedented amount of home foreclosures.
E. The Court’s Loss Mitigation Program Does Not Violate Bankruptcy Code
Section 521(a)(2).
The objecting mortgage creditors argue that the LMP is incompatible with the
debtor’s requirements under § 521(a)(2) and causes a debtor to pursue options for
retaining secured property that are impermissible under § 521(a)(2). They contend that
by selecting the “Other” box on the statement of intention (an election provided for on
Official Form 8), the Lawtons and Mr. Sosa failed to specify an intention for one of the
“exclusive” retention options under § 521(a): reaffirmation or redemption. Because
redemption under § 722 is not available for debts secured by real property, the objecting
mortgage creditors argument is essentially that participation in the LMP deprives
mortgage creditors in chapter 7 cases of the benefit of reaffirmation as the sole retention
option available to debtors for home secured loans.
As an initial matter, this argument is factually inaccurate. It fails to consider that
participation in the LMP could result in debtors electing to reaffirm their mortgage debt
following a modification of the loan terms as facilitated by the LMP. The objecting
mortgage creditors nevertheless argue that the LMP is in conflict with the specific
12
requirements of § 521(a)(2) and the First Circuit opinion in In re Burr, 160 F3d 843 (1st
Cir. 1998). This argument ignores Bankruptcy Code amendments enacted after Burr
which specifically affect debts secured by real property.
Section 524(j), enacted by the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, provides that the holder of a claim secured by a security interest
in real property that is the debtor’s principal residence does not violate the discharge
injunction by engaging in any act that is in the “ordinary course of business between the
creditor and the debtor,” or by “seeking or obtaining periodic payments ... in lieu of
pursuit of in rem relief to enforce the lien.” By contemplating that a creditor may
continue to receive payments on a debt that has been discharged and not reaffirmed rather
than enforce its in rem rights against the property, this statutory provision codifies the
“ride through” procedure for home secured loans and effectively overrules decisions such
as Burr with respect to such loans. Surely there would be no reason for Congress to enact
§ 524(j) if reaffirmation were the only retention option available for home secured loans.
In fact, if the holding in Burr continued to be viewed as applicable to home secured loans
after BAPCPA, § 524(j) would be rendered a nullity. See Kawaauhau v. Geiger, 523 U.
S. 57, 62 (1998) (“[W]e are hesitant to adopt an interpretation of a congressional
enactment which renders superfluous another portion of that same law” (internal
quotation marks omitted)).
Other changes made by BAPCPA make clear that the Code’s “exclusive”
retention options are limited to loans secured by personal property. The most significant
change was the enactment of § 362(h), which codified court opinions such as this Court’s
opinion in In re Rathbun, 275 B.R. 434 (Bankr. D.R.I. 2001), which had held that the
13
remedy for failure to comply with § 521(a)(2) is relief form the automatic stay. Section
362(h) terminates the automatic stay with respect to certain secured property if the debtor
fails to both 1) timely file a statement of intention or to indicate an intent to redeem,
surrender, or retain the property and enter into a reaffirmation agreement and 2) take
timely action carrying out the stated intention, unless the debtor states an intention to
reaffirm and the creditor refuses to reaffirm on the original terms. Importantly, Congress
made this provision applicable only as to personal property. A related provision found in
§ 521(a)(6), also enacted by BAPCPA, similarly applies only to personal property.
These statutory changes have led a number of courts to hold in post-BAPCPA
opinions that a debtor may retain a home by continuing to make payments and without
reaffirming the mortgage debt. See, e.g, In re Waller, 394 B.R. 111 (Bankr. D.S.C.
2008); In re Caraballo, 386 B.R. 398 (Bankr. D.Conn. 2008); In re Wilson, 372 B.R. 816
(Bankr. D. S.C. 2007); In re Bennett, 2006 WL 1540842 (Bankr. M.D. N.C. May 26,
2006). For some courts, this conclusion with respect to home secured loans is bolstered
by Congress’s decision not to delete the “if applicable” language in § 521(a)(2)(A), and
to retain § 521(a)(2)(C) in its entirety except for the addition of the phrase “except as
provided in section 362(h)”, which again only applies to loans secured by personal
property.
Although this Court is not compelled in this case to decide whether these
BAPCPA statutory amendments have altered the First Circuit’s holding in Burr with
respect to home secured loans, these amendments directly challenge the objecting
mortgage creditors’ contention that the LMP permits a debtor to elect a retention option
not available under the Code. Retention of the debtor’s residence by continuing to make
14
payments on a discharged home mortgage debt is specifically contemplated by § 524(j).
Thus, a debtor who wishes to participate in the LMP can prepare the statement of
intention by checking the box for “Other,” and inserting language such as: “loss
mitigation” (as was done by Mr. Sosa) or “Retain with continuing payments and request
loss mitigation.” A debtor could also state an intention such as “Reaffirm the debt, if
loan modified under loss mitigation program.” No Bankruptcy Code provision precludes
these options for the retention of a debtor’s principal residence in a chapter 7 case, or
prohibits the debtor from stating an intention to reaffirm a debt that is conditioned upon
the debtor negotiating and obtaining acceptable terms for the reaffirmation agreement.
The objecting mortgage creditors contend, however, that participation in the LMP
prevents debtors from performing their stated intention within the time frame set out in §
521a)(2)(B), which is 30 days after the first date set for the meeting of creditors. They
argue that because the loss mitigation period under the LMP is 60 days after entry of a
Loss Mitigation Order, the LMP “necessarily conflicts” with the 30-day time period for
performing a stated intention as provided in § 521(a)(2)(B). On the contrary, in cases in
which a Loss Mitigation Order is entered soon after the case is filed, the time periods are
not necessarily in conflict. The parties could negotiate and finalize a loan modification
incorporated as part of a reaffirmation agreement within both the 60-day loss litigation
period and the 30-day period after the first date set for the meeting of creditors. In fact,
the objecting mortgage creditors’ argument on this point is somewhat disingenuous since
they control the speed within which a loss mitigation decision is made. All too often
delay in the process is caused by mortgage servicers failing to process applications and
15
making unnecessary requests for updated information.9 Decisions in bankruptcy cases
should be made even more quickly since the HAMP Treasury guidelines permit the
servicer to use the filed bankruptcy schedules and tax returns as a substitute for the
normal program application to determine eligibility.10 Servicers are required to render a
decision on a completed HAMP application within 30 calendar days.11 If mortgage
creditors adhered to the Treasury guidelines and promptly rendered decisions,
compliance with § 521(a)(2)(B) would occur in many cases without a need to seek an
extension of time. Treasury guidelines even permit waiver in a bankruptcy case of the
typical three month trial plan period, and immediate conversion to a permanent HAMP
modification, if the debtor has made at least three postpetition payments that are equal to
or greater than the proposed modified payment.12
The objecting mortgage creditors’ argument also ignores that procedural time
deadlines are rarely absolute. In recognition that certain retention options such as
reaffirmation may not be consummated within the 30-day period, both the Bankruptcy
Code and Bankruptcy Rules provide for an extension of applicable time periods upon a
showing of cause. Section 521a)(2)(B) provides that the debtor shall “perform his
intention with respect to the property” within the 30-day period or “within such
additional time as the court, for cause, within such 30-day period fixes.” F.R. Bankr. P.
9
The Providence Journal reported last year that a Rhode Island homeowner mailed 99
pages of financial documentation to her servicer and four months later, still had not been
notified that her modification had been approved. See For struggling R.I. homeowners,
federal help is slow to come, Providence Journal, Aug. 15, 2009. The New York Times
has also reported that homeowners’ loan files are routinely lost. See Peter S. Goodman,
Paper Avalanche Buries Plan to Stem Foreclosures, N.Y. Times, June 28, 2009.
10
U.S. Treasury Dept. HAMP Supplemental Directive, 10-02, p. 8.
11
U.S. Treasury Dept. HAMP Supplemental Directives, No. 09-07, p. 7; No. 10-01, p. 3.
12
U.S. Treasury Dept. HAMP Supplemental Directive, 10-02, p. 8.
16
4004(c)(2) provides that the debtor may request that the court defer entry of the
discharge, thereby preserving the automatic stay under § 362(c)(2)(C). See also Rhode
Island LMP, Part IV, subpart B(2). The Advisory Committee Note for Rule 4004(c)(2)
makes clear that it is intended to assist debtors and creditors in finalizing the execution of
reaffirmation agreements due to the requirement in § 524(c) that reaffirmations must be
filed before the entry of the discharge. See In re Roderick, 425 B.R. 556 (Bankr. E.D.
