Central District Consumer Bankruptcy Attorney's Association

FYI
Hank
Sent: Monday, January 14, 2008 14:52
To: Sections: Bus Law Insolvency Constituency List
Subject: House Committee Approves Bill Allowing Modification of Certain Home
Mortgages Through Chapter 13 Bankruptcy
Insolvency Law Committee - Business Law Section of the State Bar of
California
Bankruptcy e-Bulletin
Donna T. Parkinson
Chair
Parkinson Phinney
400 Capitol Mall, 11th Floor
Sacramento CA 95814
916-449-1444
FAX 916-449-1440
donna@parkinsonphinney.com
Christopher Celentino
Co Vice Chair
Duane Morris LLP
101 W. Broadway Suite 900
San Diego CA 92101
619-744-2200
FAX 619-744-2201
ccelentino@duanemorris.com
Ellen Friedman
Co Vice Chair
Friedman Dumas & Springwater LLP
150 Spear Street, Suite 1600
San Francisco, CA 94105
415-834-3800
FAX 415-834-1044
efriedman@friedumspring.com
January 14, 2008
Dear Insolvency Law Committee Constituency List Members:
Under current law, Section 1322(b)(2) of the Bankruptcy Code prohibits
modification, through a Chapter 13 plan, of a claim that is secured by real
property that is the debtor's primary residence.
On December 12, 2008, the House Judiciary Committee approved , HR
3609, which would allow borrowers under certain subprime and other specified
residential real property mortgages to substantially modify the terms of
their loans through a Chapter 13 bankruptcy plan.
HR 3609 would eliminate the prohibition in Section 1322(b)(2) only
with respect to residential real property mortgages that : (i) are
"subprime" mortgages (generally defined as mortgages with an annual
percentage rate of more than 3% above the yield of U.S. Treasury securities
of comparable maturity, or more than 5% above the comparable U.S. Treasury
yield in the case of subordinate mortgages) and other "nontraditional" loans
(generally defined as negatively amortizing mortgages or loans with
interest-only payments, but excluding reverse mortgages and home equity
lines of credit), (ii) are the subject of a notice that a foreclosure may
be commenced, (iii) were first incurred from January 1, 2000 to the date of
enactment of the legislation; and (iv) debtors seek to modify as otherwise
permitted in Chapter 13 bankruptcy cases filed within seven years after the
enactment of the legislation.
Such mortgages could be modified in the following ways through a
Chapter 13 plan: (1) reducing the amount of the debt to the value of the
property; (2) waiving otherwise applicable early payment or prepayment
penalties; (3) prohibiting, reducing or delaying adjustments to the interest
rate of an adjustable rate loan; (4) extending the maturity until the later
of the remaining term or 30 years after the filing of the bankruptcy case;
and (5) requiring the accrual of post-petition interest at a fixed rate
equal to the Federal Reserve's conventional mortgage rate plus a "reasonable
risk premium."
HR 3609 would also change a number of related provisions under Chapter
13 of the Bankruptcy Code, including adding new Section 1322(c) to provide
that while a Chapter 13 case is pending, no post-bankruptcy fees, costs, or
charges may be added to a debt that is secured by the debtor's principal
residence unless such amounts are contractually authorized, are permitted
under applicable non-bankruptcy law, are reasonable, and the secured
creditor gives timely notice thereof to both the debtor and the Chapter 13
bankruptcy trustee.
The bill has now been sent to the full House for consideration.
The text of the legislation is available at
http://www.abiworld.org/pdfs/HR3609_substitute.pdf
Thank you for your continued support of the Committee.
Best regards,
Gary M. Kaplan
Howard Rice Nemerovski Canady Falk & Rabkin
Member of the Insolvency Law Committee
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FYI

Hank

-----Original Message-----From: Mark Porter
[mailto:MPorter@Fenwick.com]Sent: Monday, January 14, 2008
14:52To: Sections: Bus Law Insolvency Constituency
ListSubject: House Committee Approves Bill Allowing Modification of
Certain Home Mortgages Through Chapter 13 Bankruptcy
Insolvency Law Committee - Business Law Section of the State Bar of
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