Mortgage Issues: Key Issues in Chapter 13 - sbli-inc.org 410 ––Part1Part 1 ––Identifying the...

Mortgage Issues inMortgage Issues inCh t 13 B k tCh t 13 B k tChapter 13 BankruptcyChapter 13 Bankruptcy

Recent Mortgage Servicing RegulationsRecent Mortgage Servicing Regulations

Consumer Financial Protection Bureau (CFPB)Periodic statements for residential mortgage loans12 C.F.R. §1026.41 - effective July 18, 2015

S ti 41(d)(3) R i di l f i lSection 41(d)(3) Requires disclosure of any partialpayments that were sent to a suspense or unapplied fundsaccount.

Section 41(d)(4) Requires all transaction activity includingpayments received and applied, payments received and held insuspense account, imposition of any fees or charges be disclosedin the statement.


Periodic statements for residential mortgage loans

Section 41(e)(5) Requirement to send periodic statement doesnot apply to consumers in bankruptcy.Wi h i f h d b h iWith respect to any portion of the mortgage debt that is notdischarged, the servicer must resume sending periodicstatements at the earliest of the case is dismissed, case is closedor consumer receives a discharge.

This portion is subject to further rulemaking, which willlikely make periodic statements required in bankruptcy.


Requirements under Real Estate Settlement Procedures Act

12 CFR 1026.36(c)(1) Servicer to credit the payment tothe borrower’s account as of the date the servicer receives it

12 CFR 1024.34(a) Servicer required to pay taxes,insurance premiums and other charges by the due date.



12 CFR 1024.36 The mortgage servicer must:

• Acknowledge receipt within 5 business days• Acknowledge receipt within 5 business days.• Respond in writing to the information request within 30

business days.



12 CFR 1024.36 A Request for Information (“RFI”)formerly called a Qualified Written Request (“QWR”), mustinclude:include:• The borrower's name,• Information that allows the servicer to identify the

borrower's account and the requested information relatesto the borrower's mortgage loan.

The RFI may be made by borrower or their agent.

Revised Proof of ClaimRevised Proof of ClaimF 410 d 410AF 410 d 410AForms 410 and 410AForms 410 and 410A

EffectiveEffective December 1, 2015December 1, 2015

Form 410Form 410Form 410Form 410

Form 410Form 410P t 1P t 1Part 1Part 1

Identifying the ClaimIdentifying the Claim

FormForm 410410 –– Part 1Part 1 –– Identifying the ClaimIdentifying the Claim

Account number is not asked for until the second pageAccount number is not asked for until the second page

As with Form B10, there are boxes to identify:As with Form B10, there are boxes to identify:Who is the current creditor?Who is the current creditor?Where should notices be sent?Where should notices be sent?Where should payments be sent?Where should payments be sent?Is this an amended claim?Is this an amended claim?Is there a competing claim filed by someone else?Is there a competing claim filed by someone else?Uniform Claim Identifier (no longer in its own box)Uniform Claim Identifier (no longer in its own box)

Box 1 is for identifying the creditorBox 1 is for identifying the creditor

Form 410Form 410 –– Part 1Part 1 –– Identifying the ClaimIdentifying the Claim

Box 1 is for identifying the creditorBox 1 is for identifying the creditor

Other namesOther namesNot for transfersNot for transfersBut could include a name changeBut could include a name change

Box 2 is for indicating whether the claim has beenBox 2 is for indicating whether the claim has been


Box 2 is for indicating whether the claim has beenBox 2 is for indicating whether the claim has beentransferred or acquired, and identifying thetransferred or acquired, and identifying thetransferortransferor

This is newThis is new


Box 3 is for indicating addresses where notices andBox 3 is for indicating addresses where notices andpayments should be sentpayments should be sent

Notice that UCI is no longer in a separate boxNotice that UCI is no longer in a separate box

Box 4 is for indicating whether claimant is filing anBox 4 is for indicating whether claimant is filing an


Box 4 is for indicating whether claimant is filing anBox 4 is for indicating whether claimant is filing anamended claimamended claim

Box 5 is for indicating whether claimant knows ifBox 5 is for indicating whether claimant knows if


o 5 s o d c g w e e c owso 5 s o d c g w e e c owsanybody else has filed a POC for this claim (e.g., theanybody else has filed a POC for this claim (e.g., thedebtor)debtor)

Form 410Form 410Part 2Part 2

I f ti Ab t th Cl iI f ti Ab t th Cl iInformation About the ClaimInformation About the ClaimAs of the Date the Case Was FiledAs of the Date the Case Was Filed

Form 410Form 410 –– Part 2Part 2 –– Claim InformationClaim InformationAs with Form B10, there are boxes to identify inAs with Form B10, there are boxes to identify inPart 2:Part 2:

