Getting a mortgage modified can be a daunting process–like a root canal, only involving paper, yet almost as painful.
You send required documents only to be told by the mortgage servicer that they never got them. The modification request then gets denied. In many cases the mortgage company doesn’t appear to be acting in good faith or complying with federal guidelines for mortgage modification. They don’t seem to care. You’re told conflicting things. You think you qualify, but you can’t get the help you need, or the process otherwise breaks down.
The big news in bankruptcy is that one of our South Carolina bankruptcy judges has embraced a new process for submitting mortgage modifications and for implementing mediation of disputes between borrowers and their mortgage company. The process is new to South Carolina, but has been used in other places with great success–particularly in Florida which has been hit hard in the foreclosure crisis.
The gist of how it works
If a debtor wishes to submit a mortgage modification request while in a Chapter 13 bankruptcy, the debtor can file a motion with the court and serve it on the mortgage company. The mortgage company can object, but I predict that will rarely happen, and when it does, the objection will not be well received by the court. Once the objection period expires, the court will issue an order allowing the debtor to submit a modification through the “DocuMod” portal within 14 days of entry of that order. Once the modification request is submitted, the mortgage company has 120 days to approve a modification or issue a denial. If successful, the mortgage company and the debtor will submit a consent order for approval by the bankruptcy court. And if there’s a problem in the process, the debtor can bring that issue to the attention of the bankruptcy judge.
The beauty of it
The beauty of it is that (1) documents are uploaded via a secure portal, and the application is submitted by answering a series of questions, so that there’s a record of the application both the debtor and the mortgage company can view, thereby making the process transparent; and (2) there’s court supervision of the process requiring the mortgage company to act in good faith. There’s no guaranty of getting a mortgage modification, but there’s a far higher likelihood of being approved. The success rate in other bankruptcy districts has been over 70%. And that’s way (way, way, way) higher than the normal approval rate.
Types of relief
Relief might include a reduction in the monthly payment and interest rate, reduction in principal, forbearance, second mortgage modification or elimination, among other concessions.
One last little thing…
If there’s a downside to this, it’s that this program is–as of now–a pilot program here in South Carolina. As of this writing (December 5, 2014) only Chapter 13 cases assigned to Judge John Waites (Charleston Division cases) are eligible for this new program.
However, PLEASE NOTE that any debtor in any bankruptcy chapter (7, 13, or even 11) is eligible to apply for a mortgage modification. Bankruptcy doesn’t change that. But it would be done the traditional way by contacting the mortgage servicer and filling out paperwork as it’s always been done if the mortgage company doesn’t agree to use the DocuMod portal. It would also be done without court supervision. Less than ideal, for sure, but not hopeless. Our firm has been successful at getting mortgages modified this way for several years. They key is keeping a good record of all communications with the mortgage company, especially regarding document submission. When they say they didn’t get it–and they will–you need to be able to prove that they did.
It’s our hope that this program works as well here as it has in other bankruptcy districts and that our other two bankruptcy judges adopt this program.