Homeowners who are currently in an active bankruptcy or plan to file and are behind on their mortgage can look forward to a newly launched program called the Loan Modification Management (“LMM”) Pilot Program. Borrowers can be reviewed for a modification in conjunction with a bankruptcy under the supervision of the courts. With the Home Affordable Modification now a program of the past, it is reassuring to know that mortgage relief programs still do exist for those struggling homeowners.We’ve outlined the benefitsand criteria of this new and exciting program below:
Eligibility
- BK filing fee must be paid in full
- Property must be in foreclosure prior to the BK filing (i.e. an NOD recorded)
- Subject loan must be secured
- Could be primary residence or an investmentproperty
- Applies to homeowners in a Chapter 7, 11, or 13 BK
Benefits for Debtors
- Debtors will be assigned a Single Point of Contact
- Debtor/Court visibility
- Pause in automatic stay relief litigation
- Lender representative must attend court hearings
- Program manager facilitates progress
- Judges can access the portal and monitor progress
- 400 various lenders are in the program
Adequate Protection/Quid Pro Quo
- While being reviewed for a loan modification, instead of making a regular mortgage payment as required by the Code, the Debtor shall make adequate protection payments to the creditor in the amount that is 31% of the gross monthly income (lenders have 14 days to oppose inclusion into the program or the amount calculated as adequate protection)
- Relief from stay will be continued or dropped until the Loan Modification process is concluded
- If the debtor does not follow the loan modification obligations, creditors may terminate the LMM
- If approved, the borrower will make trial modification payments in lieu of adequate protection payments
Costs
- Program Fee $380 (includes access to portal, doc prep, and assigned to program manager),separately, the lender will need to pay $300 to the program manager directly
- Attorney Fees – approximately $2500 (the no-look fee)
This program was newly launched on December 5, 2016 by the United States Bankruptcy Court for the Central District of California. For now, only a few judges are taking part in this program. That being said, as the program matures, we most likely will see an influx of judges participate in the program. As a point of reference, current participating judges include:
Los Angeles Division:
-Honorable Julia W. Brand
-Honorable Neil W. Bason
San Fernando Valley Division:
-Honorable Martin R. Barash
Santa Ana Division:
-Honorable Catherine E. Bauer
Riverside Division:
-Honorable Scott H. Yun
If your case is not assigned to one of the above judges, you should consider filing a motion to have the case transferred to a judge that participates in the program.
Other Loan Modification Programs outside of bankruptcy are still in place (i.e. One Mod, Flex Mod, in house modification programs) and there are still more to come. For the time being however, it is promising to see a program that facilitates dialogue and motivates both parties to finalize a reasonable and favorable agreement under the supervision of the bankruptcy court. Struggling homeowners in bankruptcy should feel reassured that with this program there is light at the end of the tunnel.
We at VLG applaud the Central District for recognizing the importance of affordable homeownership and for finding a solution to fill the void left by HAMP.
