Given the way they behave, you’d think mortgage servicers actually flew a pirate flag over their operations.
They cash your check for the mortgage payment, then who knows what they do with it and what they credit it to.
Outside of bankruptcy, screw ups in handling your payments are a breach of the contract between you and the lender. The servicer is the agent for the lender.
Good luck in getting the real story about what’s going on, and call up a miracle to get it fixed.
But, if you’ve been through Chapter 13, you’ve got a teammate in the fight to get proper credit for your payments: the bankruptcy judge.
Because in, or after, a Chapter 13, getting the loan accounting wrong violates federal bankruptcy law.
And bankruptcy judges are generally not pleased to find that loan servicers are sloppy or indifferent about following the law.
Borrower bites bank
You see, banks violate the bankruptcy discharge if they don’t credit Chapter 13 plan payments to a home mortgage properly.
Violating the discharge injunction exposes them to sanctions, including payment of the debtor’s attorneys fees and actual damages.
One of the few consumer-friendly provisions of bankruptcy “reform” ten years ago was this addition to Bankruptcy Code Section 524.
(i) The willful failure of a creditor to credit payments received under a plan confirmed under this title, unless the order confirming the plan is revoked, the plan is in default, or the creditor has not received payments required to be made under the plan in the manner required by the plan (including crediting the amounts required under the plan), shall constitute a violation of an injunction under subsection (a)(2) if the act of the creditor to collect and failure to credit payments in the manner required by the plan caused material injury to the debtor.
The loan servicer got caught violating the discharge in Scott v. Caliber Home Loans, Inc. (In re Scott) (Bankr. N.D.Okla., 2015).
After agreeing the homeowner was current on the mortgage at the end of the Chapter 13, weeks later Caliber announced that the debtor owed $1700 in unpaid fees and charges and threatened foreclosure.
Not so fast, the bankruptcy judge said, and held that Caliber had willfully violated the discharge. Get out your checkbook, Caliber.
Borrowers empowered by new rule
Mortgage accounting after bankruptcy was such a mess that a Chapter 13-specific rule was adopted in 2012, Rule 3002.1 requires a mortgage creditor to give notices of payment changes and fees added to the loan during the Chapter 13 and to file an accounting if it contends the homeowner isn’t current at the end of the case.
That’s where Caliber got caught. They responded at the end of the case as the rule required, but then took a contrary position immediately after the case was over.
I don’t know whether to see Rule 3002.1 as a blunderbuss or cutlass to be used against piratical banks, but I certainly feel better armed in the conflict with servicers over mortgage accounting.
Outside of bankruptcy
Getting information from mortgage lenders has been made somewhat easier by rules enacted by the CFPB under Dodd-Frank. The borrower can now request information about their loan, without having identified a problem in advance.
More on mortgage requests for information.
Ho, ho, ho.
Pirate with blunderbuss courtesy of Steve and Flickr