Cal. 2010).
Given the unprecedented foreclosure crisis nationwide and in Rhode Island, and
the national policy of promoting loan modifications through the HAMP program as a
response to the crisis, a debtor’s request for a Loss Mitigation Order and the Court’s
subsequent entry of the Order should be deemed sufficient cause for providing additional
time in accordance with § 521(a)(2)(B).
Moreover, the LMP provides sufficient safeguards for mortgage creditors to
address the objecting servicers’ concern about “institutionalizing and sanctioning noncompliance” with the § 521(a)(2)(B) time requirements without a sufficient showing of
cause. If a mortgage creditor believes that loss mitigation would not be successful or that
it has been requested in bad faith, the LMP provides that the creditor may file an
objection. See Rhode Island LMP, Part V, subpart D. A Loss Mitigation Order may
enter only after consideration by the Court of the objection. To the extent that a request
for a Loss Mitigation Order is deemed a request for additional time under § 521(a)(2)(B),
the mortgage creditor’s concern that sufficient cause does not exist for a time extension
may be heard by the Court. This is effectively no different than the mortgage creditor’s
right to file an objection to a request for additional time under § 521(a)(2)(B).
17
F. The Loss Mitigation Program Is Typical of Many Foreclosure Conference
Programs Now In Effect Around the United States.
The nation is facing an unprecedented foreclosure crisis, with millions of homes
already foreclosed and millions more at risk to follow. Policy makers and investors in
mortgage-backed securities have stressed the need for active pursuit of loss mitigation
options.13 These options include loan modifications that lower a borrower’s monthly
payments, thereby preventing foreclosure and minimizing the substantial losses investors
otherwise incur in every foreclosure. The Treasury Department’s $75 billion Home
Affordable Modification Program (“HAMP”) announced in March 2009 has signed up
servicers responsible for over 85% of the home mortgage debt in the country.14 Most
13
See e.g., Cheyenne Hopkins, Modification: Tentative Steps Toward a Regulatory
Consensus, American Banker (Nov. 27, 2007); The Subprime Lending Crisis: The
Economic Impact on Wealth, Property Values and Tax Revenues, and How We Got
Here, Report and Recommendations by the Majority Staff of the Joint Economic
Committee (October 2007); Remarks of FDIC Chairman Sheila C. Bair, American
Securitization Form (ASF) Annual Meeting (June 6, 2007); Statement on Loss
Mitigation Strategies for Servicers of Residential Mortgages (Sept. 2007), available at
http://www.occ.treas.gov/ftp/bulletin/2007-38a.pdf; Associated Press, Paulson to
Mortgage Industry: Help Curb Defaults (Oct. 31, 2007), available at
http://money.cnn.com/2007/10/31/real_estate/paulson_housing.ap/.; American
Securitization Forum, Streamlined Foreclosure and Loss Avoidance Framework for
Securitized Subprime Adjustable Rate Mortgage Loans, Executive Summary (Dec. 6,
2007), available at http://www.treas.gov/press/releases/hp706.htm. For a study
documenting the staggering losses to investors associated with the foreclosure alternative
see Alan M. White, Deleveraging the American Homeowner: The Failure of 2008
Voluntary Mortgage Contract Modification, 41 Connecticut Law Rev. 1107 (2009).
Electronic copy available at: http://ssrn.com/abstract=1325534 at 14 (showing that as of
late 2008 lenders were incurring losses averaging $124,000 in each foreclosure. With
the loans in foreclosure having an average value of $212,000, this meant the lenders were
losing 57% of their investment each time they completed a foreclosure. Average losses
on foreclosed second mortgages were nearly 100%.
14
U. S. Dept. of Treasury Making Home Affordable Servicer Performance Report April
2010. Ocwen has published many press releases over the past year touting its eagerness
to confer with homeowners about loan modifications and other loss mitigation options.
Ocwen claims that it sets an industry standard for a servicer’s willingness to talk with
18
mortgage servicers, including Ocwen in this case, are signatories to a Servicer
Participation Agreement under the HAMP program.15 Participating servicers are under
contractual obligations to consider homeowners for an affordable loan modification
before they foreclose. They are required to consider a debtor in an active bankruptcy
case for HAMP if a request is made by the debtor, debtor’s counsel, or the case trustee.16
If a homeowner is found eligible under the HAMP program guidelines, the servicers must
stop the foreclosure and implement the loan modification.17 This Court’s LMP program
fulfills a much needed role in ensuring that foreclosures do not proceed without
consideration of these sensible alternatives if requested by the parties. Servicers who
comply with the HAMP guidelines likewise meet the requirements of the LMP easily and
quickly.
Four recent studies confirm what has been widely reported about the troubled
implementation of the HAMP program.18 Participating mortgage servicers routinely fail
homeowners. See e.g. Congressional Testimony of Ocwen CEO Ronald M. Faris March
3, 2010, available at http://www.irconnect.com/cfonews/ocn/ocn_others.html?d=185758,
and June 24, 2010 press release concluding: “The firm also cites its reliance on consumer
behavioral science research and long-standing partnerships with grass roots consumer
advocacy groups as instrumental in enhancing borrower outreach and effective
communications,” available at
http://www.irconnect.com/cfonews/ocn/ocn_others.html?d=195061. Ocwen’s efforts to
avoid talking to homeowners through this Court’s LMP is in marked contrast to these
public relations efforts.
15
See http://makinghomeaffordable.gov/contact_servicer.html.
16
U.S. Treasury Dept. HAMP Supplemental Directive. No. 10-02, p. 7.
17
U.S. Treasury Dept. HAMP Supplemental Directive. No. 09-01, pp. 6, 2.
18
U.S. Government Accountability Office, Troubled Asset Relief Program, Further
Actions Needed to Fully and Equitably Implement Foreclosure Mitigation Programs
GAO 10-634 (June 2010); Congressional Oversight Panel: Evaluating Progress of TARP
Foreclosure Mitigation Programs (April 14, 2010); Office of the Special Inspector
General for the Troubled Asset Relief Program (SIGTARP): Factors Affecting
Implementation of the Home Affordable Modification Program (March 25, 2010); and
U.S. Government Accountability Office: Troubled Asset Relief Program Home
19
to comply with Treasury Department guidelines that require notice to a borrower of the
reason for rejecting a HAMP application. Servicers frequently do not offer homeowners
the opportunity for a review HAMP denial decisions. The Congressional Oversight Panel
noted in its April 2010 Report that servicers were reporting reasons for only 31% of
disqualified or cancelled HAMP modifications. Much of the data the servicers did report
was plainly erroneous. For 71% of denials, servicers gave no valid reason. For
modification cancelations servicers provided no reason in 72% of cases.19 Over recent
months the number of homeowners approved for initial HAMP modifications has been
falling dramatically. In each of the past three months hundreds of thousands of
homeowners were dismissed from temporary loan modifications and exposed to renewed
foreclosure actions
Courts around the country have come to recognize that these developments call
for a degree of heightened judicial supervision over foreclosures. If they fail to take on
this responsibility, additional hundreds of thousands of families may lose their homes
unnecessarily. To avoid this outcome, the county courts serving such large cities as
Chicago, Philadelphia, Cleveland, and Pittsburgh have implemented foreclosure
Affordable Modification Program Continues to Face Implementation Challenges (March
2010).
19
COP Report, p. 54. The COP Report goes on to state: “[T]he panel is deeply
concerned about the unacceptable quality of the denial and cancelation reasons and
strongly urges Treasury to take swift action to ensure that homeowners are not denied the
opportunity for a modification and shuffled off to foreclosure without a servicer at least
accounting for why the modification was denied or cancelled.” Among the Panel’s
specific recommendations in April 2010 were that Treasury impose “meaningful
monetary penalties for non-compliance” with the requirement to refrain from foreclosure
until the required review is completed. Despite the oversight panel’s call for “swift
action” and an effective penalty system, Treasury’s enforcement of HAMP requirements
remains ineffective.