Account number (last four digits only)Account number (last four digits only)Basis of the claim (e.g., money loaned)Basis of the claim (e.g., money loaned)Nature of the collateral (if secured)Nature of the collateral (if secured)Instructions to attach evidence of perfectionInstructions to attach evidence of perfectionappears on the form instead of the instructionsappears on the form instead of the instructionsExtent a claim is securedExtent a claim is securedAmount of any arrearsAmount of any arrearsInterest rate (no longer in its own box)Interest rate (no longer in its own box)

Box 7 is for providing the amount of the claimBox 7 is for providing the amount of the claim

Form 410Form 410 –– Part 2Part 2 –– Claim InformationClaim Information

o 7 s o p ov d g e ou o e co 7 s o p ov d g e ou o e c

Question about whether amount includes interestand fees and instruction to provide itemizedstatement

Box 8 is for providing the basis of the claim (e.g.,Box 8 is for providing the basis of the claim (e.g.,


o 8 s o p ov d g e b s s o e c (e g ,o 8 s o p ov d g e b s s o e c (e g ,money loaned)money loaned)

Instruction: “AttachInstruction: “Attach redacted copies of anyredacted copies of anydocuments supporting the claim required bydocuments supporting the claim required byBankruptcy Rule 3001(cBankruptcy Rule 3001(c).”).”

Box 9 is for providing information about securedBox 9 is for providing information about securedclaims:claims:

Nature of the property securing the claim (e.g., aNature of the property securing the claim (e.g., amotor vehicle or real estate)motor vehicle or real estate)


Basis for perfection (and attach documents)Basis for perfection (and attach documents)Value of the property securing the claimValue of the property securing the claimAmount of the arrears (i.e., amount to cure anyAmount of the arrears (i.e., amount to cure anydefault as of the date of petition)default as of the date of petition)Annual Interest Rate (fixed or variable)Annual Interest Rate (fixed or variable)

Box 10 is for providing information in the event theBox 10 is for providing information in the event the


o 0 s o p ov d g o o e eve eo 0 s o p ov d g o o e eve eclaim is based on a leaseclaim is based on a lease

Form 410Form 410P t 3P t 3Part 3Part 3

Declaration PageDeclaration Page

Form 410Form 410 –– PartPart 33 –– Declaration PageDeclaration PagePart 3 replaces Section 8 of Form B10, andPart 3 replaces Section 8 of Form B10, and includesincludessignificant changessignificant changes

Part 3 now includes a box for attorneysPart 3 now includes a box for attorneys

Section 8 of former B10 includes a declaration underSection 8 of former B10 includes a declaration underpenalty of perjury, that the information provided inpenalty of perjury, that the information provided inthe claim is true and correct to the best of the filer’sthe claim is true and correct to the best of the filer’sknowledge, information and reasonable beliefknowledge, information and reasonable belief

Form 410Form 410 –– Part 3Part 3 –– Declaration PageDeclaration PageTheThe newnew declaration is broken into 3 parts:declaration is broken into 3 parts:

Signature serves as an acknowledgment thatSignature serves as an acknowledgment thatdebtor has received credit for payments receiveddebtor has received credit for payments receivedII hhave examined information in POC and have aave examined information in POC and have areasonable belief information is true and correctreasonable belief information is true and correctreasonable belief information is true and correctreasonable belief information is true and correctI declare under penalty of perjury that theI declare under penalty of perjury that theforegoing is true and correct (i.e., not that theforegoing is true and correct (i.e., not that theinformationinformation isis true and correct, but that the debtortrue and correct, but that the debtorhas received proper credit, the information hashas received proper credit, the information hasbeen examined, and there is a reasonable beliefbeen examined, and there is a reasonable beliefabout the accuracy of the info)about the accuracy of the info)

Form 410AForm 410AMortgage Proof of ClaimMortgage Proof of ClaimMortgage Proof of ClaimMortgage Proof of Claim

AttachmentAttachment

Form 410AForm 410A –– Mortgage POC AttachmentMortgage POC Attachment•• Replaces POC AttachmentReplaces POC Attachment•• Only required if loan is secured by principalOnly required if loan is secured by principal

residenceresidence•• Detailed payment history that can be automatedDetailed payment history that can be automated

should be shown on formshould be shown on form•• Disclosure requirements should be uniformDisclosure requirements should be uniform

nationwide; local variations should be prohibitednationwide; local variations should be prohibited•• Amount of regular monthly mortgage payment asAmount of regular monthly mortgage payment as

of the petition date should be includedof the petition date should be included•• Calculation of the total claim should be shownCalculation of the total claim should be shown

Form 410AForm 410A –– Loan HistoryLoan History

The loan history shows:The loan history shows:

When payments were dueWhen payments were dueWhen the debtor made paymentsWhen the debtor made paymentsHow payments were applied or placed in suspenseHow payments were applied or placed in suspenseWhen fees and charges were incurredWhen fees and charges were incurredWhat the balances were for various componentsWhat the balances were for various componentsof the loan after amounts were received or feesof the loan after amounts were received or feesand charges were incurredand charges were incurred

