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I have a question about HAMP mortgage requests in a Chapter

Resolved Question:

I have a question about HAMP mortgage requests in a Chapter 13 bankruptcy.

https://www.hmpadmin.com//portal/resources/docs/counselor/faqs/hampbankruptcyfaqsenglish.pdf

The FAQs for the chapter 13 state:

4. Can I be considered for a HAMP modification if I am in bankruptcy?
Yes, if you are in an active (open) chapter 7 or chapter 13 bankruptcy case, you must be considered for a HAMP modification if you, your attorney, or the bankruptcy trustee submits a request to the servicer. With your permission, the bankruptcy trustee may contact the servicer to request a HAMP modification.

The state of Utah has a model chapter 13 plan found here:
http://www.utb.uscourts.gov/clerks_office/form/2012ch13_model_plan_eff_jul012012.pdf

I am wondering if I can simply include a proposed HAMP payment at 2% interest over 40 years as part of the plan in section 6B.

I want to include a proposed HAMP payment under section 6B of the Utah chap 13 plan.
"Secured Claims Not Subject To 11 U.S.C. § 506: Pursuant to § 1325(a)(9), the following claims are not subject to “cramdown” under § 506. The allowed secured claim of such creditor shall be the secured amount listed in the allowed proof of claim, unless modified by an amended claim or court order."

If the creditor doesn't object to my proposed new HAMP house payment, would the court automatically approve my new house payment?
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  Fran-mod replied 2 years ago.
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Expert:  JoeLawyer replied 2 years ago.
Hello.

I am wondering if I can simply include a proposed HAMP payment at 2% interest over 40 years as part of the plan in section 6B.


Unlikely, though I have never seen anyone try that. One problem you might have is that creditors being treated in a Chapter 13 Plan have to be paid over the Plan life, so trying to use a 36- to 60-month Plan to restructure a long-term mortgage note into a 40 year term being paid outside the Plan would probably be objected to by either the Trustee, the creditor, or both. And, even absent an objection, the court, sua sponte, may refuse to confirm.

Also, 11 U.S.C. 506(b) states that "To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement or State statute under which such claim arose." (emphasis added). So, since the agreement provides an interest rate (I am assuming), I do not believe the Plan can modify that rate.

Finally, you can read In re Rodriguez, 396 B.R. 436 (2008), HERE, in which the court states "A chapter 13 plan may not reduce the lender's claim to the value of the collateral under § 506 nor may the plan alter the contractual interest rate." Granted, the Rodriguez court is in Texas so the ruling is not binding on Utah, but it is nonetheless persuasive and indicative of the federal disposition.

If the creditor doesn't object to my proposed new HAMP house payment, would the court automatically approve my new house payment?

 

Possibly, though again I would go with "unlikely at best." Even if the creditor does not object, the trustee has to report to the court whether the Plan meets the criteria to allow it to be confirmed by the court, and I think you might have a tough time getting such a provision past the trustee since it is probably in violation of 506(b).

 

But, student loans also supposedly could not be modified with Chapter 13, but then the U.S. Supreme Court came out with the Espinosa (130 S.Ct. 1367 (2010)) decision (HERE) in which the Supreme Court essentially said the confirmation order is binding, so if you could get such a provision confirmed, it would probably be binding. But, again I am doubtful about being able to get it confirmed in the first place.

 

ANOTHER APPROACH?

 

Another approach might be to use the recent Homeowners in Bankruptcy Relief Plan if your mortgage lender is one of the lenders therein. Essentially, on February 9, 2012, the U.S. Attorney General announced that it and 49 states had reached a settlement with the nation's 5 largest mortgage servicers to resolve mortgage servicing, foreclosure, and bankruptcy abuses allegedly perpetrated by those servicers. On April 5, 2012, the settlement was approved by the U.S. District Court for D.C. The banks are required to spend at least $17 billion on various forms of relief for homeowners. Homeowners may be eligible for modification, forbearance or forgiveness of principal, short sale, waiver of deficiency balance, and other relief.

 

So, if you're dealing with one of the mortgage servicers below, you can call the corresponding phone number to try to get something worked out:

Bank of America(NNN) NNN-NNNN/p>

Chase(NNN) NNN-NNNN/p>

Citi(NNN) NNN-NNNN/p>

Ally/GMAC(NNN) NNN-NNNN/p>

Wells Fargo(NNN) NNN-NNNN/p>

 

See also http://nationalmortgagesettlement.com/

 

and https://www.mortgageoversight.com/

 

and http://www.justice.gov/ust/eo/public_affairs/consumer_info/nms/

 

Believe it or not, this does seem to be working. GMAC contacted me last week (THEY contacted ME) and asked to reduce a Chapter 13 client's second mortgage balance from $94,000 to $67,000 principal and reduce the interest rate from 9.X% to 3.X%. I said "Uh... where do we sign?" We signed the "Non-HAMP Mortgage Modification" form they faxed me, and I filed a Motion to Modify Secured Debt with the court, seeking court approval of the agreement (which I strongly expect to get).

 

Good luck,

Joe

 

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