20
conference and mediation programs similar to this Court’s LMP program.20 Courts in
smaller cities, as diverse as Santa Fe, New Mexico and Louisville, Kentucky, have
followed suit.21
In addition to these initiatives from local courts, state supreme courts have
implemented similar programs. The New Jersey Supreme Court promulgated rules for a
uniform statewide foreclosure mediation program.22 In Delaware, the president judge of
the state’s superior courts issued a mediation rule applicable to all the state’s superior
courts.23 The Ohio Supreme Court has established a model program which common
pleas courts in many of the state’s most populous counties have implemented.24 Most
recently, Florida’s Supreme Court announced a statewide initiative that requires
mediation automatically in all foreclosure cases filed in that state.25
20
Chicago, Philadelphia, Cleveland, Pittsburgh Cook County Chicago Court Program:
http://cookcountyforeclosurehelp.org/about/; Philadelphia County:
http://s98001.gridserver.com/images/pdf/foreclosure_mortgage/foreclosure_med_prog_b
y_state/pa_philly_pilot_program.pdf; Cuyahoga County (Cleveland):
http://s98001.gridserver.com/images/pdf/foreclosure_mortgage/foreclosure_med_prog_b
y_state/ohio_prgm_summary.pdf; Allegheny County (Pittsburgh):
http://s98001.gridserver.com/images/pdf/foreclosure_mortgage/foreclosure_med_prog_b
y_state/pa_pitts_admin_order.pdf
21
Santa Fe First Judicial District Admin Order:
http://s98001.gridserver.com/images/pdf/foreclosure_mortgage/foreclosure_med_prog_b
y_state/nm_admin_order.pdf Jefferson County Kentucky Admin Order:
http://s98001.gridserver.com/images/pdf/foreclosure_mortgage/foreclosure_med_prog_b
y_state/kentucky_admin_order.pdf
22
http://www.nj.gov/foreclosuremediation/resources.html
23
http://www.deforeclosurehelp.org/mediation.html
24
See:
http://s98001.gridserver.com/images/pdf/foreclosure_mortgage/foreclosure_med_prog_b
y_state/ohio_prgm_model.pdf . Cities with programs in effect include Cleveland,
Cincinnati, Columbus, Toledo, and Akron.
25
Florida Supreme Court: No. AOSC09-54 Re: Final Report and recommendations on
residential Mortgage Foreclosure Cases (December 28, 2009)
http://www.floridasupremecourt.org/pub_info/documents/AOSC09-54_Foreclosures.pdf.
21
In addition to these court-initiated programs, the legislatures in several states have
recently enacted statutes which direct state courts to implement various forms of
conference and mediation programs for foreclosure cases. These include programs now
in effect in Connecticut, Indiana, Maine, New York, and Vermont.26 In the non-judicial
foreclosures states of California, Oregon, Maryland, Michigan, and Nevada the
legislatures have enacted forms of conference and mediation requirements for foreclosure
cases, with varying degrees of court involvement.27 Even local Rhode Island
municipalities such as the Cities of Providence and Cranston have initiated similar
requirements.
These programs initiated by state and local courts and governments have several
features in common. They are designed to bridge the communication gap between loan
servicers and homeowners, a gap that has often been cited as the major obstacle to
effective loss mitigation. The programs require active participation by a representative of
the servicer with full authority to consider all loss mitigation options. They regulate
production of documents and facilitate some form of meeting between the homeowner
and servicer, either in person or by phone. The courts play a role in supervising and,
26
Connecticut (Conn. Gen. Stat. Ann. § 8-265ee); Indiana (2009 Senate Enrolled Act No.
492); Maine (14 Maine Rev. Stat. Ann. § 6321-A); New York (New York Civil Practice
Laws Rule § 3408); Vermont (2010 House Bill 590). The Supreme Court of South
Carolina has issued an administrative order that, while not requiring a specific form of
conference, requires servicers to certify completion of HAMP-related loss mitigation
reviews as a condition to proceeding with a foreclosure in the state. S.C. Administrative
Order No. 2009--05-22-01 Re: Mortgage Foreclosures and the Home Affordable
Modification Program (HMP).
http://www.floridasupremecourt.org/pub_info/documents/AOSC09-54_Foreclosures.pdf.
27
California (Cal. Civ. Code § 2923.5 and §§ 2923.52-53); Maryland (2010 House Bill
472 (Chapter 485); Michigan (2009 Enrolled Bills 4453, 4454, 4455); Nevada (2009
Enacted Assembly Bill 149); Oregon (Enrolled Senate Bill 628).
22
when necessary, intervening to move the process along. The programs do not require
servicers or lenders to implement a particular loss mitigation option. In the bankruptcy
context, these programs importantly do not compel a modification of the mortgage
creditor’s claim and therefore are not in violation of § 1322(b)(2). See In re Simarra,
2010 WL 2144150 (Bankr. D.R.I. April 14, 2010). Instead, they set a standard for
transparency and accountability in the foreclosure process that is often lacking without
this intervention. The Rhode Island Bankruptcy Court’s Loss Mitigation Program has all
of these attributes and functions with procedures modeled after many similar programs in
effect in courts around the country.
III.
Conclusion
For the reasons stated above, amicus curiae counsel requests that this Court
uphold its statutory and inherent authority to implement the Loss Mitigation Program,
and issue loss mitigation orders in the above-entitled cases.
Respectfully submitted,
Amicus Counsel
By its attorneys,
/s/ John Rao
RI # 2777
National Consumer Law Center, Inc.
7 Winthrop Square, 4th Floor
Boston, MA 02110
(617) 542-8010
[email protected]
Geoff Walsh
National Consumer Law Center, Inc.
23
7 Winthrop Square, 4th Floor
Boston, MA 02110
(617) 542-8010
DATE: August 13, 2010
CERTIFICATE OF SERVICE
I, John Rao, amicus counsel, hereby certify that on the 13th day of August, 2010,
I electronically filed this Brief with the Clerk of the Bankruptcy Court for the District of
Rhode Island using the CM/ECF System. The following participants have received notice
electronically:
Susan W. Cody, Esq.
Lynn Bouvier Kapiskas, Esq.
Gary L. Donahue, U.S. Trustee
Stacy Ferrara, Trustee
Charles A. Pisaturo, Jr., Trustee
Michael W. Favicchio, Esq.
Russell D. Raskin, Esq.
/s/ John Rao
24
Recent Developments in the Home Affordable Modification Program
(HAMP)
John Rao
National Consumer Law Center, Inc.
7 Winthrop Sq., 4th Floor
Boston, MA 02110
[email protected]
www.consumerlaw.org
1.
New HAMP Guidelines Offer Hope for Distressed Borrowers
With Supplemental Directive 10-02, 1 the Treasury Department (Treasury) has modified
the borrower communication, foreclosure procedures, and bankruptcy law provisions of
the Home Affordable Modification Program (HAMP). The HAMP program is designed to
get servicers to offer affordable loan modifications to borrowers for their first lien
mortgage loans. The new directive, effective on June 1, 2010, requires that servicers
improve their borrower outreach and communication efforts, and refrain from referring a
loan to foreclosure until the (a) borrower is determined to be ineligible for HAMP or (b)
reasonable solicitation efforts have failed.
In addition, servicers are required to consider borrowers in active chapter 7 or chapter 13
cases for a HAMP modification if requested by the borrower, borrower’s counsel or
bankruptcy trustee. Other changes were made to facilitate HAMP modifications for
debtors in bankruptcy.
Prohibition against Referral to Foreclosure
Supp. Dir. 10-02 provides that, as of June 1, 2010, a servicer may not refer a loan to
foreclosure or conduct a scheduled foreclosure sale until either (a) the borrower is
evaluated for HAMP and determined to be ineligible, or (b) reasonable attempts to solicit
the borrower have been unsuccessful. 2
Importantly, in a drastic change from prior Treasury guidance, all foreclosure activity
must cease once a borrower is in a trial period plan, even if the loan had previously been
referred to foreclosure. 3 The servicer must take all reasonable efforts to take actions
within its authority to halt further activity in the foreclosure process, whether judicial or
1
Available at https://www.hmpadmin.com/portal/docs/hamp_servicer/sd1002.pdf.
A servicer may also refer a loan to foreclosure or continue with a planned foreclosure
sale for other reasons, including if the borrower fails to make payments under an offered
trial period plan, or declines to participate in the HAMP program.
3
If the borrower fails to make a payment, the servicer may proceed with the foreclosure
process.
2
non-judicial, once the borrower enters into a trial period plan based on verified income.
In other words, servicers are no longer permitted to accept trial plan payments and
simultaneously going forward with foreclosure proceedings on a separate track.
