Mortgage Modification and Chapter 13 Bankruptcy

08/05/10


The new HAMP rules that went into effect June 1, 2010 greatly increased the attractiveness of Chapter 13 as a platform to obtain a HAMP mortgage modification. Basically, by filing both a HAMP mortgage modification and a chapter 13 bankruptcy at the same time, one may be able to do all of the following at the same time:

  1. Obtain a modification of the first mortgage
  2. Avoid the second mortgage (ie. "equity line") if it is "underwater" due to a fall in value
  3. Reorganize unsecured debt

The new HAMP guidelines provide the following new provisions:

  • Bankruptcy - Homeowners in chapter 13 are required to be considered for HAMP upon request.
  • Chapter 13 Plan - The chapter 13 plan may provide for anticipated or estimated HAMP modified mortgage payment which is normally 31% of gross income.
  • Waiver of Application - The mortgage servicer may accept the bankruptcy schedules in lieu of the Request for Modification and Hardship Application to determine eligibility for HAMP.
  • Cooperation Required - Mortgage servicer must work with the homeowner to obtain Bankruptcy Court approval.
  • Waiver of Trial Period - Mortgage servicer may waive trial period mortgage modification and provide a permanent mortgage modification if the chapter 13 plan had been providing the amount of the proposed modified mortgage payment.
  • Investor Approval - Mortgage servicers must use "reasonable efforts" to obtain approval from investors to participate in HAMP.
  • Reconsideration - Ability to seek reconsideration of HAMP denial.
Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983

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