consumer bankruptcy powerpoint

7/27/2019 Consumer Bankruptcy Powerpoint

1/25

TheNationalMortgageSettlement:What

EveryConsumerBankruptcyLawyerNeeds

ToKnowAboutIt

Presentedby:

JohnRao,Esq.,NationalConsumerLawCenter,NACBAVicePresident,andProfessorKatherinePorter, Univ.ofCaliforniaIrvineSchoolofLaw;CaliforniaMonitorThursday,September27,2012


2/25

NationalMortgageSettlement PartiestotheDeal

Government:

US

DOJ

(including

US

Trustee

Program),

HUD,

US

Treasury,AttorneysGeneral(exceptOK)

5Servicers: BankofAmerica

Wells

Fargo JPMorganChase

Citibank

GMAC(akaAlly).

Timingof

Settlement

Relief March1: Loanmodificationscanreceivecredit

October3: Allservicingstandardsmustbeimplemented


3/25

ServicingStandardsforBankruptcy

NationalMortgageSettlement


4/25

AccuracyofFiledDocuments Allpleadings,proofsofclaim,affidavits,sworn

statements,anddeclarationsfiledinjudicialforeclosure

orbankruptcy

cases,

and

in

notices

of

default

or

sale

in

nonjudicialforeclosures,mustbe:

accurateandcompleteandaresupportedbycompetentandreliableevidence

Doesthisimposeastricterstandardthan

BankruptcyRule

9011?


5/25

AccuracyofFiledDocuments Ifproofofclaimorstayreliefmotionincasependingbefore

Settlementcontainsmateriallyinaccurateinformation,

servicermust:

fileanamendedclaimormotion,atservicersexpense,

within30daysofacquiringknowledgeoftheinaccuracy

notcollect

any

attorney

fees

or

other

charges

for

preparationorsubmissionofproofofclaimormotionfor

reliefthatislaterwithdrawnordeniedasaresultofa

substantialmisstatementastotheamountdue


6/25

Affidavits,SwornStatements,andDeclarationsMust: Bebasedonpersonalknowledgeorrelianceonbusiness

recordsas

allowed

under

FRE

Notcontainfalseorunsubstantiatedinformation,but

statementsbasedoninformationandbeliefareallowed

ifso

stated

Accuratelyidentifyaffiant/declarantbyname,employer,

andtitle

BesignedBYHANDanddated(signaturestampsandother

mechanicalsignaturesprohibitedexceptforelectronicfiling)


7/25

ProofsofClaim Servicersrequiredtoattachtoproofofclaimthe

LoanDocuments,whichinclude:

originalor

duplicate

of

note,

including

all

indorsements;

acopyofanymortgageordeedoftrust

(including,ifapplicable,evidenceofrecordation

in

applicable

land

records);

and

copiesofanyassignmentsofmortgageordeedoftrust

requiredtodemonstratetherighttoenforcethe

borrowersnoteunderapplicablestatelaw


8/25

ProofsofClaim Servicersmustalsoattachtoproofofclaim:

affidavitifnotehasbeenlostordestroyed

statementsetting

forth

basis

for

asserting

that

applicablepartyhasrighttoforeclose

musthaveprocedurestoensureserviceror

foreclosingentity

has

documented

enforceable

interestinnoteandmortgageunderstatelaw,or

isotherwiseaproperpartytotheforeclosureaction

OfficialForm10(AttachmentA)asrequiredby

BankruptcyRule

3001(c)(2)(C)

mustcomplywithallotherrequirements

inRule3001


9/25

BankruptcyMortgageRules Settlementimposessanctionseparatefromthatavailable

underBankruptcyRule3002.1(i)

ifservicerfailstoprovidepaymentchangenoticeasrequired

byRule3002.1(b),servicershallwaiveandnotcollectany

latechargeorotherfeesimposedsolelyasaresultofthe

borrowersfailure

to

timely

make

the

changed

payment

Ifservicerfailstotimelyprovidenoticeoffees,asrequired

by3002.1(c)andRule3002.1(g),thefeesaredeemedwaived

andmaynotbecollectedfromtheborrower

exceptionforindependentcharges feespaidbyservicer

thatareauthorizedbyborroweroradvancedbyservicer

fortaxes,HOAfees,liensorinsurance


10/25

StayReliefMotionsInChapter13cases,themotionpapersmust:

IncludeLoanDocumentsorstatethattheyareattached

toafiled

proof

of

claim

Statethebasisforthemovingpartysrighttoforeclose

Disclosewhetherdebtorisbeingevaluatedforaloss

mitigationoption

Disclosetermsofanytrialperiodorpermanentloan

modificationplanpendingattimeofmotion


11/25

StayReliefMotions InChapter13cases,themotionshallhaveattachedan

affidavit,swornstatementordeclarationsettingforth:

whetherthereareanyprepetitionorpostpetition

defaults

ifdefault,adescriptionofanydefault,andadetailed

itemizationof

all

amounts

owed,

the

prepetition

and

postpetitionarrearages,andeachfeeorchargeapplied

tosuchprepetitionamountorpostpetitionamount;and

anuptodatestatementofallamountsclaimedandthe

amountnecessarytocureanydefault


12/25

PaymentApplicationinCh.13

Cases Servicersmustensurepromptandproperapplicationof

paymentsmade

on

prepetition

arrearage

and

post

petition

paymentamounts

Debtoristobetreatedasbeingcurrentsolongasmaking

paymentsinaccordancewithconfirmedplanandanylater

effectivepayment

change

notices

Throughoutthecase,servicerisrequiredtoupdateitsrecords

toreflectpaymentsmadeduringcaseandwaiverofanyfeeas

requiredunder

Settlement


13/25

LoanModificationsforBankruptcyDebtors



14/25

PrincipalReductionEligibilityCriteria IndefaultorimminentriskofdefaultattimeofSettlement