The servicer does not violate this provision if:
 a state foreclosure court, bankruptcy court, or public official refuses to stop
proceedings after requested to do so by the servicer;
 the servicer must take action to protect the interest of the investor; or
 there is not sufficient time to stop the activity or event (but the servicer
must not permit a sale to go forward).
If a borrower is denied a HAMP modification, the servicer is required by Supp. Dir. 0908 to send a written Non-Approval Notice. Per the new guidance, the servicer may not
conduct a foreclosure sale within 30 days of the Non-Approval Notice, or any longer
period that is needed to consider supplemental material provided by the borrower. 4
However, this 30-day window does not apply if the modification is not approved because
the property or mortgage is ineligible, the borrower withdraws from the program, or the
borrower fails to make payments under a trial or permanent HAMP modification. 5
What Constitutes Reasonable Solicitation
Servicers must pre-screen all first-lien mortgages when two or more payments are due
and unpaid to determine whether they qualify for the basic criteria under HAMP. 6
Servicers are also now required to proactively solicit borrowers whose mortgage loan
passes this initial pre-screen, unless they have documented that the borrower is not
willing to participate in HAMP.
A servicer is deemed to have made a “Reasonable Effort” to solicit a borrower if over a
period of 30 calendar days: (1) the servicer makes a minimum of four telephone calls at
different times of day; and (2) the servicer sends two written notices clearly describing
HAMP, one certified/express mail and one regular mail.
If the servicer is successful in contacting the borrower and the borrower wishes to
participate in HAMP, the servicer must send a written communication via regular or
4
This provision should be read in connection with the provisions in Supp. Dir. 09-08,
which may extend the time to foreclosure sale beyond 30 days if the servicer needs to
resolve “inconsistencies” in the NPV test.
5
These exceptions indicate that Treasury intends that each borrower be considered for a
full evaluation and eligibility be determined before a referral to foreclosure can occur,
including the running of an NPV test.
6
One-to-four unit residential property, occupied by buyer as primary residence, not
vacant or condemned, loan originated on or before January 1, 2009, unpaid principal
balance does not exceed $729,750 for a one-unit dwelling (higher amounts for larger
dwellings) and was not previously modified under HAMP.
2
electronic mail describing the initial package required to be submitted by the borrower to
request a HAMP modification. 7 The servicer is not required to send the initial package if
it determines that the borrower does not meet the basic eligibility criteria for a HAMP
modification or the borrower’s monthly mortgage obligation is substantially less than
31% of the borrower’s gross monthly income.
Deadline for Suspension of Foreclosure Sales
Supp. Dir. 10-02 imposes a deadline for the suspension of foreclosure sales: when a
borrower submits a request for HAMP consideration after the sale has been scheduled
and the request is received no later than midnight of the seventh business day prior to the
foreclosure sale date, the servicer must halt the sale.
The borrower is deemed to have made a request for HAMP modification when it submits
a complete Initial Package (RMA, Form 4506T-EZ, evidence of income). The servicer is
permitted, in its discretion, to impose additional requirements for requests received later
than 30 days prior to the scheduled foreclosure sale. 8
Mitigating the Impact of Foreclosure
Supp. Dir. 10-02 also requires that servicers take steps to mitigate the impact of
foreclosure. For example, when a borrower is simultaneously in foreclosure and either
being evaluated for HAMP or is in a trial period plan, the servicer must provide the
borrower with a written explanation and make clear that while certain foreclosure actions
may continue, the home will not be sold at sale.
A servicer is now also required to provide to the foreclosure attorney/trustee a written
certification that the borrower is not eligible for a HAMP modification before a
foreclosure sale may be conducted. The certification must be provided within seven days
prior to the scheduled foreclosure sale date.
In addition, servicers are required, within 90 days of signing a Servicer Participation
Agreement with Treasury, to review all agreements to determine investor participation in
HAMP. Within 30 days of identifying a non-participating investor, the servicer must
contact the investor in writing and encourage it to permit modifications under HAMP.
This standard appears largely toothless, but an attorney can use the Truth in Lending Act
to obtain the investor’s identity 9 and then try to find out whether the servicer has
7
This communication must: (1) include a description of the income evidence required for
a HAMP modification; (2) provide the Request for Modification and Affidavit (RMA)
and, if necessary, a Hardship Affidavit; and (3) include IRS Form 4506T-EZ or IRS Form
4506T.
8
For example, a servicer may require that a complete Initial Package be delivered
through certified/express delivery mail with return receipt/delivery confirmation to either
the servicer or the foreclosure attorney/trustee. Any such requirement must be posted on
the servicer’s website and communicated to the borrower in writing.
9
See 15 U.S.C. § 1641(f)(2).
3
complied with its obligation to request participation. Servicers are also required to
provide Fannie Mae, HAMP’s Program Administrator, with a list of investors that do not
participate in HAMP.
Limitations of the Supplemental Directive
Supp. Dir. 10-02 only forbids servicers from referring a mortgage loan to foreclosure
until (1) the borrower is determined to be HAMP-ineligible, or (2) solicitation efforts
have failed. If the servicer determines the borrower is not eligible for a modification or
the solicitation efforts have failed, it may refer the loan to foreclosure.
In addition, the new guidance does not forbid servicers from proceeding with pending
foreclosure actions, at least until a trial modification based on verified income, as
described in Supp. Dir. 10-01, has begun. If the borrower is denied a loan modification,
or misses a payment, the servicer may proceed with foreclosure activities to the point of
sale, even if the borrower is contesting the denial.
Practice Pointers
If a foreclosure sale has already occurred, ask the foreclosure attorney/trustee for the
servicer’s certification that the borrower was HAMP-ineligible. If the certification is
missing or inaccurate, this should strengthen the case for a wrongful foreclosure action.
In the same vein, servicers are now required to have a procedure under which a borrower
can escalate disagreements to a supervisory level, and the failure to establish such a
procedure can be additional grounds for contesting a sale or denial of modification.
Some borrowers have run into situations in which servicers are asking them to submit
income or property valuations repeatedly. Supp. Dir. 10-02 makes clear that servicers
must have procedures in place to “ensure that borrowers are not required to submit
multiple copies of documents.” 10 Documentation under HAMP remains current for 90
days after the time the servicer receives it.11 The program does not require verified
income to be resubmitted before a permanent modification is granted, nor does the
property valuation need to be updated. 12
Finally, be sure to remind the server of the timelines established by Supp. Directives 0907 and 10-01. The servicer is required to provide a notification of receipt within ten
business days. 13 The servicer is also required to provide a notification of a decision or of
incomplete submissions within 30 calendar days and any request for submissions beyond
this 30 days is untimely. Supp. Dir. 10-02, p. 3.
10
Supp. Dir. 10-02, p. 4.
Supp. Dir. 10-01, p. 2.
12
Supp. Dir. 09-07, pp. 2, 6.
13
Supp. Dir. 10-01, p. 2.
11
4
If the servicer is not complying with these timelines, it might be necessary to escalate.
The appropriate email address is [email protected] and the telephone number
is 1-866-939-4469.
Borrowers in Bankruptcy
Supp. Dir. 10-02 makes clear that borrowers in active chapter 7 and 13 cases are eligible
for a HAMP modification. This is a marked departure from Treasury’s prior guidance in
HAMP Supp. Dir. 09-01, which provided that borrowers in bankruptcy were eligible for
HAMP modifications “at the servicer’s discretion.” In addition, borrowers who are in a
trial period plan and subsequently file for bankruptcy may not be denied a HAMP
modification on the basis of the bankruptcy filing.
While servicers are not required to actively solicit borrowers in active bankruptcy cases,
they must consider them for a HAMP modification if the borrower, borrower’s counsel or
bankruptcy trustee submits a request to the servicer.
The guidance provides that servicers are required to work with the borrower and
borrower’s counsel to obtain any court and/or trustee approvals required in accordance
with local rules and procedures. Some courts have required that a motion be filed
seeking approval of a permanent modification, while others have permitted approval to
come from the trustee followed by the submission of an agreed order.
Borrowers in a trial period plan might run up against the three-month trial modification
deadline if it takes any significant amount of time to obtain court and/or trustee
approvals. In such a case, Supp. Dir. 10-02 provides that servicers “should” extend the
trial plan period to accommodate delays in obtaining such approvals, but are not required
to extend the trial period beyond two months, resulting in a five-month trial period.
