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NACTT Annual Conference 2017

Posted By USFN, Monday, November 6, 2017
Updated: Monday, October 23, 2017

November 6, 2017

by Joel W. Giddens
Wilson & Associates, P.L.L.C.
USFN Member (Arkansas, Mississippi, Tennessee)

The National Association of Chapter Thirteen Trustees (NACTT) held its annual four-day conference in Seattle, Washington this past July. Mortgage issues continued to be a hot topic at the conference, with several interesting educational panels addressing them, as well as much useful dialogue between mortgage representatives, mortgage servicing attorneys, and Chapter 13 trustees. This article highlights a few of the educational offerings and events of interest to the mortgage servicing industry.

Meeting of Trustees, Servicers, and Attorneys
The conference began with the NACTT Mortgage Committee meeting. This group is comprised of several Chapter 13 trustees, servicer representatives, and their attorneys; it is a continuation of the efforts begun in 2004 to improve mortgage servicing in Chapter 13 bankruptcy cases. Participation is through monthly teleconferences, subcommittees on specific issues, and biannual in-person meetings — and is open to any interested mortgage servicer representative, bankruptcy attorney, or Chapter 13 trustee. (Contact the USFN Bankruptcy Committee for information about joining.) Topics that the mortgage committee addressed in Seattle included:

• Augmented claim codes and identifier information developed by the National Data Center (NDC) to aid mortgage servicers in compliance with the changes to the mortgage servicing rules under RESPA (i.e., modified periodic statements for borrowers in bankruptcy, beginning April 19, 2018). Development of the claim codes and identifier information changes are in their final stages and can be obtained by servicers through subscription to the NDC.
• CFPB Monthly Billing Statements — Several compliance issues were discussed, including the timing of when pre-petition claim information should be displayed on the statements (only after the proof of claim is filed or at some other time) and the information to include on statements for contested claims or contested lien strip-offs. On the latter issue, the consensus was that the best practice would be for local counsel to obtain specific language from the bankruptcy court in the order resolving the claim objection or lien strip-off action.
• Changes to Federal Rules of Bankruptcy Procedure (FRBP), Rule 3002.1 – This rule relates to post-petition bankruptcy notices for mortgages secured by borrowers’ principal residences in Chapter 13 cases. Servicers have had issues with compliance under the rule in filing timely notices of payment change for home equity lines of credit (HELOC) due to the fact that payments usually change every month. The current rule requires servicers to file a payment change notice for any and all changes, including HELOCs, even when the change may be for an amount less than one dollar. A proposal was approved by the committee (to be submitted to the Advisory Committee on Rules of Bankruptcy Procedure for consideration), which would provide for annual notices and reconciliation of HELOC accounts, rather than the monthly notices.
• A proposal to standardize the loan modification approval process in Chapter 13 bankruptcy.

NACTT Presentations and Panels
Director of the Administrative Office of the U.S. Trustee program, Clifford J. White III, provided opening remarks for the conference, as is customary for the NACTT annual meeting. The Office of the U.S. Trustee (UST) falls under the Department of Justice and is responsible for overseeing the administration of bankruptcy cases and private trustees, including Chapter 13 trustees. Director White’s remarks, as we move further away in time from the “mortgage meltdown,” appeared not to be focused as much on enforcement actions against mortgage servicers as on other issues. On the heels of the U.S. Supreme Court’s decision earlier this year in Midland Funding, LLC v. Johnson, 581 U.S. __, 137 S. Ct. 1407 (May 15, 2017), that filing proofs of claim for debt time-barred under state law did not constitute a violation of the Fair Debt Collection Practices Act (FDCPA), Director White urged trustees to remain vigilant in policing such claims, and he said that the UST’s program would continue to view such claims as an abuse of the bankruptcy process that harms debtors and legitimate creditors.

Another recent development, the legalization of marijuana in some states, also drew comments from Director White. He made it clear that the UST would not allow marijuana assets to be administered under any chapter of the Bankruptcy Code. In this respect, according to current U.S. Justice Department thinking, state laws regarding legitimacy of the marijuana trade are immaterial as far as federal bankruptcy laws are concerned. Whether a bankruptcy judge will agree with the UST’s office on this point is an open question.

