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SB94: Loan mods and collecting fees
The scenario described in the brown bag seminar would be (roughly) as follows:
1. Debtor has income sufficient to pay a mortgage payment under HAMP guidelines (for example, 31% of debtor's gross income $2,000/month).
2. $2,000/month would be sufficient to come up with a payment that would qualify under HAMP guidelines regarding maximizing NPV.
3. Debtor's current mortgage payment is $3,000 per month.
4. Debtor has a large amount of arrearages (eg: $60,000+), so plan payment would need to be $1,000+ to pay arrearages in a five year plan.
5. Mortgage payment of $3,000 + $1,000+ for plan payment is clearly infeasible given debtor's budget.
In this example, if Debtor files a plan proposing to pay $2,000 month into the plan for the lesser of six months or until a loan modification is approved, then it is at least a possibility that the attorney could get paid for assisting with the loan modification work.
If loan mod is ultimately approved, plan can be amended to remove arrearages, J can be amended to reflect modified mortgage payment amount, attorney can file fee app for work done on the loan mod and, if fees are approved by judge, attorney can get paid through the plan. The plan could be stepped down once the arrearages are recapitalized.
If the loan mod is denied, the plan can be amended to surrender the property and step down the plan payments to reflect debtor's new housing expense (ie: for rent payment). Attorney can still file fee app for the work done on the loan modification. To the extent that this results in more money in the plan, this could also result in higher payments to other creditors.
Obviously the "step-down plan" would not work with all judges or all trustees. However, if the Trustee is receptive to a step down plan, and if the judge is inclined to accept a modified mortgage declaration and award reasonable attorneys' fees for the loan modification work, then there is at least a possibility that the attorney would get paid for the work--even if the loan mod was ultimately unsuccessful.
The step-down plan has at least three apparent benefits:
1. It forces the debtor to make a meaningful payment while their loan mod is under review. This demonstrates that the debtor is acting in good faith, is serious about seeking a loan modification and is not just filing an infeasible Chapter 13 case and asking for repeated continuances to buy time.
2. It subjects the attorneys' fees to judicial review. I understand that there are some attorneys (not CDCBAA members, I am sure) who try to get around SB 94 by charging huge fees for frivolous litigation in an effort to stall foreclosure--with no real intention of assisting their clients to keep the home long-term. When the litigation ultimately fails, the final step is to file a clearly infeasible Chapter 13 case simply to buy even more time. In some situations, clients can afford to pay excessive fees to these attorneys since the clients are not paying their mortgages. By paying these funds into a Chapter 13 plan instead, the debtor allows the court to control how the funds are ultimately disbursed--whether to the debtor's attorney for fees, to the mortgage creditor to pay arrearages or to other creditors pursuant to the plan.
3. The debtor's Chapter 13 counsel (who is in a good position to evaluate the debtor's financial condition, determine the likelihood that a loan mod will be approved, etc.) can control and supervise the loan mod application process and may be able to get paid for doing so.
>
> The services need to be complete. Not necessarily successful. Just try to get paid if not successful.
> Sent via BlackBerry by AT&T
>
> -----Original Message-----
> Sender: cdcbaa@yahoogroups.com
> Date: Mon, 8 Apr 2013 13:56:58
> To:
> Reply-To: cdcbaa@yahoogroups.com
> Subject: [cdcbaa] SB94: Loan mods and collecting fees
>
> This came up at Ms. Dockery's brown bag on Friday. There seems to be a
> perception that attorneys cannot be paid unless the loanmod is a success.
> This seems to be false.
>
> Here's a statement on that from the California State Bar.
>
> http://ethics.calbar.ca.gov/Portals/9/d ... 011_%20PAW.
>
> See paragraph 7 in the FAQ.
> Hale
>
The post was migrated from Yahoo.
The services need to be complete. Not necessarily successful. Just try to get paid if not successful.
Sent via BlackBerry by AT&T
Sender: cdcbaa@yahoogroups.com
Date: Mon, 8 Apr 2013 13:56:58
To:
Reply-To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] SB94: Loan mods and collecting fees
This came up at Ms. Dockery's brown bag on Friday. There seems to be a
perception that attorneys cannot be paid unless the loanmod is a success.
This seems to be false.
Here's a statement on that from the California State Bar.
The post was migrated from Yahoo.
Great summary.
On Mon, Apr 8, 2013 at 1:56 PM, Hale Andrew Antico wrote:
> **
>
>
> **
> This came up at Ms. Dockery's brown bag on Friday. There seems to be a
> perception that attorneys cannot be paid unless the loanmod is a success.
> This seems to be false.
>
> Here's a statement on that from the California State Bar.
>
>
> http://ethics.calbar.ca.gov/Portals/9/d ... %20PAW.pdf
>
> See paragraph 7 in the FAQ.
> Hale
>
>
>
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Great summary. On Mon, Apr 8, 2013 at 1:56 PM, Hale Andrew Antico <bk.lawyer@gmail.com> wrote:
This came up at Ms.
Dockery's brown bag on Friday. There seems to bea perception that
attorneys cannot be paid unless the loanmod is a success. This seems to be
false.
Here's a statement
on that from the California State Bar.
http://e
The post was migrated from Yahoo.
This came up at Ms. Dockery's brown bag on Friday. There seems to be a
perception that attorneys cannot be paid unless the loanmod is a success.
This seems to be false.
Here's a statement on that from the California State Bar.
The post was migrated from Yahoo.