The guidance reiterates Treasury’s previous position in Supp. Dir. 09-01 that borrowers
who have received a chapter 7 discharge and did not reaffirm the mortgage debt are
nonetheless eligible for a HAMP modification. The following language must be inserted
into the modification agreement: “I was discharged in a Chapter 7 bankruptcy proceeding
subsequent to the execution of the Loan Documents. Based on this representation,
Lender agrees that I will not have personal liability on the debt pursuant to this
Agreement.”
Protection from Plan Objections, Stay Relief and Dismissal Motions
Supp. Dir. 10-02 also addresses the problem of servicers filing motions for stay relief
and/or plan objections while the debtor is being considered for a modification. For
example, servicers have filed objections on the grounds that the debtor/borrower is not
making the full mortgage payment, even though they have been making payments under
the trial period plan.
5
Under the new guidance, if a borrower in an active chapter 13 case is in a trial period
plan and makes post-petition payments in the amount required by the trial period, the
servicer may not object to confirmation, move for stay relief, or move for dismissal on
the grounds that the debtor did not pay the non-modified mortgage payments. While this
provision does not apply if the borrower has not yet begun a trial period plan at the time
of filing, it should reduce unnecessary litigation costs for borrowers.
Document Requirements
For purposes of determining income eligibility, the servicer may accept copies of the
bankruptcy schedules and tax returns (if required to be filed) in lieu of the RMA and
Form 4506T-EZ. If the schedules are more than 90 days old, the borrower must provide
the servicer with updated income information. Borrowers are still required to provide a
Hardship Affidavit (or RMA).
Servicer may Waive Trial Plan for Chapter 13 Borrower
Supp. Dir. 10-02 also provides that borrowers in an active Chapter 13 case who are
HAMP-eligible may be converted to a permanent modification without completing the
trial period if: (1) the borrower makes all post-petition payments on the mortgage to be
modified and at least three of the payments are greater than or equal to the modified
payment; (2) the bankruptcy court approves the modification; and (3) the trial period plan
waiver is permitted by the investor guidelines. However, waivers under this approach are
contingent on the development of “systems capability” and at the discretion of the
servicer. It remains unclear whether servicers will in fact waive the trial period or
whether the investor guidelines permit such a waiver.
2.
Notice Requirements Under HAMP
Many borrowers—potentially hundreds of thousands—have been left in limbo by
servicers, unsure of the status of their Home Affordable Mortgage Program (HAMP)
applications. Many have had foreclosure sales scheduled or completed while their
servicers were considering them for HAMP, in violation of the servicers’ contract with
Treasury. 14 This article discusses two tools for obtaining information from the servicer
about a borrower’s HAMP application: Supplemental Directive 09-08 and the servicer
provisions of the Real Estate Settlement Procedures Act. Both—at least in theory—can
be used not only to obtain information, but to prevent a foreclosure sale and force a
14
A survey of consumer advocates conducted by NCLC and NACA found that almost
95% of respondents had worked with at least one client who had a foreclosure sale
scheduled during HAMP review. 14% of respondents had had more than 50 clients
facing improper foreclosure sales. Available at:
www.consumerlaw.org/issues/foreclosure/content/NCLC-NACA-Foreclosure-SaleSurvey-ResultsJan2010.pdf.
6
proper evaluation of the borrower for a HAMP modification. Discovery is, of course,
another option for acquiring information from servicers.
Obtaining information about the status and substance of the servicer’s evaluation of a
borrower is important because it can be used to show that a foreclosure sale has been
improperly scheduled or that foreclosure can be avoided through appropriate application
of the HAMP guidelines. Many courts, even in non-judicial states, consider foreclosure
to be an equitable remedy only available if the foreclosing entity has proceeded properly
and with “clean hands.” 15
What Does the Servicer Need to Disclose - Supplemental Directive 09-08
Supplemental Directive 09-08 (Supp. Dir. 09-08), 16 released in November, 2009, purports
to provide for servicer accountability. It requires notices to borrowers who fail to qualify
for a trial or permanent HAMP modification, or who default on a trial modification,
listing the reason for the non-approval. Supp. Dir. 09-08 also requires servicers to
provide some elements of the Net Present Value (NPV) test upon request. The absence of
the borrower notices required by Supp. Dir. 09-08 can be used to argue that the borrower
is still being considered for HAMP, and that a foreclosure sale should therefore not take
place. 17
Supp. Dir. 09-08 became effective January 1, 2010, so any borrower whose eligibility for
a HAMP modification had not been determined by that date should receive notice if later
determined to be ineligible. Supp. Dir. 09-08’s notice requirements apply if a borrower is
not offered a Trial Period Plan, a permanent HAMP modification, or if the servicer
contends that eligibility may be denied because the borrower has not provided financial
information. 18 The notice must provide the primary reason or reasons for the nonapproval. 19 Importantly, if the notice discusses other non-HAMP loss mitigation options
that are being considered or offered to the borrower, it must clearly state that the
borrower was considered for but is not eligible for HAMP.
15
See NCLC, Foreclosures § 6.4.5 (2d ed. 2007 and Supp.). For a particularly strict
application of this principle, resulting in the cancellation of the underlying mortgage, see
IndyMac Bank v. Yano-Horoski, 2009 WL 3858797 (N.Y. Sup. Ct. Nov. 19, 2009). See
also Woods v. Monticello Dev. Co., 687 P.2d 1324 (Colo. Ct. App. 1982) (“Equitable
remedies are not automatic—the term itself implies a balancing.”); Sovereign Bank,
F.S.B. v. Kuelzow, 687 A.2d 1039 (N.J. Super. Ct. App. Div. 1997) (“Foreclosure is a
discretionary remedy.”); M & T Mortg. Corp. v. Foy, 858 N.Y.S.2d 567 (N.Y. Sup. Ct.
2008) (“The courts are not merely automatons mindlessly processing paper motions in
mortgage foreclosure actions most of which proceed on default.”); Rosselot v.
Heimbrock, 561 N.E.2d 555 (Ohio Ct. App. 1988).
16
All Supplemental Directives are available at www.hmpadmin.com/portal/
programs/hamp/servicer.html.
17
See Supp. Dir. 10-02.
18
Supp. Dir. 09-08, at 1.
19
The notices must comply with the Equal Credit Opportunity Act, when applicable.
Supp. Dir. 09-08, at 1.
7
When the reason for non-approval of a trial or permanent modification is a negative result
on the NPV test, the servicer must inform the borrower that she has the option of
requesting certain data related to the NPV test. 20 The borrower (or her representative)
has 30 calendar days from the date of the notice of non-approval to request the NPV data.
The servicer must provide it within 10 business days of the request. The servicer is not
allowed to proceed to a foreclosure sale until 30 calendar days after the NPV data is
given to the borrower, to allow the borrower time to identify potential errors. If the
borrower finds “material” errors, the servicer must redo the NPV test. By triggering a 30day period of ostensible protection from foreclosure sale, a request for the NPV inputs
provides an opportunity for borrowers and their advocates to discover whether errors
have been made.
Although somewhat useful, Supp. Dir. 09-08 has a number of weaknesses:

Investor or guarantor rules can be listed as the reason for rejection, but the
identity of the investor, the source of purported conflict (such as the PSA)
and evidence of the servicer’s required efforts to get a waiver are not
provided;
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The borrower must make an affirmative request for the NPV values, adding
a cumbersome extra step;
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Servicers are only required to provide some of the NPV values 21 —notable
exceptions include the market value of the property and how it was
determined, the terms of the modified loan that were used for the test, and
the numerical values of the NPV results for modification versus rejection
(critical for knowing how far the borrower is from qualifying); and

NPV retesting is only required if the borrower finds “material” inaccuracies
“likely to change the NPV outcome.” This effectively leaves the decision to
retest in the hands of frontline servicer staff, without meaningful standards,
despite the fact that only minimal effort would be required to redo the NPV
test for any error pointed out by the borrower.
In addition, Supp. Dir. 09-08 fails to address ongoing concerns that the NPV test itself is
not publicly available, that there is no meaningful appeal process for HAMP denials
20
For a discussion of the factors considered under the NPV test, see NCLC, Foreclosures
§ 2.3.4A (2009 Supp.).
21
Available NPV inputs are: a) unpaid balance on the original loan as of [data collection
date]; b) interest rate before modification as of [data collection date]; c) months
delinquent as of [data collection date]; d) next ARM reset date (if applicable); e) next
ARM reset rate (if applicable); f) principal and interest payment before modification; g)
monthly insurance payment; h) monthly real estate taxes; i) monthly HOA fees (if
applicable); j) monthly gross income; k) borrower’s total monthly obligations; l)
borrower FICO; m) co-borrower FICO (if applicable); n) zip code; and o) state.
