Our clients were scheduled to have their Chapter 13 Plan confirmed at 10:00 AM last Friday. The Judge's calendar was posted and there were over 60 clients scheduled for the same time. Out of 28 pages, my clients were listed on page 22. Unfortunately, the way the calendar works, you have to be there on time and you have to wait until your case is called.
Having over 3 hours to observe the other cases being called on the Chapter 13 calendar it was clear that most of the activity involved "loss mitigation" or loan modification negotiations.
The Southern and Eastern Districts of New York have these wonderful loss mitigation programs where under the clients lender is forced to negotiate a loan modification for the client as part of a Chapter 13 bankruptcy filing. The lender must appear through counsel and explain why it has not offered a modification that is reasonable.
HAMP and the guidelines come up frequently as does Net Present Value. What is clear is that the lenders have some latitude in working with these guidelines in offering reduced payments. Observing Judge Drain dealing with these loss mitigation issues over a three hour period, it was clear that he wanted both the lender and the debtor to make good faith efforts. Judge Drain stressed to the lenders and servicers (who by the way he thought should be dealt with differently), that they needed to offer their best options to the debtors. He frequently brought up the concept of it not making much sense for a bank to foreclose if they were going to lose money on that foreclosure and could avoid it if they extended better terms to the debtors. He also stressed to the debtors that if they did not have the ability to make payments under a modified mortgage that they should consider using their income for other more important purposes, like buying food, and not wasting those funds on a house that is under water and for which they have no hope of continuing payments.
Judge Drain was very impressive as a compassionate member of the judiciary who gave each debtor plenty of latitude within the realm of what was reasonable. He dealt with attorneys and debtors with respect and concern.
It is clear that in the Southern and Eastern Districts of New York that clients requiring help with potential foreclosures should take advantage of the judicially mandated loss mitigation procedures that are in place.