While mortgage servicers and servicing practices in bankruptcy still garner attention from the UST for compliance with bankruptcy rules, other areas for bankruptcy abuse prevention are gaining the UST’s attention. These include debtor fraud (about 60 percent of the UST actions over the prior year), poor debtor attorney performance in representing their clients, and abuses committed by multi-state debtor law firms practicing remotely in out-of-state jurisdictions.

The NACTT offered many topical and informative educational sessions of interest to mortgage servicers: the annual Chapter 13 case law update, as well as panels on FRBP Rule 3002.1, mortgage servicer proofs of claim, plan completions in Chapter 13, and other mortgage issues that included guidelines for mortgage proofs of claim Form 410A. Perhaps the most interesting panel for all attendees was on the new plan form and the upcoming changes to the FRBP.

As most are probably aware, on December 1, 2017, debtors’ attorneys will be required to file Chapter 13 plans on either the plan form adopted by their local district or on the National Form Plan, Form 113 (if no local plan has been adopted by the district). Of the 94 federal judicial districts, only seven districts (thus far) have chosen to not adopt a local plan; they will use Form 113 (with the exception of the Northern District of Indiana, where debtors’ attorneys may choose the plan form to use). The good news for servicers is that after December 1, 2017, there will be fewer national variations of Chapter 13 plans to review. Of more immediate impact on mortgage servicers, as discussed by the panel, is the shortened proof of claim bar date effective December 1, 2017. Claims will be due 70 days from the petition date, with an additional 50 days to supplement claims with supporting loan documents (see FRBP Rule 3002(c)(7)).

The panel also discussed other rule changes impacting mortgage servicers. These included the necessity for secured creditors to file proofs of claim to receive distributions under the plan (FRBP Rule 3002(a)), the valuation of property in Chapter 13 plans (rather than by a separate motion for valuation) (FRBP Rule 3012), the termination of the automatic stay and co-debtor stay upon confirmation of plans for properties that debtors propose to surrender to creditors (FRBP Rule 3015.1(d)(4)), and the proper service of a Chapter 13 plan (stricter requirements due to the binding effect of plan confirmation on cramdowns and lien strip-offs) (FRBP Rule 7004).

American Bankruptcy Institute (ABI) Public Hearing
An additional component of this year’s meeting was a public hearing held by the ABI’s Chapter 13 committee of the Commission on Consumer Bankruptcy. The committee (a 23-member group of law professors, retired bankruptcy judges, in-house corporate counsel, as well as creditor and debtor attorneys) is charged with recommending improvements to the consumer bankruptcy system that can be implemented within its existing structure. These changes might include amendments to the Bankruptcy Code, changes to the Federal Rules of Bankruptcy Procedure, administrative rules or actions, recommendations on proper interpretations of existing law, and other best practices that judges, trustees, and lawyers can implement.

The commission heard testimony from ten panelists who have various roles in the bankruptcy system, including Chapter 13 trustees, creditor and debtor attorneys, and a representative from an employer’s trade association. The matters presented were at the discretion of each panelist. Several panelists advocated raising or eliminating the debt limitation set forth in 11 U.S.C. § 109(e) that prevents individual debtors from filing Chapter 13 cases instead of Chapter 11 cases because they are above the thresholds (currently $394,725 for unsecured debt and $1,184,200 for secured debt). Other items raised included eliminating the home mortgage anti-modification protection in 11 U.S.C. § 1322(b)(2), plus changing the discharge provisions of the Bankruptcy Code to allow for the discharge of some student debt obligations. This initial public hearing will be followed by others, after which the committee will ultimately prepare a final report with recommendations for changes.

Conclusion
The NACTT conference continues to provide opportunities for mortgage servicers and their attorneys to interact with Chapter 13 trustees, bankruptcy judges, and debtors’ counsel in an informal setting, along with many informative educational panels impacting Chapter 13 practice and mortgage servicing. Once again, the conference proved to be a valuable experience for bankruptcy practitioners and mortgage servicers — a place to come together to discuss the issues impacting our world.

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Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

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