SD 09-08, at A-2.
8
(borrowers are directed to contact the HOPE Hotline for escalation), and that servicers
persistently lose borrower submissions and fail to stop scheduled foreclosure sales in
accordance with HAMP requirements.
Getting the Full Story - Send a QWR Under RESPA
Complete NPV information, as well as other records of the servicer’s eligibility
determination should be obtainable under the Real Estate Settlement Procedures Act
(RESPA), which imposes requirements on servicers to respond to borrower requests for
information or correction of account errors. 22 The servicer’s obligation is triggered by
receipt of a “qualified written request” (QWR) from the borrower or her representative,
sent to an address for receipt of QWRs if so designated by the servicer, 23 that includes
sufficient information to identify the borrower’s account and provides the “reasons for
the belief … that the account is in error” or “sufficient detail” to the servicer regarding
the information requested. 24 The servicer must acknowledge receipt within 20 business
days and take action on the request within 60 business days (closer to 3 months on the
calendar).
The power of a QWR to get complete information about the servicer’s consideration of a
borrower for HAMP has yet to be tested (at least as reflected in court opinions). The
information available through a QWR is limited to information “relating to the servicing”
of the loan. 25 HAMP activities should qualify because loss mitigation has become a
routine function of servicers in the servicing of mortgage loans, and the only method of
obtaining a HAMP modification based on the design of the program is through a
participating servicer. But some servicers resist providing anything other than payment
and escrow information. 26
If servicers do not provide requested information after conducting an investigation, they
must provide the borrower with an explanation of why the information “is unavailable or
cannot be obtained by the servicer.” 27 Because of servicers’ extensive reporting
obligations under HAMP, nothing that a borrower might request is likely to be actually
unavailable or unobtainable by the servicer. 28
22
12 U.S.C. § 2605. See also Regulation X, the implementing regulation for RESPA,
especially 24 C.F.R. § 3500.21.
23
See NCLC, Foreclosures § 8.2.2.3 (2d ed. 2007 and Supp.).
24
12 U.S.C. § 2605(e)(1)(B)(ii).
25
12 U.S.C. § 2605(e)(1)(A). See also 24 C.F.R. § 3500.21(e)(2)(i).
26
For a discussion of what constitutes a QWR, see NCLC, Foreclosures § 8.2.2.2 (2d ed.
2007 and Supp.).
27
12 U.S.C. § 2605(e)(2)(C)(i); 24 C.F.R. § 3500.21(e)(3)(ii)(B).
28
Supp. Dir. 09-01, 09-02, 09-03, 09-06, and 10-01 all include requirements relating to
record keeping and documentation. Supp. Dir. 09-06 in particular lists many of the data
fields that servicers must report to Fannie Mae. All NPV inputs and results are of course
required, including the method of property valuation and the details of the modification
considered (which may vary from the standard waterfall because of investor restrictions).
Supplemental Directives 09-01 and 10-01 contain helpful minimum documentation
9
Servicers also sometimes claim that requested information is privileged or confidential,
even though there is no language in RESPA or Regulation X that suggests this as a reason
for withholding information. There is almost no useful case law on this question. 29
Given strong servicer resistance to making the NPV test public, it is a likely response to
QWRs and could get a boost from language in Supp. Dir. 09-08 which states that
“[s]ervicers are not required to provide the numeric NPV results or NPV input values not
enumerated in [the list of available data].” On the other hand, participation in the HAMP
program clearly does not exempt servicers from otherwise applicable law and regulation.
For instance, the Servicer Participation Agreement explicitly requires servicers to warrant
that HAMP activities “will be performed in compliance with … Federal and state laws
designed to prevent unfair, discriminatory or predatory lending practices.” If RESPA
would otherwise require disclosure of NPV information, contrary language in HAMP
program documentation should be of little import.
Disputing a Wrongful HAMP Denial with a QWR
Another potential use of the QWR mechanism would be to request “correction” of a
borrower’s account in the form of a loan modification consistent with the HAMP
guidelines. A threshold question is whether wrongful denial of a HAMP modification or
incorrect application of the HAMP modification guidelines would constitute an account
error within the meaning of RESPA. The statute and Regulation X do not specify the
types of errors that borrowers may seek to correct. 30 Given that RESPA is a remedial
consumer protection statute that should be construed liberally, 31 and that the handling of
loss mitigation requests is a customary task of servicers in servicing mortgages, errors
related to processing loan modification requests should be subject to the dispute
procedures in RESPA. 32
requirements, including logs of individual borrower contacts, attempts to obtain waivers
from investors, and training and policy materials.
29
See Pettie v. Saxon, 2009 WL 1325947 (W.D. Wash. May 12, 2009) (accepting as in
compliance with RESPA, without discussion, servicer’s withholding of requested
information with the explanation that it was privileged or confidential); In re Price, 403
B.R. 775 (Bankr. E.D. Ark. 2009) (finding that plaintiffs had stated a claim for relief
under RESPA by alleging that information withheld by servicer was public record
information reported to the SEC and would have identified specific loss mitigation and
foreclosure avoidance measures available but not offered to plaintiffs).
30
See NCLC, Foreclosures §§ 8.2.2.2, 8.2.2.5 (2d ed. 2007 and 2009 Supp.).
31
Ploog v. HomeSide Lending, Inc., 209 F. Supp. 2d 863 (N.D. Ill. 2002) (holding
RESPA is remedial in nature); Johnstone v. Bank of America, N.A., 173 F. Supp. 2d 815
(N.D. Ill. 2001) (same); Rawlings v. Dovenmuehle Mortgage, Inc., 64 F. Supp. 2d 1156
(M.D. Ala. 1999) (same).
32
To the extent a borrower is charged late fees or penalties resulting from a delay in the
conversion from Trial Plan to permanent modification or is charged any improper fees in
relation to the modification, an even stronger argument can be made that the account
should be “corrected.” See 12 U.S.C. § 2605(e)(2)(A), defining correction of account to
include crediting of late charges and penalties.
10
In the context of error correction, a QWR must include “a statement of the reasons for the
belief of the borrower, to the extent applicable, that the account is in error.” 33 Without
knowing all the NPV inputs, it might be difficult for a borrower to make the necessary
statement of reasons about why a HAMP denial was in error. Still, if the advocate has
obtained some or all of the input values by either making a request under Supp. Dir. 0908 or sending a QWR as described above, and it appears that HAMP eligibility was
wrongfully denied, a follow-up QWR should be sent stating the reasons “to the extent
applicable” why an account error has been made and requesting correction.
If the borrower requests correction of an account error, within 60 business days, the
servicer must either: 1) correct the account and notify the consumer, or 2) conduct an
investigation and state the reasons why the account is correct, with the name and phone
number of a servicer employee who can provide further information. 34
Private Remedies Available
Sending a QWR does not stop the foreclosure process or collection efforts, 35 but if the
servicer fails to respond appropriately, the borrower has a private right of action for
actual (including emotional distress) damages, costs and attorney fees, as well as
statutory damages up to $1,000 in the case of a pattern and practice of noncompliance. 36
Care should be taken in pleading your client’s damages. 37
Sending a QWR also protects a borrower’s credit. Servicers cannot report adverse
information on payments related to the subject of the QWR to consumer reporting
agencies during the QWR response period. 38 This may be valuable in the HAMP context,
because the borrower’s mortgage remains in force during the Trial Plan Period and the
33
12 U.S.C. § 2605(e)(1)(B)(ii).
12 U.S.C. § 2605(e)(2)(B).
35
24 C.F.R. § 3500.21(e)(4)(ii). This is arguably an overreaching interpretation by HUD
of 12 U.S.C. § 2615, which provides that “validity and enforceability” of mortgages is
not affected by RESPA.
36
12 U.S.C. § 2605(e). See also NCLC, Foreclosures § 8.2.6 (2d ed. 2007 and Supp.).
37
Courts are increasingly requiring an allegation of actual damages as an element of a
RESPA claim. See NCLC, Foreclosures § 8.2.6.2 (2d ed. 2007 and Supp.). This should
not be insurmountable in the case of a HAMP wrongful denial. Even the failure to provide
information could result in actual damages. For example, a borrower might argue that
failure to provide the numerical NPV values resulted in the borrower throwing good
money after bad trying to qualify for an unlikely HAMP modification when other loss
mitigation options, such as a deed in lieu, would have been better for the borrower’s
finances and credit score.
