LOSS MITIGATION: In and Out of Bankruptcy Court...LOSS MITIGATION: In and Out of Bankruptcy Court December 4, 2015 Materials by: Keri P. Ebeck, Esq. Weltman, Weinberg & Reis, Co. LPA

LOSS MITIGATION: In and Out of Bankruptcy Court

December 4, 2015

Materials by: Keri P. Ebeck, Esq. Weltman, Weinberg & Reis, Co. LPA

Panelists: Honorable Judge Thomas P. Agresti Abagale Steidl, Esquire Daniel Foster, Esquire

•  Evaluation of the situation •  Is the loan delinquent? •  What is the borrower’s intent? •  Is the property in foreclosure? •  Has loss mitigation been granted before?

•  If so when and what type? •  Has loss mitigation been denied before?

•  If so, when and what type? •  Have circumstances changed?

•  Is this the borrowers’ principal residence?

•  Client (either borrower or lender’s) expectations of loss mitigation

IS LOSS MITIGATION AN OPTION?

•  Pro-active Loss Mitigation Efforts: Before, During

and After Foreclosure –  Private Sale –  Deed in Lieu of Foreclosure –  Forbearance Agreements –  Loan Modifications –  Cash for Keys –  Short Sale –  Short Payoff

LOSS MITIGATION OPTIONS

Private Sale –  Obtain real estate agent –  Approved by the Court (if required) –  Listing Agreement

•  Most lenders like to see a property listed at least 6 months for short sale/short payoff options

–  Appraisal/FMV

• Deed In Lieu of Foreclosure –  Title Report- title issues to consider –  Additional liens and judgments –  Difference between sheriff’s deed, warranty deed, deed in lieu of

foreclosure –  Subject to all liens; Unlike sheriff’s deed, does not remove any

liens


•  Deed In Lieu of Foreclosure –  Tax consequences –  Collection upon personal liability- note –  Favorable Option

•  Forbearance Agreements –  Terms and payments

•  Amount/payments being deferred •  Interest rate during forbearance •  What happens to the amount deferred •  Status of taxes/insurance

–  Payments during that time


•  Loan Modifications –  Options Available

•  Reductions of principal balance •  Extend maturity date •  Re-amortize loan •  Interest rate reductions

–  Temporarily or permanent •  Balloon note/end of maturity •  Combination of the above

–  Questions on terms of loan modification •  Taxes/insurance amounts

–  These amounts will adjust


•  Loan Modifications –  Questions on terms of loan modification

•  Trial to permanent mod? •  What happens in case of default?

–  Issues to Consider •  Charge off/credit reporting •  Escrow issues •  1099 reporting (if portion is forgiven)


- Cash for Keys •  Amount offered by lender to vacate property in broom swept

condition •  Can be negotiated within reason, but ultimate decision is

lenders •  Date certain to vacate/property will be inspected by lender’s

representative before monies are provided •  In middle of foreclosure: would require a consent judgment

–  Favorable option •  Allows for graceful exit on a date certain •  Monies to help with moving expenses and finding other living

arrangements


-  Short Sale and Short Payoff -  Most lenders require property to be listed 6 months -  Appraisal/FMV -  Sale must be close to FMV -  Funds at closing to debtors should be minimal to none -  Most lenders still require a loss mitigation packet to be

completed

-  Issues with Short Sale/Short payoff -  Credit reporting -  1099 reporting -  Length of time to approve; buyer could walk


•  LOCAL RULES 9020-1 THROUGH 9020-7 •  Participation for the Lender is mandatory (if not successfully

objected to) •  LMP commences upon the entry of a Loss Mitigation Order •  All LMP activity must be conducted through the DMM Web Portal

•  https://www.dclmwp.com •  All lenders are required to register with the DMM Portal

•  If not previously registered, within fourteen (14) days of the entry of the LMP order, the creditor/lender shall register and post its entire LMP package on the DMM portal

WDPA LOSS MITIGATION PROGRAM (LMP)

•  Debtor’s attorney/debtor must completed document preparation through a software provider before the request for LMP can be filed

•  Within seven (7) days after entry of the Order or the Creditor’s registration on the Portal, the debtor shall upload and submit through the Portal the completed LMP package, including all documentation


•  Within fourteen (14) days after the debtor’s submission of the LMP package and required documentation, the Creditor shall designate (via the Portal) a specific individual, who is a single point of contact

•  Within sixty (60) days of the Order, the debtor, on notice to the creditor shall file and serve a Status Report –  Attach printout of the current and complete account history from

the Portal

•  Within seven (7) days after the conclusion of the LMP period (if not extended by Order), debtor shall file and serve a Final Report –  Attach printout of the current and complete account history from

the Portal


–  Requirements of LMP •  A debtor who files a Motion for Loss Mitigation must

immediately make adequate protection payments to the Creditor in an amount that is at least sixty (60%) of the monthly principal and interest payment that is contractually due plus one hundred (100%) of any required monthly escrow payment

•  LMP participants shall communicate only within the DMM portal

•  LMP participants shall act in good faith


•  Duration of LMP –  LMP Period shall be ninety days unless otherwise

specified in the LMP Order •  Requests for Extensions

–  Shall be made by way of a Motion to Extend the LMP •  Attach a proposed order and complete/current printout

of account history from Portal •  Must be served on all parties

•  Must be filed prior to LMP expiring •  Objections shall be filed within seven (7) days from

service of the motion


–  Termination of LMP •  Final Status Report filed •  If the LMP parties agree to a loan modification, the

debtor must file a proposed order to approve the interim trial modification –  14 days prior to first mod payment being due


•  WDPA COUNTIES WITH LOSS MITIGATION PROGRAMS •  Allegheny •  Blair •  Butler •  Fayette •  Somerset •  Washington

STATE COURT PROGRAMS (WDPA ONLY)

•  Allegheny County Program •  An urgent notice (attachment “A”), is to be filed/attach to

a complaint in mortgage foreclosure, as well as the lender/creditor shall determine and designate on a complaint if the property is owner-occupied and residential. •  In order for a borrower to be eligible for the program,

the property must be both. •  Once the complaint is filed with the attached urgent notice,

the complaint along with the notice is served upon the borrower.