Form 410AForm 410A –– Loan HistoryLoan HistoryNew form requires home mortgage claimant toNew form requires home mortgage claimant toprovide loan history starting with the first date ofprovide loan history starting with the first date ofdefaultdefault

This is the first date on which the borrower failedThis is the first date on which the borrower failedto make a payment in accordance with the termsto make a payment in accordance with the termsof the note and mortgage unless the note wasof the note and mortgage unless the note wassubsequently brought current with no principal,subsequently brought current with no principal,interest, fees, escrow payment, or other chargesinterest, fees, escrow payment, or other charges“immediately payable”“immediately payable”

Form 410AForm 410A –– LoanLoan HistoryHistory

Query:Query: What if a borrower reinstates by paying allWhat if a borrower reinstates by paying allthe delinquent payments and late charges, but thethe delinquent payments and late charges, but thefee for an inspection performed while the loan wasfee for an inspection performed while the loan wasdelinquent is later assessed? Or what if the debtordelinquent is later assessed? Or what if the debtordelinquent is later assessed? Or what if the debtordelinquent is later assessed? Or what if the debtordoes not pay the late charge and it remains the onlydoes not pay the late charge and it remains the onlyfee outstanding for several years?fee outstanding for several years?

Form 410AForm 410A –– Loan HistoryLoan History•• Loan history will enable debtor to (better) seeLoan history will enable debtor to (better) see

basis for mortgage and arrearage amountsbasis for mortgage and arrearage amounts

•• Goal is to facilitate resolution of disputes aboutGoal is to facilitate resolution of disputes aboutmortgage amounts (and provide basis formortgage amounts (and provide basis forobjections to claim in others)objections to claim in others)

•• New form has advantage of being in format thatNew form has advantage of being in format thatcan be automatedcan be automatedoo Current B10A must be completed manuallyCurrent B10A must be completed manuallyoo Larger servicers believe they can automate the formLarger servicers believe they can automate the formoo Credit unions are apparently on the same platformCredit unions are apparently on the same platform

Form 410AForm 410A –– Loan HistoryLoan History•• Pending amendments of Rule 9009 would requirePending amendments of Rule 9009 would require

uniform implementation of the new form in alluniform implementation of the new form in alldistricts, thereby allowing creditors to developdistricts, thereby allowing creditors to developuniversally applicable software form completionuniversally applicable software form completion

•• Black Knight,Black Knight, CorelogicCorelogic and AACER are workingand AACER are workingon software solutionson software solutions

Form 410AForm 410A –– Loan HistoryLoan History•• New form requires disclosure of all information onNew form requires disclosure of all information on

the current Attachment A, but in a format that isthe current Attachment A, but in a format that ismore transparent and capable of being more easilymore transparent and capable of being more easilyand accurately completedand accurately completed

•• New form adds information old form does notNew form adds information old form does notinclude:include:oo Statement of current mortgage paymentStatement of current mortgage paymentoo Calculation of total amount of the debt (thoughCalculation of total amount of the debt (though

that was required on former Form B10)that was required on former Form B10)

Form 410AForm 410A –– Part 1: Mortgage and Case InfoPart 1: Mortgage and Case Info•• Case NumberCase Number•• Names of Debtor 1 andNames of Debtor 1 and

Debtor 2Debtor 2•• Last 4 digits of numberLast 4 digits of number

used to identify theused to identify theused to identify theused to identify themortgagemortgage

•• Creditor’s nameCreditor’s name•• Servicer’s name, if applicableServicer’s name, if applicable•• Method used to calculate interest on the debt (i.e.,Method used to calculate interest on the debt (i.e.,

fixed accrual, daily simple interest, or otherfixed accrual, daily simple interest, or othermethod)method)

•• Principal balance on thePrincipal balance on thedebtdebt

•• Interest due and owingInterest due and owing•• Any fees or costs owedAny fees or costs owed

under the note orunder the note or

Form 410AForm 410A –– Part 2: Total Debt CalculationPart 2: Total Debt Calculation

under the note orunder the note ormortgage andmortgage andoutstanding as of theoutstanding as of thedatedate of the bankruptcyof the bankruptcy filingfiling

•• Any escrow deficiency for funds advancedAny escrow deficiency for funds advancedoo Amount of any prepetition payments for taxes and insuranceAmount of any prepetition payments for taxes and insurance

servicer or mortgagee made out of its own funds and for which itservicer or mortgagee made out of its own funds and for which ithas not been reimbursedhas not been reimbursed

•• Also disclose the totalAlso disclose the totalamount of funds onamount of funds onhandhand