38
12 U.S.C. § 2605(e)(3); 24 C.F.R. § 3500.21(e)(4)(i).
34
11
reduced payments made by borrowers may be reported by servicers to credit bureaus as if
they were partial payments. 39
3.
HAMP Changes Made By Dodd-Frank Bill
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) 40
was signed into law on July 21, 2010. Dodd-Frank makes the Home Affordable
Modification Program (HAMP) more transparent. It mandates creation of a new web
portal for homeowners to determine whether their loan modification meets HAMP’s Net
Present Value test, requires servicers to turn over NPV inputs and outputs at the time of
denial, and mandates public release of the NPV model itself and certain data. 41
The Act also sets up a bridge loan program for unemployed homeowners, 42 modeled
on the Pennsylvania Homeowners’ Emergency Mortgage Assistance Program. The funds,
while permitted to be used in a federally administered program, may be provided to statetailored programs as well.
39
The Consumer Data Industry Association has recently created a new reporting code for
payments made under a HAMP Trial Plan. It is not clear whether reporting using the new
code would qualify as providing “adverse information.” HAMP FAQs, Q67.
40
Pub. L. No. 111-203, 124 Stat. 1376 (July 21, 2010) ("Dodd-Frank").
41
Dodd-Frank § 1482–1483.
42
Id. § 1496.
12
Getting A Second Look
1) Get and review the denial notice
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SD 09-08 requires a denial notice with a reason.
The notice must have a toll-free number to reach a servicer representative who can provide
more information.
NPV values need not be provided in the denial notice, but must be provided if requested
within 10 calendar days if the borrower requests them within 30 calendar days of the denial
notice. Sup. Dir. 09-08, p.3.
Dodd-Frank, P.L. 111-203, Section 1482 requires more NPV values to be provided to
borrowers.
2) If the servicer got any of the NPV inputs wrong, provide information as to the correct
inputs.
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The servicer must re-run the NPV if the correction “is material and likely to change the
NPV outcome.” Sup. Dir. 09-08, p. 3.
Dodd-Frank, P.L. 111-203, Section 1482 requires a portal for use by borrowers to check the
accuracy of the servicer’s NPV calculation.
The foreclosure sale must be suspended while the NPV is re-run. Sup. Dir. 09-08, p. 3.
3) If the borrower was denied for any financial reason, including the NPV test or
excessive forbearance, and the borrower has additional income to report, including
additional income from a non-borrower, request reconsideration.
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A borrower remains eligible for HAMP if the denial is for any financial reason or because
of basic eligibility considerations, and the borrower’s circumstances change. Sup. Dir. 1001, p. 4.
The borrower has until midnight of the seventh business day (typically 10 days) proceeding
a scheduled foreclosure sale to request reconsideration. Sup. Dir. 10-02, p. 9.
5) If the servicer won’t review, escalate!
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Ask for the servicer’s in-house escalation team.
E-mail [email protected].
Ask for Ken Hannold if escalation isn’t satisfactory.
© National Consumer Law Center, March 2010
Boston Headquarters: 7 Winthrop Square, Boston, MA 02110
www.nclc.org
Identifying Participating Servicers
1) Check to see if the loan is owned by either Fannie Mae or Freddie Mac.
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All loans owned by Freddie or Fannie are governed by their loss mitigation requirements,
which include specific versions of HAMP
www.fanniemae.com/loanlookup
www.freddiemac.com/mymortgage
2) Check to see if the Loan is a VA or FHA loan.
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VA and FHA loans have their own versions of HAMP.
Usually, VA or FHA loans will be identified as such on the settlement statement (the HUD1 or HUD-1A)
3) Check the Making Home Affordable website.
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http://makinghomeaffordable.gov/contact_servicer.html
4) Google the servicer.
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Does their website say they are participating in HAMP?
Are they a subsidiary of another entity?
Is the servicer’s name a “dba” for another entity?
5) Check the actual contracts at financialstability.gov.
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HAMP FAQ 1301 provides that a parent company may sign on behalf of its subsidiaries.
Some of those contracts spell out who is covered.
Some of the contracts are signed by one or more entities, or require notice to be provided to
multiple entities. Any entity named in the contract is at least arguably covered.
6) Check the FFIEC’s website.
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http://www.ffiec.gov/nicpubweb/nicweb/SearchForm.aspx
Listing of all lending institutions and their affiliate/ subsidiary structure
7) If you believe the servicer is covered, but the servicer denies, escalate!
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E-mail [email protected].
Ask for Ken Hannold if escalation isn’t satisfactory.
© National Consumer Law Center, March 2010
Boston Headquarters: 7 Winthrop Square, Boston, MA 02110
www.nclc.org
What to Do When the Servicer Asks You to
Re-Verify Income Documentation
1. Ask why they need it.
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HAMP only requires that documentation be within 90 days at the time of the servicer
receives it. Sup. Dir. 09-07, p. 2, Sup. Dir. 10-01, p. 2.
HAMP does not require verified income to be resubmitted before the permanent
modification. Sup. Dir. 09-07, p. 2.
Property valuation similarly does not need to be updated once obtained. Sup. Dir. 0907, p. 6
Servicers are supposed to have procedures in place to “to ensure that borrowers are not
required to submit multiple copies of documents.” Sup. Dir. 10-02, p. 4.
HAMP probably allows for servicers to re-verify income more often if required by the
investor. Sup. Dir. 10-01, p. 4. If the servicer says the investor requires more frequent
re-verification, ask them to give you a copy of the PSA or other contract that requires
more frequent verification.
2. Remind the servicer of the timelines established by Sup. Directives 09-07 and 1001.
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Notification of receipt within 10 business days of receipt. Sup. Dir. 09-07, p. 7, Sup.
Dir. 10-01, p. 2.
Notification of decision or of incomplete submission within 30 calendar days. Sup. Dir.
09-07, p. 7, Sup. Dir. 10-01, p. 3. Any request for information beyond this 30 days is
untimely.
3. If the servicer isn’t complying with those timelines, escalate!
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E-mail [email protected].
Ask for Ken Hannold if escalations isn’t satisfactory.
© National Consumer Law Center, March 2010
Boston Headquarters: 7 Winthrop Square, Boston, MA 02110
www.nclc.org
What To Do When The Servicer Denies a HAMP Mod Because
The Client Received a Discharge In A Chapter 7 Case and Did
Not Reaffirm the Mortgage Debt?
1. Remind the servicer that a prior bankruptcy discharge is not a basis for denial. Sup.
Dir. 10-02, p. 8; Sup. Dir. 09-01, p. 2 and 16.
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2.
The debtor is eligible for a HAMP mod even if the first lien mortgage debt was discharged and
no reaffirmation was entered into in the chapter 7 case.
Same rule for GSE mortgages. FannieMae Announcement 09-05R, p. 3.
Verify that servicer has included language in HAMP agreement making loan
modification non-recourse. Sup. Dir. 10-02, p. 8; Sup. Dir. 09-01, p. 16.
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The following language must be inserted in Section I of the HAMP agreement:
“I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution
of the Loan Documents. Based on this representation, Lender agrees that I will not
have personal liability on the debt pursuant to this Agreement.”
Same rule for GSE mortgages. FannieMae Announcement 09-05R, p. 18.
3. If the servicer isn’t complying, escalate!
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E-mail [email protected].
Ask for Ken Hannold if escalations isn’t satisfactory.
© National Consumer Law Center, March 2010
Boston Headquarters: 7 Winthrop Square, Boston, MA 02110
www.nclc.org
What to Do When the Servicer Denies a HAMP Mod Because
They Re-Ran the NPV Test
1. Ask when they ran it the first time
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The NPV test should be run before the trial plan offer is extended. Sup. Dir. 09-01, p.
4, HAMP Checklist for Verified Trial Period Plans, p. 7, FAQ 2314.
Check what version of the NPV test was in effect at that time. The version used the
first time they run the NPV test must be used for any subsequent runs of the NPV test.
FAQ 1808, 1809.
2. Ask why they re-ran the test
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HAMP only provides for the NPV test to be run twice: once, when there is a verbal
request for a modification and once, when verified income is submitted. FAQ 2314
Servicers do not need to update property valuations or re-run the NPV test to account
for updated property valuations. FAQ 2100, Sup. Dir. 09-07, p. 6.