Underwater

Ownershipofloan

NoFannie/FreddieorFHA/VA

Wells

Fargo,

Citi,

&

GMAC servicerownedloan

BankofAmerica&Chase

servicerownedloans

investorowned

loans

with

delegated

authority


15/25

FirstLienPrincipalReductions BankofAmerica

Mandatory

solicitation

of

certain

group

of

borrowers

(60daysdefaultasof1/31/12,andothercriteria)

Borrowersinbankruptcywillbesolicitedthroughtheir

counseliftheyarerepresented

Watchforthesesolicitationsandnotifyyourclients

WellsFargo,Chase,Citi,andAlly/GMAC

Notsubjecttosamesolicitationrequirementsas

Bankof

America

Policiesonsolicitingborrowersinbankruptcy

notyetdisclosed.


16/25

SecondLienPrincipalReductions BankofAmerica

Sending

solicitations

to

eligible

borrowers Completeforgivenessofloan

Optoutoffersthatforgiveliensofnonresponders

Borrowersinbankruptcyarebeingsolicited,including:

Debtors

with

confirmed

plans

to

strip

off

second

liens

Debtorswithentereddischargeorders

WellsFargo,Chase,Citi,andAlly/GMAC

SecondlienmodificationprogramsvarybutprimarilyoccurwhenafirstlienismodifiedunderSettlement

bythemoranothersettlementbank


17/25

RefinanceProgram Mandatorysolicitationrefinanceprogramforservicer

owned

first

liens

of

CURRENT

underwater

borrowers.

Refinanceisreallystreamlinedmodificationtoreduce

interestrate.

Borrowerswhoarecurrentlyinbankruptcyorwhohave

beenin

bankruptcy

during

the

last

24

months

are

NOT

eligibleforthisprogram andcannotapply.


18/25

Enforcement



19/25

EnforceablebyPrivateParties? Notdirectlyenforceablebyborrowers/debtors

Failuretocomplywiththestandardsmayprovideadditional

supportforrequestbydebtorsfor:

sanctionsinadditiontothoseavailableunder

BankruptcyRules

3001(c)(2)(D)

and

Rule

3002.1(i)

denialofstayreliefforfailuretoshowcause

undersection363(d)(1)

disallowanceofclaimundersection502(b)(1)


20/25

EnforceablebyPrivateParties? Violationssupportclaimsthatnoncomplyingservicers

areviolatingaclearindustrystandard,givingrisetoclaims

basedon:

stateUDAPlaws

dutyofgoodfaithandfairdealing

SeeWigodv.WellsFargoBank,N.A.,673F.3d547(7thCir.2012);InreHinson,2012WL1354807(Bankr.E.D.N.C.Apr17,2012)

Courtsmay

apply

equitable

principles

to

deny

relief

requestedbyservicersthatrelatestoviolationsofstandards


21/25

Enforcement:Metrics Metricsmeasurecompliancewithservicingstandards

Translateservicing

standards

into

defined

activities

thatwillbemeasuredortested

Eachmetrichasanacceptableerrorrate(often5%)

todetermineifpenaltycanbeimposed

Penaltiesof$1millionforfirstviolation

BanksInternalReviewGroupdoesinitialworkon

servicing;auditedbyprofessionalfirmhiredby

NationalMonitor


22/25

Enforcement:Credits Creditsmeasuredollarstoward$17billion

Settlementrelief

Differentamountsofcreditfordifferentactivities

Principalreductions

Refinances

Short

sales

Antiblightmeasures

Andmanymore

Differentcreditamountsfordifferentactivities

Example1:

firstlien

principal

reduction

of

servicer

owned

loan

is

$1=$1creditbutifinvestorowned$1=$0.40.

Example2: $0.10onthedollarcreditforforgivingsecondliensthat

areover180daysdelinquent


23/25

WheretoReportProblems

Nationwide:

NACBAofcourse!

TheUSTrusteeprogram

Aparty

to

Settlement

OntheMonitoringCommittee

JosephSmith,theNationalMonitor


24/25

WheretoReportProblems


25/25

WheretoReportProblemsInCalifornia:

Email

the

California

Monitor

Program:[email protected]

Weworkindividualcasestohelppeople

Otherstateswithinterestingorprogressivehelpsystemsfor

Settlementinclude:

IllinoisAGinhouseloanmodificationunit

MassachusettsSpecial

Counsel

for

Settlement

Arizonacobrandingpilot