Bankruptcy Court Set To Require Mortgage Lenders To Negotiate Mortgage Modifications With Chapter 13 Debtors
The Orlando bankruptcy court is preparing to adopt a rule providing for mandatory mediation between homeowners and their mortgage companies to facilitate mortgage modification. Congress rejected a change in the bankruptcy code that would have empowered Chapter 13 debtors to force reduction in their first mortgage principal to their residence’s current fair market value. This proposed procedural rule will not circumvent the bankruptcy code and will not force reduction of first mortgage principal. What the rule will do is enable Chapter 13 debtors by motion filed with the court to compel a bank representative with full authority to modify mortgages to meet with the debtor and an independent mediator to negotiate in good faith a possible modification of the debtor’s first mortgage terms. The terms and the conditions of the rule are expected to be announced shortly. This bankruptcy rule should be a big help to debtors who want to save their primary residence from foreclosure.
The Florida Supreme Court is requiring mediation in state court foreclosure cases. This state court rule is helpful, but the bankruptcy court rule could be better for homeowners. Before getting to mediate with a bank agent with full authority the homeowner has to be in a foreclosure case. The homeowner first has to stop paying the mortgage for at least three months, wait for the bank to file a lawsuit, hire a civil attorney to answer the lawsuit, proceed for several months in civil litigation, and then at some point, arrange for a court ordered mediation. The result of the mediation is a contractual agreement to modify the mortgage, and the modification usually calls for a few months of trial payments before it is binding.
Chapter 13 mediation should be faster and more definitive. A debtor probably can get an order requiring mediation with their mortgage lender very soon after filing a Chapter 13 bankruptcy petition. The borrower/debtor will not have to miss several mortgage payments and fall farther behind on their mortgage. There will probably be uniform court orders. The bankruptcy rule probably will permit a court order adopting any mediated mortgage modification which order can be recorded in the public real estate records.
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Alright, it is really clear with the Chapter 13 that the mediation should be faster and definitive. Therefore, it is good to know that they are preparing to adopt the rule that provides mandatory mediation.
In that way, it will be possible for debtor to meet mortgages and an independent mediator to negotiate in good faith a possible modification of the debtor’s first mortgage terms.
Posted by: Skye @ compulsory liquidation | March 18, 2011 at 03:02 AM
my wife and i were not behind in our mortgage but felt trouble coming. we contacted our mortgage lender to ask for help and they refused because we were not behind on our payments. We contacted an attorney and the lawyer told us the lender had no reason to help us. He advised us to hire his firm and stop paying our mortgage payments and he would negotiate a modification. It has now been 5 months and no modification has been negotiated and we were served a 20 days to respond to forclosure. what should we do now. we never wanted to lose our home and only took the advice of an attorney that basically follows the article mentioned above...can anyone help us
Posted by: Jerry | June 04, 2010 at 05:54 PM
we helped them - they should be made to help us!
Posted by: Jan | April 27, 2010 at 02:08 PM
It's amazing how slow the government has acted on this issue.
Posted by: Charles Moreton | March 19, 2010 at 03:45 AM
It's about time
Posted by: Charles Moreton | March 19, 2010 at 03:42 AM