•• This amount is the totalThis amount is the totalof the following ifof the following if


of the following, ifof the following, ifapplicable:applicable:oo Positive escrowPositive escrow

balancebalanceoo UnappliedUnapplied fundsfundsoo Amounts held in suspense accountsAmounts held in suspense accounts

To determine the total debtTo determine the total debtdue:due:

Total the amounts owedTotal the amounts owedThen subtract the totalThen subtract the total


+++

funds on handfunds on handInsert this amountInsert this amountunderunder Total debtTotal debt

–=

•• Insert the amount ofInsert the amount ofprincipal and interestprincipal and interestportion of all prepetitionportion of all prepetitionmonthly installmentsmonthly installmentsthat remain outstandingthat remain outstanding

Form 410AForm 410A –– Part 3: ArrearagePart 3: Arrearage

that remain outstandingthat remain outstandingas of the petition dateas of the petition date

•• TheThe escrow portionescrow portion of prepetition monthlyof prepetition monthlyinstallment payments should NOT be included ininstallment payments should NOT be included inthis figurethis figure

•• Insert amount of feesInsert amount of feesand costs outstandingand costs outstandingas of the petition dateas of the petition date

•• This amount shouldThis amount should


equal theequal the Fees/ChargesFees/Chargesbalancebalance as shown in theas shown in thelast entry in Part 5,last entry in Part 5,Column PColumn P

•• Insert any escrowInsert any escrowdeficiency for fundsdeficiency for fundsadvancedadvanced

•• This amount should beThis amount should be


the same as amount ofthe same as amount ofescrow deficiency statedescrow deficiency statedin Part 2in Part 2

•• The escrow deficiency amount (i.e., the negativeThe escrow deficiency amount (i.e., the negativebalance in the escrow account on the day the casebalance in the escrow account on the day the casewas filed) is ordinarily the starting balance for thewas filed) is ordinarily the starting balance for the

Form 410AForm 410A –– Part 3: ArrearagePart 3: ArrearageIMPORTANTIMPORTANT

escrow analysisescrow analysis

•• Although not spelled out in the instructions, it hasAlthough not spelled out in the instructions, it hasbeen determined that because the escrowbeen determined that because the escrowdeficiency is being listed on a separate line in Partdeficiency is being listed on a separate line in Part3, the escrow account needs to be brought up to3, the escrow account needs to be brought up tozero prior to running the escrow analysiszero prior to running the escrow analysis

•• This may require a programming change for theThis may require a programming change for thefirst escrow analysis run after the filing of afirst escrow analysis run after the filing of abankruptcy casebankruptcy case

Form 410AForm 410A –– Part 3: ArrearagePart 3: ArrearageIMPORTANTIMPORTANT

•• Insert the projectedInsert the projectedescrow shortage as ofescrow shortage as ofthe date the bankruptcythe date the bankruptcypetition was filedpetition was filed(should be based on and(should be based on and


(should be based on and(should be based on andconsistent with escrowconsistent with escrowanalysis performed as ofanalysis performed as ofthe date of the petition under Rule 3001)the date of the petition under Rule 3001)

•• Calculation shouldCalculation shouldinclude 1/6 ofinclude 1/6 ofanticipated annualanticipated annualcharges against thecharges against theescrow account or 2escrow account or 2


escrow account or 2escrow account or 2months of the monthlymonths of the monthlypro rata installmentspro rata installmentsduedueby the borrower as calculated under RESPAby the borrower as calculated under RESPAguidelinesguidelines

•• The shortage is theThe shortage is thedifference between thedifference between theactual amount in theactual amount in theescrow account andescrow account andthe required amountthe required amount


www.maxconsumerdefenseacademy.com

the required amountthe required amount

•• Amount actually heldAmount actually heldshould equal the amountshould equal the amountof a positive escrow account balance as shown inof a positive escrow account balance as shown inthe last entry in Part 5, Column Othe last entry in Part 5, Column O

•• The amount actuallyThe amount actuallyheld should also equalheld should also equalending balance forending balance forprevious escrowprevious escrowcomputation period oncomputation period on


computation period oncomputation period onescrow analysisescrow analysis

IMPORTANTIMPORTANT

Escrow portion of missed prepetition mortgageEscrow portion of missed prepetition mortgagepayments will not be recovered as a separate line itempayments will not be recovered as a separate line item

•• Insert the amount ofInsert the amount offunds on hand as of thefunds on hand as of thepetition datepetition date

•• Subtract this numberSubtract this number


+++–

from the total amountsfrom the total amountsdue listed in Part 3 todue listed in Part 3 toarrive at thearrive at the TotalTotalPrepetition ArrearagePrepetition Arrearage

=

•• Insert principal andInsert principal andinterest paymentinterest paymentamount of monthlyamount of monthlypayment as of petitionpayment as of petition

