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Mortgage Modification Procedures Established in Bankruptcy Courts forNorthern District of California

Effective August 1, 2015, most bankruptcy courts adopted sweeping new mortgage modification procedures, which can be viewed here.

This impressive set of new procedures was tested in Florida and certain other jurisdictions but is entirely new to the Northern District. Specifically, the procedures provide for monitoring and mediation of mortgage modifications based upon lender consent. Most major lenders regularly consent and have pre-registered with the electronic documentation system, which is key to the functioning of the program.

The program applies to all open and new chapter 13 bankruptcy cases in participating courts. It may also be applied in individual chapter 11 bankruptcy cases by special request.

The new procedures streamline the processes under HAMP, HARP, Fannie Mae, Freddie Mac, FHA, VA, private bank programs and other mortgage modification procedures. It also eliminates several common roadblocks to mortgage modification approval and dealing with mortgage modification denials, including document completion, income and expense analysis, forbearance and balloon payments, reamortization, cure of arrears and due diligence and title problems.

A key advantage is the combination of mortgage modification with bankruptcy relief, adding opportunities for discharge of unsecured debts, reorganization of priority debts and resolution of title and lien-priority issues. This combination is likely to provide relief for thousands of debtors who were poorly served by either process standing on its own. 

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