Servicers do not need to re-run the NPV test if escrow amounts, including tax and
insurance payments, change. FAQ 2209
Servicers should not re-run the NPV test when approving the final, permanent
modification; they should only re-visit the waterfall to determine the final payment,
principal, and forbearance amounts. FAQ 2314.
Servicers cannot use the NPV test for other purposes, other than those specified in their
contracts—which should mean that the NPV test cannot be re-run because an investor
asks. FAQ 1812.
3. Ask what version of the test they used and what inputs they held constant.
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The servicer can only change the following inputs: association fees, insurance, taxes,
income, and the post-modification terms determined by the income (the unpaid
principal balance, monthly payment, principal forbearance amount, amortization term,
and interest rate after modification). FAQ 1810. Note that a change in the association
fees, insurance, or taxes is not a reason to re-run the NPV test. FAQ 2209.
When the servicer re-runs the NPV test, they must use the same version of the NPV test.
FAQ 1808, 1809.
4. If the NPV test was run with inaccurate inputs, ask them to run it again.
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Servicers must re-run the test if the homeowner identifies inaccuracies in the inputs the
servicer used, and the correct inputs would change the NPV result. Sup. Dir. 09-08, p. 3.
5. Escalate!
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E-mail [email protected].
Ask for Ken Hannold if escalations isn’t satisfactory.
© National Consumer Law Center, March 2010
Boston Headquarters: 7 Winthrop Square, Boston, MA 02110
www.nclc.org
What To Do When the Servicer Refuses To Accept or Process a
HAMP Application Because Client Is In An Active Bankruptcy
Case?
1. Remind the servicer that a pending bankruptcy is not a basis for denial. Sup. Dir. 1002, p. 7.
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A debtor in an active chapter 7 or chapter 13 bankruptcy case must be considered for HAMP if
the debtor submits a request to the servicer.
A debtor in a trial period plan who later files bankruptcy may not be denied a permanent
HAMP on the basis of the bankruptcy filing.
2. Inform servicer’s bankruptcy counsel of the obligation to work with you to get court
or trustee approval of the mod, if needed. Sup. Dir. 10-02, p. 7-8.
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Trial period may be extended two months (resulting in total five-month trial period) to get court
approval.
3. File an objection and seek sanctions if the servicer takes action in a chapter 13 case
because the debtor is paying the trial plan payment rather than the regular, nonmodified mortgage payment. Sup. Dir. 10-02, p. 8.
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Servicer must not object to plan confirmation, move for dismissal, or move for relief from the
automatic stay on this basis.
4. Request that Trial Period Plan be waived if the debtor has already made sufficient
payments. Sup. Dir. 10-02, p. 8.
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Servicer may put debtor in a permanent mod without completing the trial period plan if the
debtor has made all post-petition mortgage payments and at least three of them are equal to or
greater than the proposed modified payment.
Waiver of trial plan must be permitted under applicable investor guidelines.
5. Request that servicer use schedules and tax returns filed in chapter 7 or 13 case in lieu
of RMA and Form 4506T-EZ. Sup. Dir. 10-02, p. 8.
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Servicer may accept these documents if they are not more than 90 days old.
Debtor must still provide executed Hardship Affidavit (or RMA).
6. If the servicer isn’t complying, escalate!
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E-mail [email protected].
Ask for Ken Hannold if escalations isn’t satisfactory.
© National Consumer Law Center, March 2010
Boston Headquarters: 7 Winthrop Square, Boston, MA 02110
www.nclc.org
What to Do When the Servicer Says the Investor Is Not
Participating
1) Ask who the investor is.
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Servicers participate, not investors.
You can do a 15 U.S.C. §1641(f)(2) request to the servicer to identify the holder, and the
servicer is liable for statutory damages and attorney fee’s if it doesn’t answer you.
Under Sup. Dir. 10-02, after June 1, 2010, servicers must provide Fannie Mae with a list of
investors who are not participating; this list could be obtained in discovery or FOIA’ed and
cross-checked.
If the loan is a Freddie, Fannie, or FHA loan, the servicer has to review for HAMP and
offer a Freddie, Fannie or FHA HAMP modification if the homeowner qualifies. (Freddie
and Fannie are the “investors,” and you can find out if they hold the loan from their
websites; FHA is the mortgage guarantor and requires FHA HAMP participation).
2) If there is mortgage insurance on the loan, contact the mortgage insurance company.
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FHA-insured loans must be evaluated for FHA HAMP.
Private mortgage insurers may be involved in evaluating loans for modification; unlike the
servicer, they stand to lose money if the loan forecloses.
3) Ask the servicer to identify the document forbidding the servicer from offering a
HAMP modification.
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Investors do not make these decisions on a case-by-case basis; the directive will likely be in
a PSA. Few PSAs forbid all modifications.
Even if there is a conflict between the PSA and a HAMP modification, HAMP allows the
servicer to skip steps in the waterfall if required by the PSA or to substitute amortization
extension for term extension. HAMP FAQs 2301, 2304.
4) Ask the servicer what “reasonable efforts” they’ve taken to get the investor to waive
the restrictions on HAMP mods in the PSA.
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Reasonable efforts are required by Sup. Dir. 09-01, p. 1.
Under Sup. Dir. 10-02, effective June 1, 2010, the servicer must write to the investor
requesting a waiver at least once.
5) If the servicer won’t answer those questions, escalate!
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Ask for the servicer’s in-house escalation team.
E-mail [email protected].
Ask for Ken Hannold if escalation isn’t satisfactory.
© National Consumer Law Center, March 2010
Boston Headquarters: 7 Winthrop Square, Boston, MA 02110
www.nclc.org
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY
In Re:
NEW JERSEY JUDICIARY
FORECLOSURE MEDIATION
PROGRAM
_______________________________
GENERAL ORDER CLARIFYING THAT PARTICIPATION IN
THE NEW JERSEY JUDICIARY FORECLOSURE MEDIATION PROGRAM
DOES NOT VIOLATE THE AUTOMATIC STAY
UPON RECOGNITION of a need to facilitate expanded access to the New
Jersey Judiciary Foreclosure Mediation Program for individual debtors with
pending bankruptcy cases, the Court adopts this general order to clarify that
participation by debtors and mortgagees in the Foreclosure Mediation Program
does not violate the automatic stay of actions or proceedings against the debtor
under 11 U.S.C. § 362(a) in any way. By resolution of the Board of Judges of
the United States Bankruptcy Court for the District of New Jersey,
IT IS ORDERED, that participation in the New Jersey Judiciary
Foreclosure Mediation Program (“Program”) by mortgagees and by debtors with
pending bankruptcy cases who meet the qualifying conditions of the Program
shall not be deemed to be violative of the automatic stay. The parties are not
required to obtain relief from the automatic stay in order to participate in the
Foreclosure Mediation Program.
IT IS FURTHER ORDERED, that for a pending case under Chapter 13,
the debtor must continue to comply with all obligations in the bankruptcy case,
including the obligation to continue to make regular monthly mortgage
payments to the mortgagee(s) and to make any required payments to the
Chapter 13 trustee during the time that the mediation process is pending.
IT IS FURTHER ORDERED, that in all cases, if the automatic stay is in
place during the participation of the parties in the Program, the automatic stay
will remain in place. The mortgagee(s) will not have the right to continue with
the foreclosure process otherwise permitted in connection with the Program,
unless a separate motion for relief from the stay is granted by the Bankruptcy
Court.
IT IS FURTHER ORDERED, that mortgagees shall retain all rights under
the Bankruptcy Code, including the right to move for full relief from the
automatic stay under 11 U.S.C. § 362(d), and the right to commence or
continue foreclosure proceedings following the termination of the automatic stay
by operation of law under 11 U.S.C. § 362(c).
IT IS FURTHER ORDERED, that if the mediation process results in a
settlement or other consensual arrangement, including modification of the
mortgage, the parties must seek Bankruptcy Court approval of the resolution of
the matter by motion on notice to the mortgagee, trustee and all other
interested parties.
IT IS FURTHER ORDERED, that if a settlement or other consensual
arrangement approved by the Court impacts on the provisions of a Chapter 13
plan, a modified plan must be filed.
IT IS FURTHER ORDERED, that notice to the Bar of this Order shall be
provided on the Court’s website at www.njb.uscourts.gov.
Date: May 18, 2009
/S/Hon.
JUDITH H. WIZMUR
Hon. Judith H. Wizmur, Chief Judge
United States Bankruptcy Court
District of New Jersey
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