Form 410AForm 410A –– Part 4: MonthlyPart 4: Monthly MtgMtg PaymentPayment

p y pp y pdatedate

•• Insert monthly escrowInsert monthly escrowportion of monthlyportion of monthlypaymentpayment

•• Amount should take intoAmount should take into


account receipt of anyaccount receipt of anyamounts claimed inamounts claimed inPart 3 as escrowPart 3 as escrow deficiency and projected escrowdeficiency and projected escrowshortageshortage

•• Therefore, the POCTherefore, the POCshould assume that theshould assume that theescrow deficiency andescrow deficiency andshortage will be paidshortage will be paid


shortage will be paidshortage will be paidthrough the plan andthrough the plan andprovide for a credit ofprovide for a credit ofthe same amount whenthe same amount whencalculating postcalculating post--petition escrow installmentpetition escrow installmentpaymentspayments

•• Add any amounts forAdd any amounts forprivate mortgageprivate mortgageinsuranceinsurance

Add li f ddi i lAdd li f ddi i l


•• Add lines for additionalAdd lines for additionalamounts included inamounts included inmonthly payment suchmonthly payment suchas credit life insuranceas credit life insurance

•• TheThe Total MonthlyTotal MonthlyPaymentPayment is the sum ofis the sum ofthe principal andthe principal andinterest monthlyinterest monthly


++

interest, monthlyinterest, monthlyescrow, PMI, andescrow, PMI, andother amounts (e.g.,other amounts (e.g.,credit life insurance)credit life insurance)

=

Form 410AForm 410A –– Part 5: Loan Payment HistoryPart 5: Loan Payment History

Loan Payment History from First Date of DefaultLoan Payment History from First Date of Default


Beginning with the First Date of Default, enter:Beginning with the First Date of Default, enter:•• The date of the default in Column AThe date of the default in Column A•• Amount incurred in Column DAmount incurred in Column D•• Description of the charge in Column EDescription of the charge in Column E•• Principal balance, escrow balance, and unapplied orPrincipal balance, escrow balance, and unapplied or

suspense fund balance as of that date in Columns M, O,suspense fund balance as of that date in Columns M, O,and Q respectivelyand Q respectively

For:For:

1)1) All subsequently accruing installment paymentsAll subsequently accruing installment payments2)2) Any subsequent payment receivedAny subsequent payment received3)3) Any fee, charge, or amount incurredAny fee, charge, or amount incurred


4)4) Any escrow charge satisfied since the date of firstAny escrow charge satisfied since the date of firstdefaultdefault

Enter the information in date of order, showing:Enter the information in date of order, showing:

•• Description of the transactionDescription of the transaction•• Contractual due dateContractual due date•• How the amount was applied or assessedHow the amount was applied or assessed


•• The resulting principal balance, accrued interestThe resulting principal balance, accrued interestbalance, escrow balance, outstanding fees orbalance, escrow balance, outstanding fees orcharges balances, and the total unapplied fundscharges balances, and the total unapplied fundsheld or in suspenseheld or in suspense


•• Column N is for showing the accrued (i.e.,Column N is for showing the accrued (i.e.,g (g (running) interest balance for daily simple interestrunning) interest balance for daily simple interestloansloans


•• Principal balance, escrow balance, and unappliedPrincipal balance, escrow balance, and unappliedp ppp ppor suspense fund balance on the date theor suspense fund balance on the date thebankruptcy case was filed should be the figures inbankruptcy case was filed should be the figures inthe last row of the history for Columns M, O, andthe last row of the history for Columns M, O, andQ respectivelyQ respectively


•• If the amount at the bottom of Column O isIf the amount at the bottom of Column O isnegative, this is the amount of the escrownegative, this is the amount of the escrowdeficiency to be entered in Parts 2 and 3 of Formdeficiency to be entered in Parts 2 and 3 of Form410A410A

•• The requirement to produce a history back to theThe requirement to produce a history back to the“first date of default” could mean servicer must go“first date of default” could mean servicer must goback several yearsback several yearsoo If loan has been transferred, the transferee willIf loan has been transferred, the transferee will

need detailed information about any fees orneed detailed information about any fees or

Form 410AForm 410A –– Servicer ChallengesServicer Challenges

need detailed information about any fees orneed detailed information about any fees orcosts incurred prior to the transfer of loancosts incurred prior to the transfer of loan

oo Otherwise, fees and costs assessed beforeOtherwise, fees and costs assessed beforetransfer need to be waivedtransfer need to be waived

oo Similarly, if loan is contractually delinquent asSimilarly, if loan is contractually delinquent asof transfer date, transferee will need a detailedof transfer date, transferee will need a detailedhistory going back to the first date of defaulthistory going back to the first date of default

oo Otherwise, loan will need to be brought currentOtherwise, loan will need to be brought currentat least through transfer dateat least through transfer date

