Why does Bankruptcy Court have the highest mortgage modification success rate?

15 Jun Why does Bankruptcy Court have the highest mortgage modification success rate?

As I have previously reported, the highest probability of forcing your mortgage servicer to modify your mortgage is in the Chapter 13 Bankruptcy Mortgage Modification Mediation Program.

Historically, mortgage modifications since 2008 (when mortgage servicers borrowed hundreds of billions of taxpayer money in a program known as TARP) have had dismal results. However, reports show that the probability of a meaningful mortgage modification in bankruptcy court is 75%, and our firm enjoys a success rate above 90%!

WHY?

TheChapter 13 Bankruptcy Mortgage Modification Mediation Program works because, under Federal Law, if a bankruptcy judge orders parties to go to mediation, the parties arelegally boundto mediate ingood faith. This legal duty to act in good faith does not exist in many state courts, including my home state of Florida. This means that, instate court, a mortgage company doesn’t have to justify denying your modification, and it can lie about not getting proper documentation or about the results of its underwriting analysis.

Servicing Underwriters are the people who actually decide whether to extend a modification to a customer. Outside of bankruptcy, underwriters routinely say,”No,” and no reason need be given. The truth is that mortgage companies do not want to modify your mortgage. Don’t believe me? Ask former Bank of America employee, Simone Gordon, who recently testified in an affidavit that Bank of America employees regularly lied to homeowners. She testified that customers are denied loan modifications for knowingly false reasons, and BoA underwriters are rewarded for sending homeowners to foreclosure.

In bankruptcy court, in contrast to state court, “good faith” requires the mortgage servicer to provide abona fide reasonto deny a mortgage modification, and in reality, 90% of the time, they can’t do it. Therefore, begrudgingly, underwriters say, “Yes” for fear of sanctions.

Can a mortgage servicer really be sanctioned for denying a mortgage mod? You betcha! Recently, Parker & DuFresne had a hearing before Bankruptcy Judge Jerry Funk because Homeward Residential, a national mortgage servicing company headquartered in Jacksonville, failed to act in good faith during the mediation process. Judge Funk ordered Homeward to pay more than $18,000 punitive damages, sanctions and attorney fees for failing to act in good faith. Take a look at this Sanctions Order against Homeward Residential!

So, stop begging your mortgage servicer for a loan modification. Go to your bankruptcy lawyer and ask about the Chapter 13 Mortgage Modification Mediation Program. If your jurisdiction doesn’t have the program, find a bankruptcy lawyer who will ask the court to start one.

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Chip Parker is the managing partner of Parker & DuFresne, P.A., where he represents Northeast Florida businesses and consumers facing bankruptcy, and homeowners facing foreclosure. His firm files more homeowners in the Mortgage Modification Mediation Program than any other law firm in Northeast Florida. Parker is the recipient of Jacksonville Area Legal Aid's prestigious Award for Outstanding Pro Bono Service. Mr. Parker is an active member of the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.
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