Can the Loan Modification Program be Saved?

Following the lead of several Bankruptcy Courts across the country, Local Chapter 13 Trustee Thomas W. McDonald Jr. has proposed a Mortgage Modification Mediation program that would function through a Chapter 13 proceeding. McDonald’s proposal addresses several of the major complaints about the voluntary Making Home Affordable Program (HAMP). The Obama Administration designed HAMP to assist defaulting homeowners in avoiding foreclosure and keeping their homes.

The stories of frustrated homeowners who attempt to obtain loan modifications are retold every day. After faxing and refaxing voluminous documentation supporting their loan modification, home owners are told that their documents cannot be found or are otherwise misplaced. Follow up calls to check on the status of a loan modification reveal that that homeowners file has been transferred to another agent. Then, the homeowner calls the other agent only to learn that the new agent can’t find the documents. So – the homeowner jumps through hoop after hoop after hoop and then finally gives up. They realize that just walking away from the house may be the best way to handle the situation. In more heart wrenching situations, homeowners who think that there loan modification application is being processed learn that the lender foreclosed on their house and all of their time and effort has been wasted.

McDonald’s proposal provides a solution to eliminate the endless submission of documents, as well as the barrage of conflicting notices from loan servicers. At a “town hall” meeting conducted in Judge Opperman’s court room recently, McDonald explained to local bankruptcy practitioners how other jurisdictions have adopted similar local procedures to promote and improve the number of permanent loan modifications through HAMP.

McDonald’s proposal is a sensible attempt to promote the timely and efficient modification of a mortgage loan.  McDonald’s program would allow a neutral mediator to facilitate the negotiation of a modification with the homeowner and the lender or servicer. All relevant documents and other information would be uploaded to one central “web portal” which would make them instantly available to both parties and the mediator. The servicer would be required to designate a specific person with authority to modify the loan who would participate in the entire modification process. The process would be governed by the HAMP rules and regulations with the expectation that the entire process would be completed within 90 days. Non-participation or failed attendance by the lender or servicer designee could result in Court ordered sanctions including the entry of a modification order substantially compliant with the HAMP guidelines.

Discussions continue among the US Bankruptcy Judges and the other Chapter 13 Trustees in the Eastern District of Michigan. Those of us engaged in the practice of consumer bankruptcy law are hopeful that some type of a program can be implemented so that homeowners can avoid the unpleasant frustration of trying to work with servicers who refuse to cooperate in the voluntary HAMP process.

 

The Mortgage Debt Relief Act Prevents You From Getting Taxed on Discharged Mortgage Debt

The Mortgage Debt Relief Act of 2007  – which was extended through 2012 – allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring and mortgage debt forgiven in connection with a foreclosure also qualifies for the relief. So, if you filed for bankruptcy in Michigan [...]

Read the full article »

Can Federal 1040 Income Taxes be Discharged in a Chapter 7 Bankruptcy in Michigan?

Michigan Bankruptcy and 1040 Income Taxes. Yes, provided the 5 following rules are met: 1.  The taxes at issued must be 1040 Income Taxes. Taxes such as payroll taxes, trust fund taxes, sales tax or fraud taxes are treated differently. 2.  The 3 Year Rule. The income tax return for which the taxes are owed [...]

Read the full article »

Scam Alert – Global Client Solutions & The World Law Group rip off Michigan couple!

Michigan Bankruptcy SCAM ALERT. I just retained a client who had been scammed by Global Client Solutions based out of Tulsa Oklahoma and The World Law Group based out of Austin Texas. These slick grifters convince people that they can eliminate all of your unsecured credit card debt in as little as 4 years. My [...]

Read the full article »

Michigan Bankruptcy- In Chapter 13 Can You Choose Between Paying a Set Fee or On An Hourly Basis?

Michigan Bankruptcy Fee or Hourly Basis Fee. Each 2016(b) statement provides for compensation to be either a stated flat fee; or payment of a stated retainer amount against which the attorney would bill at a specific hourly rate, with debtor agreeing to pay all Court approved fees exceeding the retainer.  During the consideration of a [...]

Read the full article »

Bankruptcy in Michigan- What happens if you fail to include a creditor in your bankruptcy in Michigan filing?

Michigan Bankruptcy Failure to list Creditor. Any time you correct or add a creditor to your michigan bankruptcy matrix you want to send them a copy of the 341 notice. You will also need to amend your Schedules including the creditor and pay the appropriate fee and file the amended Schedules and Cover Sheet for [...]

Read the full article »

Bankruptcy Michigan – What happens to the rent money when your rental property is foreclosed on in Michigan?

Michigan Bankruptcy and Rental Property Rent Money. After you file for bankruptcy in Michigan, the rents from your rental property become property of the estate. The trustee exercises full authority and control over those rent monies. The only way that the mortgage company can get control of the rents is to file a motion with [...]

Read the full article »