NEW FEDERAL LOAN MODIFICATION RULES

NOW WORK WITH BANKRUPTCY LAWS - PART 2 -

HOW CHAPTER 13 AND HAMP CAN WORK TOGETHER

Because most homeowners I meet with in Central Florida need a mortgage modification and bankruptcy relief for mortgages and automatic stay protection from collection of other debts, new HAMP rules will make it easier for homeowners to get both types of relief at the same time. I believe this will really give homeowners a better chance to save their homes and resolve other debt problems through Chapter 13 Bankruptcy.

These new rules make Chapter 13 Bankruptcy a much better option to seek mortgage modification and stay other creditors at the same time.  In addition to an affordable 1^st mortgage payment after being modified, the Chapter 13 case can also allow for the “stripping off” of second mortgages, lowering car loan payments and minimal if any payment to unsecured credit card debts.  A homeowner who files for Chapter 13 Bankruptcy to reorganize may emerge from the case with a modified first mortgage, a second mortgage that is gone forever and be otherwise debt free, including paid off cars, upon plan completion and discharge. 

With the ability to go to mediation while in an active Chapter 13 case, homeowners are really getting a boost in the mortgage modification process and much better potential to adjust and discharge other debts so they emerge successfully from their case and save their home.

ORLANDO BANKRUPTCY COURT STARTS MORTGAGE MEDIATION PROGRAM

The Orlando Division of the U.S. Bankruptcy Court for the Middle District of Florida has launched a Mortgage Mediation Program to bring mortgage lenders to the negotiation table and allows for sanctions against mortgage lenders who refuse to participate.  After filing a Chapter 13 bankruptcy case, a Debtor can then file a Motion for Mediation to begin negotiating the mortgage debt and a modification of that mortgage.  The Plan will begin with some payment on the mortgage while all other debt collection actions are automatically stayed.

The hope of the Court’s Program is to end the needless shuffling and losing of documents that have been supplied several times by the Homeowner to the mortgage company and get down to the actual negotiations of what might be possible.  With Bankruptcy Court supervision of the process, the mortgage companies may start to get serious about helping homeowners keep their homes. As a Consumer Bankruptcy Attorney in Central Florida and Greater Orlando I know this will be the best chance to engage in negotiations to modify a first mortgage on a primary homestead.  

I applaud our Orlando Bankruptcy Judges, Honorable Karen Jennemann and Honorable Arthur Briskman for providing a procedural mechanism in Chapter 13 cases that at least opens the door to saving someone's home and attempting good faith negotiations with mortgage creditors.

NEW FEDERAL LOAN MODIFICATION RULES

NOW WORK WITH BANKRUPTCY LAWS

Beginning on June 1, 2010, new HAMP rule changes will now make it possible to seek mortgage modification while in an active bankruptcy case.  Under existing U.S. Treasury rules, mortgage lenders are not required to consider modifications under the federal government’s Making Home Affordable Program (HAMP) while a homeowner is in an active bankruptcy case; however, these rules are about to change and they will prevent lenders from saying no to mortgage modification just because a homeowner is in a bankruptcy case. 

This rule change will make it much easier for homeowners to seek modification of their mortgage and save their home while adjusting and discharging other debts in a single proceeding.  The new HAMP rules also allow use of the schedules filed in the bankruptcy case to be used as the modification application and other streamlined procedures that will make it easier to communicate with lenders. It also gives the homeowner the added protection of a Court Order approving loan modifications to prevent future mortgage problems caused by the mortgage company.