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TheNationalMortgageSettlement:What
EveryConsumerBankruptcyLawyerNeeds
ToKnowAboutIt
Presentedby:
JohnRao,Esq.,NationalConsumerLawCenter,NACBAVicePresident,andProfessorKatherinePorter, Univ.ofCaliforniaIrvineSchoolofLaw;CaliforniaMonitorThursday,September27,2012
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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
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ServicingStandardsforBankruptcy
NationalMortgageSettlement
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AccuracyofFiledDocuments Allpleadings,proofsofclaim,affidavits,sworn
statements,anddeclarationsfiledinjudicialforeclosure
orbankruptcy
cases,
and
in
notices
of
default
or
sale
in
nonjudicialforeclosures,mustbe:
accurateandcompleteandaresupportedbycompetentandreliableevidence
Doesthisimposeastricterstandardthan
BankruptcyRule
9011?
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AccuracyofFiledDocuments Ifproofofclaimorstayreliefmotionincasependingbefore
Settlementcontainsmateriallyinaccurateinformation,
servicermust:
fileanamendedclaimormotion,atservicersexpense,
within30daysofacquiringknowledgeoftheinaccuracy
notcollect
any
attorney
fees
or
other
charges
for
preparationorsubmissionofproofofclaimormotionfor
reliefthatislaterwithdrawnordeniedasaresultofa
substantialmisstatementastotheamountdue
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Affidavits,SwornStatements,andDeclarationsMust: Bebasedonpersonalknowledgeorrelianceonbusiness
recordsas
allowed
under
FRE
Notcontainfalseorunsubstantiatedinformation,but
statementsbasedoninformationandbeliefareallowed
ifso
stated
Accuratelyidentifyaffiant/declarantbyname,employer,
andtitle
BesignedBYHANDanddated(signaturestampsandother
mechanicalsignaturesprohibitedexceptforelectronicfiling)
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ProofsofClaim Servicersrequiredtoattachtoproofofclaimthe
LoanDocuments,whichinclude:
originalor
duplicate
of
note,
including
all
indorsements;
acopyofanymortgageordeedoftrust
(including,ifapplicable,evidenceofrecordation
in
applicable
land
records);
and
copiesofanyassignmentsofmortgageordeedoftrust
requiredtodemonstratetherighttoenforcethe
borrowersnoteunderapplicablestatelaw
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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
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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
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StayReliefMotionsInChapter13cases,themotionpapersmust:
IncludeLoanDocumentsorstatethattheyareattached
toafiled
proof
of
claim
Statethebasisforthemovingpartysrighttoforeclose
Disclosewhetherdebtorisbeingevaluatedforaloss
mitigationoption
Disclosetermsofanytrialperiodorpermanentloan
modificationplanpendingattimeofmotion
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StayReliefMotions InChapter13cases,themotionshallhaveattachedan
affidavit,swornstatementordeclarationsettingforth:
whetherthereareanyprepetitionorpostpetition
defaults
ifdefault,adescriptionofanydefault,andadetailed
itemizationof
all
amounts
owed,
the
prepetition
and
postpetitionarrearages,andeachfeeorchargeapplied
tosuchprepetitionamountorpostpetitionamount;and
anuptodatestatementofallamountsclaimedandthe
amountnecessarytocureanydefault
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PaymentApplicationinCh.13
Cases Servicersmustensurepromptandproperapplicationof
paymentsmade
on
prepetition
arrearage
and
post
petition
paymentamounts
Debtoristobetreatedasbeingcurrentsolongasmaking
paymentsinaccordancewithconfirmedplanandanylater
effectivepayment
change
notices
Throughoutthecase,servicerisrequiredtoupdateitsrecords
toreflectpaymentsmadeduringcaseandwaiverofanyfeeas
requiredunder
Settlement
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LoanModificationsforBankruptcyDebtors
NationalMortgageSettlement
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PrincipalReductionEligibilityCriteria IndefaultorimminentriskofdefaultattimeofSettlement
Underwater
Ownershipofloan
NoFannie/FreddieorFHA/VA
Wells
Fargo,
Citi,
&
GMAC servicerownedloan
BankofAmerica&Chase
servicerownedloans
investorowned
loans
with
delegated
authority
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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.
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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
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RefinanceProgram Mandatorysolicitationrefinanceprogramforservicer
owned
first
liens
of
CURRENT
underwater
borrowers.
Refinanceisreallystreamlinedmodificationtoreduce
interestrate.
Borrowerswhoarecurrentlyinbankruptcyorwhohave
beenin
bankruptcy
during
the
last
24
months
are
NOT
eligibleforthisprogram andcannotapply.
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Enforcement
NationalMortgageSettlement
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EnforceablebyPrivateParties? Notdirectlyenforceablebyborrowers/debtors
Failuretocomplywiththestandardsmayprovideadditional
supportforrequestbydebtorsfor:
sanctionsinadditiontothoseavailableunder
BankruptcyRules
3001(c)(2)(D)
and
Rule
3002.1(i)
denialofstayreliefforfailuretoshowcause
undersection363(d)(1)
disallowanceofclaimundersection502(b)(1)
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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
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Enforcement:Metrics Metricsmeasurecompliancewithservicingstandards
Translateservicing
standards
into
defined
activities
thatwillbemeasuredortested
Eachmetrichasanacceptableerrorrate(often5%)
todetermineifpenaltycanbeimposed
Penaltiesof$1millionforfirstviolation
BanksInternalReviewGroupdoesinitialworkon
servicing;auditedbyprofessionalfirmhiredby
NationalMonitor
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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
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WheretoReportProblems
Nationwide:
NACBAofcourse!
TheUSTrusteeprogram
Aparty
to
Settlement
OntheMonitoringCommittee
JosephSmith,theNationalMonitor
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WheretoReportProblems
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WheretoReportProblemsInCalifornia:
the
California
Monitor
Program:[email protected]
Weworkindividualcasestohelppeople
Otherstateswithinterestingorprogressivehelpsystemsfor
Settlementinclude:
IllinoisAGinhouseloanmodificationunit
MassachusettsSpecial
Counsel
for
Settlement
Arizonacobrandingpilot