Form 410AForm 410A –– Servicer ChallengesServicer Challenges

at least through transfer dateat least through transfer date

•• The requirement to bring escrow account up toThe requirement to bring escrow account up tozero before running first postzero before running first post--petition escrowpetition escrowanalysis will require programming that is uniqueanalysis will require programming that is uniquefor borrowers in bankruptcyfor borrowers in bankruptcy

•• Notice of Final Cure PaymentNotice of Final Cure Payment -- Form 4100NForm 4100N

•• Response to Notice of Final CureResponse to Notice of Final Cure PaymentPayment -- FormForm4100R4100R

New Director’s FormsNew Director’s Forms

•• Director’sDirector’s FormsForms are issued under Bankruptcyare issued under BankruptcyRule 9009 byRule 9009 by thethe Administrative Office of theAdministrative Office of the U. S.U. S.Courts. The use of Director’s FormsCourts. The use of Director’s Forms is optionalis optionalbut maybut may be required by localbe required by local rulesrules or generalor generalorders.orders.

The Snares of N.C.G.S §45-91

Since 2008, N.C.G.Ss §45-91 has laid a doublesnare for consumer home loan lenders.

State Law ExampleState Law Example

Failure to either assess expenses againstconsumer borrowers within 45 days after they areincurred or to bill the borrowers 30 days afterassessment and §45-93(3) means a lender waivesthem forever.

The Snares of N.C.G.S §45-91The law applies even if a consumer borrower is inbankruptcy. In re Saeed, No. 10-10303, 2010 Bankr.LEXIS 3267 (U.S. Bankr. M.D.N.C. Sep. 17, 2010).


S 3 67 (U.S. a . . .N.C. Sep. 7, 0 0).

The automatic stay does not preclude sending thisnotice, as it is not an attempt to collect, but sent forinformational purposes. In re Hillmon, No. 11-80303, 2011 Bankr. LEXIS 5536 (U.S. Bankr.M.D.N.C. Oct. 26, 2011)

The Snares of N.C.G.S §45-91

Failure to waive untimely assessed or noticed feeswithin 30 days of a request for correction can


within 30 days of a request for correction, canresult in imposition of actual damages andattorney’s fees.

Thanks to:Thanks to:

Contact InformationContact Information

Recentand

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October

3,2015-Loan

originationand

Mortgage

LenderLicensing(changed

fromA

ugust1,2015by

CFPB

)

12C

FR1024.17(e)

TransferofServicingrequirem

ents

12C

FR1024.17(f)-(i)Escrow

shortage,surplusanddeficiency

requirements

ProposedA

mendm

entsto

Mortgage

ServicingR

ulesunder

Real

Estate

Settlement

ProceduresAct(R

egulationX

)andthe

Truth

inL

endingA

ct(Regulation

Z)

Com

mentperiod

endedM

arch2015.

Proposedam

endmentsinclude:

Ageneral

definitionof

delinquency-a

borrower

anda

borrower’s

mortgage

loanobligation

aredelinquentbeginning

onthe

datea

paymentsufficientto

coverprincipal,

interest,and,ifapplicable,escrow,becom

esdueand

unpaid.

Require

servicersto

meetthe

lossm

itigationrequirem

entmore

thanonce

ina

lifeof

aloan

forborrowersw

hobecom

ecurrentaftera

delinquencyR

equireservicers

tosend

modified

periodicstatem

entsto

consumers

who

havefiled

forbankruptcy

with

contentvaryingdepending

onw

hethertheborrow

erisin

aC

hapter7or

13.

Mortgage

Proofof

Claim

Attachm

ent—R

ule3001(c)(2)(C

)and

OfficialForm

410AW

ithperm

issionofJohn

Rao

Bankruptcy

Rule

3001(c)(2)(C)

requiresthe

mortgage

creditorto

attachto

itsproof

ofclaim

theM

ortgageProofofC

laimA

ttachmentform

. 1Theform

instructsthe

creditortodisclose

thecom

ponentsof

thetotal

amount

ofthe

debt,the

prepetitionm

ortgagearrearage,

andthe

postpetitionm

ortgagepaym

entamount.

Mortgage

creditorsinitially

were

requiredto

includean

itemization

ofprepetitionfeesand

chargesbyentering

thisinformation

inspacesprovided

onthe

form.

Theform

nowrequires,

forclaim

sfiled

onor

afterD

ecember

1,2015,

them

ortgagecreditor

toprovide

thisinform

ationas

partof

aloan

payment

history.The

loanhistory

must

includeinform

ationaboutpaym

entsreceived

andhow

theyw

ereapplied,w

henfees

andcharges

were

incurred,w

henescrow

amounts

were

disbursed,and

whether

fundsw

ereheld

inan

unappliedorsuspense

account.The

prepetitionperiod

shown

onthe

loanhistory

shouldbe

fromthe

firstdate

ofdefault

tothe

petitiondate. 2

Ifthere

were

prepetitionloan

defaultsthat

thedebtor

hadfully

cured,theloan

historyshould

beginw

iththe

firstdateof

them

ostrecentloandefaultthathasnotbeen

cured.

