Mortgage loan modification approval has been streamlined in Cleveland chapter 13 cases. If you are a debtor in the Northern District of Ohio in Cleveland, the court and trustee created an expedited procedure to approve your mortgage loan modification. This is hot off the presses. Each player in the process as a separate role to follow:
WHAT IS EXPECTED OF YOU
You have the most important job in the entire process. You have successfully participated in your plan by making all the payments when due. There is a reward for that. For the most part, the only clients I have who successfully negotiate modification of their mortgage loan are chapter 13 clients. You will have to contact your mortgage lender, make the necessary applications, and negotiate the mortgage loan modification.
MOTION FOR AUTHORITY TO MODIFY A MORTGAGE LOAN; SOMETHING FOR ME TO DO
As I indicated in previous posts, in order to incur debt in excess of $500 it is necessary to obtain court approval. A mortgage loan modification is no exception to this rule. I have to apply for and obtain certain court approvals. The first step to my doing this is for you to provide me with a copy of the loan modification agreement signed by you. I then have to file a motion for authority to modify a mortgage loan. I must:
1. Include a copy of the mortgage loan modification agreement you signed as exhibit to the motion.
2. To successfully obtain court approval it is necessary that for your current loan and the modification have the same lender. If not, you’ll have to provide me with the history of the loan from the original lender to the lender listed on the loan modification agreement. I will then have to address this history in the body of the motion.
3. I need to serve a copy of the motion on all creditors in the chain of title to the secured property.
Let’s not forget the chapter 13 trustee here. His job is to represent the unsecured creditors in your chapter 13 case. He wants his piece of the pie. It is also necessary that I file amended schedules I & J to include the new proposed monthly mortgage payment in your budget. It is likely that the reduced mortgage payment will result in additional disposable income, which will result in additional money that should be made available to pay unsecured creditors.
THE ATTORNEY FOR THE MORTGAGE COMPANY CAN PLAY TOO
Instead of requiring me to file a motion for authority to modify a home mortgage loan, it is preferred that the attorney for the lender file a motion for authority to modify the loan. If the attorney for the lender files a motion it needs to include a copy of the mortgage loan modification agreement as evidence of your willingness to enter into a modification.
Sometimes during a chapter 13 case you fall behind on your mortgage payments. This is called the post-petition arrearage. If you were behind on your payments at the time of filing, that is called a pre-petition arrearage. If either type of arrearage is included in the principal balance of the new modified mortgage loan, the motion for the lender’s attorney should give direction to the chapter 13 trustee as to whether to continue, or to discontinue payments on the mortgage loan arrearages.
The Cleveland chapter 13 trustee and the judges of Cleveland bankruptcy court have recognized the need for streamlined mortgage loan modification approval procedures to make your transition to a more affordable mortgage arrangement reality.