- Interplay of Loss Mitigation/Mortgage Modification and Conduit
When proposed in the debtor’s initial chapter 13 plan, Loss Mitigation/Mortgage Modification (“LM/MM”) is an exception to the requirement to use conduit procedure in Judge Waites’ cases under Operating Order 18-03. Chambers Guidelines provides form non-standard language for proposing LM/MM through the chapter 13 plan.
Trustees Wyman and Stephenson have reviewed this non-standard plan language and concluded that the language is adequate to permit direct payments to the creditor after the completion of LM/MM (regardless of whether the LM/MM is granted or denied) without the need for an amended plan. This language does not preclude a debtor from subsequently amending the chapter 13 plan after the completion of LM/MM; however, if the amended plan proposes arrearage payments made through the trustees, the trustees expect a contemporaneously filed budget to demonstrate that the debtor is able to make the higher payments to the trustee and direct payments to the creditor (see below).
- § 362 Settlement Orders involving Conduit
Recently, chambers has received several proposed § 362 settlement orders seeking to convert a previously direct pay or LM/MM case to a conduit case. Any such proposed settlement orders must include the chapter 13 trustee’s consent or will be considered at an actual hearing before the Court.
Pre-Confirmation: Trustees Wyman and Stephenson have indicated that they will consider consenting to pre-confirmation settlement order that propose conduit payments instead of previously proposed direct pay or LM/MM cases.
Post-Confirmation (Entirely Conduit): The trustees have indicated that they will not consent to any post-confirmation settlement orders that propose to convert a previously direct pay or LM/MM plan entirely to the conduit procedure (i.e. plan payments to the trustee include both arrearage and future ongoing mortgage payaments).
- Post-Confirmation (Arrearage Only): The trustees will consider consenting to post-confirmation settlement orders that provide for arrearage only (both pre and post-petition) to be paid in payments to the trustee while the debtor maintains ongoing payments directly to the creditor if: (1) the total arrearage is clearly established either through the settlement order or by the previous filing of an amended proof of claim and (2) an updated budget is submitted demonstrating the debtor is able to make the higher payments to the trustee and creditor.
Judge Waites will not consider any proposed § 362 Settlement Order that provides for conversion to a conduit case which includes drop dead language to allow the creditor relief from the stay or case dismissal upon the debtor’s failure to make payments under the plan to the Trustee. Ordinarily, the enforcement of trustee’s payments is made by the Trustee only, but the secured creditor may file a new motion for relief, motion to dismiss or seek other remedies upon a plan default.
- Removal of LM/MM Status Hearing
To assist the Court in reviewing LM/MM Correspondence and Certifications filed to remove LM/MM status hearings, Chambers is providing examples of satisfactory correspondence/certifications to assist the bar in complying with the required procedures under the LM/MM guidelines. An example of a satisfactory correspondence to remove the Debtor’s LM/MM status hearing is available here. An example of a satisfactory certification to remove the Mortgage Creditor’s LM/MM status hearing is available here. The use of unclear language will prohibit the removal of the hearing and require the attendance by parties and counsel.