EFFECTIVE last year June 1, 2010, mortgage servicers can no longer deny a HAMP (Home Affordable Modification Program) loan modification simply because the homeowner filed a Chapter 7 or Chapter 13 Bankruptcy. If the homeowner or the homeowner’s attorney requests the modification, it must be treated like all other HAMP applications. To start the process, you must submit an “Initial Package” that includes information about your income and expenses as well as documents to be used as evidence of income. There is also a HUD hotline to call for counseling and additional information about the program. Due to the massive volume of inquiries and requests for a HAMP loan modification, however, homeowners are finding it difficult to communicate with their lender and thus making the process a very frustrating one at best.
The good news, of course, is that people who have filed bankruptcy or those who subsequently file bankruptcy after they’ve been approved for a HAMP trial period plan (supposedly a 3-month period but in practice, lasts much longer) no longer need to worry about being automatically denied relief under HAMP. This was not so previously. Prior to June 1, 2010, whether or not borrowers involved in bankruptcy were eligible for HAMP was the servicer’s sole discretion. I have personally seen a lot of cases where a homeowner was denied relief under HAMP just because they filed for bankruptcy relief. Now, you are no longer at the mercy of your servicer in such situation and need not worry about being discriminated against and your loan modification being jeopardized simply because you exercised your legal rights under federal bankruptcy law.
If you have filed Chapter 13 to stop a foreclosure, your lender will extend the trial period plan for as long as 60 days to obtain court approval or receive payments you’ve made to the Chapter 13 trustee. Normally, in a Chapter 13, your REGULAR mortgage payments resume right after filing. But if you’ve been put on a trial period under HAMP which requires (usually) a much lower payment, you can now continue to make these lower payments while in Chapter 13. As long as you’ve made these trial period payments, your lender cannot object to the confirmation of your Chapter 13 plan or move to dismiss your case on the grounds that you haven’t made your regular mortgage payments. A bankruptcy attorney will be able to explain this to you in more detail so that you can better understand how the new HAMP regulations provide you with additional legal rights and court protection. Be aware also that while you are being evaluated for HAMP, your servicer (if they are a HAMP program participant) cannot proceed with a foreclosure sale. But in order to do the evaluation, all required documents must be received prior to 7 days before the scheduled trustee sale date. Thus, if your servicer has already commenced foreclosure proceedings, make sure that you understand exactly where you are in the foreclosure timeline so that you know how much time you have left to act in order to protect your property.
Lastly, borrowers who have obtained a Chapter 7 discharge but who did not reaffirm their mortgage (A reaffirmation agreement is a new contract between you and the lender which reinstates your personal liability on the loan.) are still eligible for HAMP. This makes sense because oftentimes, one of the reasons that homeowners get denied a loan modification is because of their high debt-income ratio. By eliminating debts in Chapter 7, homeowners may be in a better position to afford a modified loan. Thus, both the lender and the homeowner benefit from this new policy.
If you are in foreclosure and need to find the best solution for your situation, let us help you understand all your options. Call us toll-free 1-866-477-7772 to schedule a free consultation. We have offices in Glendale, Cerritos, West Covina and Valencia.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.
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