photo: woodleywonderworks via Flickr
[Ed. note: This is the first in a series of articles about mortgage modification programs. If you or someone you know needs help, the Obama Administration has a website with more information about home mortgage refinancing options at www.MakingHomeAffordable.gov.]
Earlier this month the bankruptcy courts of the Second Circuit here in New York put on an incredibly informative seminar called “The Intersection of the Bankruptcy Loss Mitigation Program with HAMP/HARP.” It was presented for the education of bankruptcy practitioners and lawyers who represent consumers. It featured bankruptcy judges from the Southern and Eastern Districts of New York, a senior manager for Government Programs and New Initiatives for Fannie Mae (the Home Affordable Modification Program and the Home Affordable Refinance Program being “new initiatives”), a VP/Deputy General Counsel for Fannie Mae, and the Director of Foreclosure Prevention at Brooklyn Legal Services.
For those folks living in New York state, the best news is that a version of this same program was presented two weeks earlier to both bankruptcy court judges AND NYS judges who will be staffing the mortgage foreclosure parts. The program was live streamed into the courthouses, so nobody had to miss it.
The Bankruptcy Loss Mitigation Program was begun in the Southern District of New York in 2008 and was adopted in the Eastern District of New York in late 2009.
In the current economy, home foreclosures often yield a loss-loss situation for homeowners and lenders. One bankruptcy court has launched an innovative program that tries to help both sides avoid such mutual dissatisfaction.
The U.S. Bankruptcy Court for the Southern District of New York offers “loss mitigation”—a program that encourages debtors who have filed for bankruptcy protection and their secured creditors to sit down and discuss ways foreclosure might be averted.
“The Bankruptcy Code does not allow me to rewrite a residential mortgage,” said U.S. Bankruptcy Judge Cecelia Morris, the program’s primary architect. “But it does allow me to say to both sides that they need to talk, in the hope that they may avert either the loss of a debtor’s property to foreclosure, increased costs to the lender, or both.”
The New York State Residential Foreclosure Program also provides for a process to force lenders to the bargaining table.
Eligibility
In an effort to streamline the process for homeowners in danger of foreclosure, the court has established a Residential Foreclosure Program. Homeowners are eligible to participate in this program if the subject property meets all of the following criteria:• It is an owner-occupied residence.
• It is a one-to-four family dwelling.
• The mortgage in question was originated between
January 1, 2003 and September 1, 2008.
• The mortgage is a sub-prime, non-traditional, or high-cost loan.Settlement Conferences
If you meet the above criteria, a Foreclosure Settlement Conference is mandatory provided the case was commenced on or after September 1, 2008. If your case was commenced before September 1, 2008, you may still participate on a voluntary basis. The plaintiff is required to identify eligible cases and provide your contact information when filing them with the court. The court will then schedule the conference within 60 days after you have been served with court papers. Please be aware that the court conference does not relieve you of your obligation to respond to the plaintiff’s papers in a timely manner. If you come to the conference without an attorney, you may be entitled to a court-appointed lawyer.At the conference, the court will:
• discuss the rights and obligations of the parties
• determine whether the parties can reach a resolution to avoid foreclosure
• evaluate workout/settlement options such as payment schedules or loan modifications
• design a plan to streamline subsequent court proceedings if a settlement cannot be reached
There was such an enormous volume of information and insights provided at this seminar that it will take me many blog posts to arrange it all and add in the links to augment. Expect to see many more posts on this topic. And for those of you outside NYS, bankruptcy is a matter of federal law. What happens in a bankruptcy case in NY can be relevant to what happens in your own state.
It was most encouraging to find that the judges appear to be disinclined to let lenders run roughshod over homeowners and are finding new and creative solutions to allow homeowners to bargain with creditors to modify their loans. At the same time, Fannie and Freddie have a stated purpose to help homeowners modify their loans and keep their houses. Whether all those noble aspirations will translate into real relief for homeowners remains to be seen—the system has a long way to go, which I will discuss I future posts; but at the very least, the plight of homeowners has not fallen on deaf ears in the courts.
Please stay tuned, there’s more to come…
Tags: bankruptcy, Bankruptcy Loss Mitigation Program, Fannie Mae, foreclosure, Freddie Mac, HAMP, HARP, homeowners, judicial, legal, loan modifications, MakingHomeAffordable.gov, mortgage crisis, mortgage modification, mortgages
