Protection from Unfair Mortgage Fees After Chapter 13
By L. Jed Berliner, Springfield Bankruptcy Attorney on Aug 4, 2007 in Bankruptcy Cases of Interest, Bankruptcy Practice and Procedure, Benefits of Bankruptcy, Chapter 13 Bankruptcy, Consumer Protection, Debt Collector Abuses, Decisions of Interest, Discharge Violations, General Bankruptcy Information, Lawyer to Lawyer, Life After Bankruptcy, Massachusetts, Mortgages, Role Of The Lawyer
You need protection from unfair mortgage fees added to your account secretly during a Chapter 13 case. The surprise fees may not show up until after the case is over, when you sell or refinance, and when you have usually have no attorney representing you (since closing attorneys generally represent the lenders), never mind an attorney who knows that fees may NOT be added to a mortgage debt from when the bankruptcy case was open without court approval.
It has been reported that mortgage servicers (you know, those people you pay the money to) earn about $60 per loan per year. This led to the systematic and universal creation of a menu of new fees such as monthly property inspections, monthly property preservation fees, broker price opinion fees, proof of claim preparation fees, review of Chapter 13 plan fees, and other similar and related charges, sometimes covered by “escrow advance” or “corporate advance” labels. They are supposedly covered by the mortgage document’s permission of “reasonable” fees.
Sometimes, fees are added even from the pre-bankruptcy period. Ameriquest Mortgage Company unsuccessfully argued a defense that its computers were not able to make the separation, and got hit with $250,000 emotional distress damages, $500,000 punitive damages, and $50,000 attorney fees when last reviewed. Nosek v. Ameriquest Mortg. Co. (In re Nosek), 363 B.R. 643, 2007.
This author believes that these unfair charges are violations of existing bankruptcy law. However, to be absolute certain of protection, your Chapter 13 plan should include language instructing the servicers on how to apply the Chapter 13 payments. This will incorporate the purpose of the new law’s addition of 11 USC 524 (i), which defines a willful failure to follow such instructions as being a violation of bankruptcy law.
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