•  Allegheny County Program •  The borrower must call the “Save Your Home hotline” as

indicated on the notice prior to entry of judgment. •  Once the borrower calls the hotline, they schedule an

appointment with one of the approved housing counselors. •  Typically this is completed within a week

•  Once the borrower meets with the counselor, a request to schedule a conciliation conference is filed and a conciliation conference will be scheduled by the Court.


•  Allegheny County Program •  The Order scheduling a conference will prevent a lender from

proceeding with the foreclosure action during that time. •  Prior to the conciliation conference being held, the housing

counselor and lender (or lender’s counsel) are to exchange financial information in order to review for loss mitigation options

•  At the conciliation conference, the Judge will either remove from the program, continue the hearing or mark the matter settled.

•  Issues that may arise •  Missing documentation •  Stale documentation •  Continuances granted 30-120 days


•  Blair County Program •  A notice (attachment “B”) is served upon the borrowers

with a complaint. Borrowers may opt-in by completing and filing a Certificate of Premises as Owner Occupied and Request for Conciliation Conference within ten (10) days from service.

•  The filing of the Certificate triggers a sixty (60) day of all proceedings while the conciliation takes place.

•  Prior to the hearing, exchange of financial information is to be completed and review for loss mitigation options.

•  Court scheduled hearings are held once a month


•  Butler County Program •  Upon filing of a complaint, the lender must note on the

court coversheet if the mortgage is a residential mortgage foreclosure

•  A notice (attachment “C”) is served with the filed complaint upon the borrowers

•  The borrowers have ten (10) days to contact the Butler County Consumer Credit/Residential Mortgage Foreclosure Division Program information hotline as indicated in the notice


•  Butler County Program •  Once the borrower contacts the information hotline and

attends a credit/mortgage assistance class, the borrower may file a request to participate in the conciliation conference

•  Said request must be filed with the Court within thirty (30) days of service

•  Upon filing, the Court will issue a case management order scheduling a conference and advising the borrower to contact Legal Services or the Bar Association for representation


•  Butler County Program •  Borrower must submit a financial worksheet and financial

information to the housing counselor and lender’s counsel/lender prior to the conference

•  All proceedings are stayed during this time and until further court order

•  Issues that may arise •  Missing documentation •  Stale documentation •  Continuances granted 30-120 days


•  Fayette County Program •  Upon filing of the complaint, the lender is required to

attach a notice (attachment “D”) with the complaint, which shall be served upon the borrower

•  The borrower is to comply with the notice and contact Legal Services to commence foreclosure mitigation counseling •  Contact must be done within twenty (20) days of

service of the complaint


•  Fayette County Program •  If the borrower opts-in to the program through Legal

Services, legal representation may request a 90 day stay of proceedings to allow time for loss mitigation review

•  There are no court conferences •  If the parties cannot reach an agreement on loss

mitigation during that 90 day stay, the case may proceed as normal without a court order

•  Issues •  Missing and stale documentation •  Needing more time to complete review


•  Somerset County Program •  Upon filing of a complaint, the lender is required to attach

a notice (attachment “E”) with the complaint •  Said notice shall be served upon the borrowers. •  The borrower is to comply with the notice and contact

Legal Services to commence foreclosure mitigation counseling •  Must be done within twenty (20) days of service

•  If the borrower opts in to the program, legal representation may request a sixty (60) day stay of proceedings


•  Somerset County Program •  There are no court conferences •  If the parties cannot reach an agreement on loss

mitigation during those sixty (60) days, the case may proceed as normal without further court order


•  Washington County Program •  Upon filing of a complaint, the lender is required to attach

a notice (attachment “F”) with the complaint, which shall be served upon the borrower

•  The borrower is to comply with the notice and contact legal services to commence foreclosure mitigation counseling •  Contact must be done within twenty (20) days from

service •  Borrower may opt-in during this time by attending a

Foreclosure Mitigation Counseling session at Legal Services


•  Washington County Program •  Sessions are held every Wednesday at 10am at the

Courthouse. •  Borrowers who opt-in may seek a ninety (90) days stay to

allow time to exchange financial information with the lender/lender’s counsel and review for loss mitigation options

•  Upon the expiration of the ninety (90) days, the lender may proceed without further order of court


–  DMM Portal as compared to good faith exchange of

documents •  Issues/potential concerns •  Pros/cons of both

–  Court ordered/scheduled conciliations •  Good faith exchange of documents prior to hearing

–  Does it work? –  Specific deadlines/duration of programs compared to

general stay of proceedings •  Does this lead to more continuances?

COMPARISION

•  Preventing further default/delays in state court? •  Ideas on how to get to the borrowers/debtors at an

early stage of default ? –  (prior or during foreclosure)

–  Statistics •  LMP •  State Court

COMPARISION

Questions?

Documents

LOSS MITIGATION: In and Out of Bankruptcy Court...LOSS MITIGATION: In and Out of Bankruptcy Court December 4, 2015 Materials by: Keri P. Ebeck, Esq. Weltman, Weinberg & Reis, Co. LPA