July 23, 2015
by Ronald C. Scott and Reginald P. Corley
Scott & Corley, P.A. – USFN Member (South Carolina)
Previously, we wrote of the loss mitigation requirements of Judge Waites, the senior bankruptcy judge for the District of South Carolina. Earlier this year Judge Waites mandated that, for cases assigned to him, all loss mitigation reviews must occur on the Default Mitigation Management (DMM) portal. Additionally, this bankruptcy judge required that any loss mitigation activity occurring outside the portal must be reported to the court by the creditor. The judge’s rules also mandate that reviews outside the portal may only occur if the court enters an order allowing a non-portal review. [For further background, see South Carolina: Default Mitigation Management Portal (USFN e-Update, April 2015 Ed.)].
Judge Waites has reached out to the bankruptcy bar to advise that he is still being asked to approve loan modifications where the loss mitigation review was not in the DMM portal, and the court was not contacted by the creditor regarding loss mitigation activity outside of the portal. The judge has indicated that he may hold hearings to approve these loan modifications and require a representative from the creditor to appear at the hearing to explain why the creditor did not comply with the court’s requirements. Additionally, if a creditor does not comply with the requirements in the future, it is probable that the creditor will be sanctioned by the court for this conduct.
Because of the strict requirements and the possible consequences of non-compliance, it is suggested that when a borrower whose bankruptcy case is assigned to Judge Waites contacts his lender/servicer about loss mitigation, the lender/servicer should communicate with local counsel to report the loss mitigation discussions to the court. Additionally, if a loss mitigation application is sent to the borrower or if one is received from the borrower, it is advisable that the lender/servicer have local counsel file a motion for loss mitigation review outside of the DMM portal. Finally, if the lender/servicer has any current loss mitigation reviews pending outside of the portal involving borrowers in a bankruptcy case assigned to Judge Waites, best practice strongly suggests that the lender/servicer should take action to report this review to the court as soon as possible.
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