Ifthe

mortgage

accountincludes

anescrow

account,the

mortgage

creditorm

ustalso

attachto

theproof

ofclaim

anescrow

accountstatementprepared

asof

thepetition

datein

aform

consistentwith

applicablenonbankruptcy

law. 3

TheR

ealEstateSettlem

entProceduresAct

permits

theservicer

toconduct

suchan

analysisin

thissituation

beforethe

endof

debtor’snorm

alescrowaccountyear. 4

Inorderto

giveeffectto

thecure

plan,theservicerm

usttreatallunpaid

prepetitionescrow

chargesas

ifthey

havebeen

paidw

henconducting

thisanalysis.

Theseunpaid

prepetitionescrow

chargesarepartofm

ortgageholder’sarrearage

claimto

bepaid

underthe

planand

suchcharges

may

notbecollected

inpostpetition

escrowpaym

ents. 5Thus,

prepetitionescrow

accountdeficiencies,

representingam

ountsdisbursed

bythe

servicerfor

taxes,insurance,

andother

escrowitem

sw

henthere

were

insufficientfunds

inthe

debtor’sescrow

account,arepaid

aspartofthe

mortgage

holder’sarrearage

claimduring

thelongercure

1Fed.R.B

ankr.P.3001(c)(2)(C);O

fficialForm410A

.2

TheInstructionsforO

fficialForm410A

state:“Thefirstdate

ofdefaultisthefirstdate

onw

hichthe

borrowerfailed

tom

akea

paymentin

accordancew

iththe

termsofthe

noteand

mortgage,

unlessthenote

wassubsequently

broughtcurrentwith

noprincipal,interest,fees,escrow

payments,orotherchargesim

mediately

payable.”3Fed.R

.Bankr.P.3001(c)(2)(C

).4R

ESPA’sim

plementing

regulation,Regulation

X,providesthatin

certainsituationsthe

servicerneed

notwaituntilthe

endofthe

twelve-m

onthescrow

computation

yeartoperform

anescrow

analysis.Iftheanalysisisdone

beforethe

endofthe

twelve-m

onthcom

putationyear,the

servicerisrequiredto

sendthe

borrowera

“shortyearstatement”

which

willchange

oneescrow

accountcomputation

yeartoanother,and

establishthe

beginningdate

ofthenew

computation

year.SeeR

eg.X,12

C.F.R

.§1024.17(i)(4).

5Inre

Rodriguez,629

F.3d136

(3dC

ir.2010);Cam

pbellv.Countryw

ideH

ome

Loans,Inc.,545F.3d

348(5th

Cir.2008);In

reB

eaudet,455B

.R.671

(Bankr.M

.D.Tenn.2011).

periodunderthe

planratherthan

inthe

shorterone-yearperiodfollow

ingthe

casefiling

aspart

ofdebtor’sescrow

portionofthe

postpetitionm

ortgagem

aintenancepaym

ents.Inaddition,Part

3ofA

ttachmentA

requiresthe

mortgage

creditorto

includeas

partoftheprepetition

arrearagean

amountfor

the“projected

escrowshortage”

asof

thepetition

date. 6If

donecorrectly,this

procedurew

illinm

ostcasesproduce

alow

ermonthly

escrowpaym

enttobe

includedas

partofthe

debtor’stotalpostpetitionm

aintenancepaym

ents.

Review

ofA

ttachment

Aand

theloan

payment

historyshould

revealif

thecreditor

isattem

ptingto

improperly

collectany

prepetitionescrow

deficiencyand

shortagein

thepostpetiton

mortgage

paymentratherthan

theprepetition

arrearageto

bepaid

undertheplan.

Incalculating

thepostpetition

mortgage

payment

amount

thatis

disclosedon

Form410A

,the

instructionsfor

theform

statethat

“aclaim

antshould

assume

thatthe

escrowdeficiency

andshortage

willbe

paidthrough

aplan

ofreorganizationand

providefora

creditofalike

amount

when

calculatingpostpetition

escrowinstallm

entpayments. 7

6TheInstructionsforO

fficialForm410A

state:Theprojected

escrowshortage

istheam

ounttheclaim

antassertsshouldexistin

theescrow

accountasofthepetition

date,lesstheam

ountactually

held.Theam

ountactuallyheld

shouldequalthe

amountofa

positiveescrow

accountbalance

asshown

inthe

lastentryin

Part5,Colum

nO

.”7See

InstructionsforMortgage

ProofofClaim

Attachm

ent.

The

SnaresofN.C

.G.S

§45-91W

ithperm

issionofFranklin

Drake

assupplemented

byEdw

ardB

oltz

Since2008,N

.C.G

.Ss§45-91

haslaid

adouble

snarefor

consumer

home

loanlenders.Failto

assessexpensesagainstconsum

erborrowers

soonafterthey

areincurred,orto

billtheborrow

erseven

sooneraftertheyare

assessed,and§45-93(3)m

eansa

lenderwaives

themforever.The

lawapplies

evenifa

consumerborrow

erisin

bankruptcy.In

reSaeed,N

o.10-10303,2010B

ankr.LEX

IS3267

(U.S.B

ankr.M.D

.N.C

.Sep.17,2010)

1.W

HEN

DO

ESIT

APPLY

?a.

Whenever

am

ortgageservicer

wants

anindividualborrow

ersecured

bya

home

loanto

repayany

“fees”advanced

toanyone

foranything.Thisincludes

latefees,

legalfees,insuranceprem

iums,late

taxes,HO

Adues-anything.

b.C

oversall“hom

eloans”

-secured

byany

NC

residentialpropertyow

nedby

anindividual,

i.even

ifnotborrower-occupied

(GS

§45-90(1)),andii.

evenifow

nedasrentalproperty

(GS

§45-90(2)),andiii.

evenifthe

borroweris

indefault,is

nowin

bankruptcyorw

aspreviously

inbankruptcy

(GS

§45-91).c.

Includesalljuniormortgages,H

ELOC

S,lines-of-credit,etc.Itdoesnothaveto

bepurchase-m

oney.d.

Coversalllenders,w

hetherservicingtheirow

nloansdirectly

orthrough3rd-party

servicers.GS

§45-90(2).

2.H

OW

DO

ESIT

WO

RK

?a.

Once

therecoverable

feeis

“incurred”(e.g..,advanced

bythe

lenderortriggeredby

tardiness),itmustbe

“assessed”(i.e.charged)to

theborrow

erwithin

45days

afterincurrence.§45-91(1)(a).i.

Attorney

fees,trustee

fees&

costsincurred

asa

resultof

aforeclosure

actionm

ustbeassessed

againsttheborrow

erwithin

45days

afterchargedto

youoryourservicerby

thelaw

yerortrustee.(Id.)ii.

Whether

lawyers

&trustees

billthe

mortgage

servicesprom

ptly,once

billedthe

45-dayclock

starts.b.

Once

therecoverable

feeis

assessed,thenitm

ustbebilled

tothe

borrowerw

ithin30

daysafterassessment.

i.M

ustbe

mailed

tothe

lastknow

naddress

ofborrow

er.No

e-billsor

e-statem

ents.ii.

Mustbe

“clear&conspicuousin

astatem

ent”.GS

§45-91(1)(b).c.

Exceptionto

thebilling

requirement

(GS

§45-91(1)(b)(i)through

(iii)).A

llTH

REE

elementsm

ustapply:i.

Resultsfrom

aservice

affirmatively

requestedby

theborrow

erAN

Dii.

Servicew

aspaid

forbythe

borroweratthe

time

theservice

was

provided(notrequested)A

ND

iii.Service

wasnotcharged

tothe

borrower’sloan

account.

3.W

HA

TA

BO

UT

THE

BA

NK

RU

PTCY

STAY

S?G

S§45-91(1)(b)w

illnotexcusefiling

noticeas

itisnotan

attemptto

collect,butforinform

ationalpurposes.In

reH

illmon,

No.11-80303,2011

Bankr.LEX

IS5536

(U.S.B

ankr.M.D

.N.C

.Oct.26,2011)

a.N

oticeof

thecharges

must

bebilled

directlyto

theborrow

erdespite

thebankruptcy

stays.Theym

ustbem

aileddirectly

tothe

borrower

and“in

careof”

thedebtor’sbankruptcy

lawyer.B

UT:

b.N

oticeshould

includea

suitabledisclaim

er:“If

youare

orhave

beenin

bankruptcy,thiscom

munication

issolely

tocom

plyw

ithN

CG

S§45-91(1),and

nottoviolate

anybankruptcy

stayorinjunction.”

c.C

h.13Form

B-10-S-2

“Notice

ofPost-PetitionExpenses,Fees

&C

harges”m

ustattach

acopy

oftheassessm

entandofthe

billingto

them

ember.

4.PEN

ALTIES:i.

Pursuantto

N.C

.G.S.

§45-91(3),“Failure...constitutes

aw

aiverof

suchfee.”

Translation:Mortgage

Servicereatsthefee

forever.ii.

PursuanttoN

.C.G

.S.§45-94,ifthe

mortgage

servicerisprovided30-days

tow

aiveim

properlynoticed

feesand

failsto

doso,

theborrow

ercan

beaw

ardedactualdam

ages,including

attorney’sfees.

Mortgage Issues: Key Issues in Chapter 13 - sbli-inc.org 410 ––Part1Part 1 ––Identifying the...

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