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Central District of California Loan Modification Management Pilot Program Streamlines Review Process

Posted By USFN, Wednesday, December 18, 2019



by Joseph C. Delmotte, Esq. and Gilbert R. Yabes, Esq.
Aldridge Pite, LLP
USFN Member (CA, GA, HI, ID, NY, OR, UT, WA)

Over the past several years, a growing number of districts across the country have identified an opportunity to provide an additional avenue for borrowers to pursue their loss mitigation options under the supervision of the bankruptcy courts resulting in the creation of numerous programs. Although the broad purpose of these loss mitigation programs is the same and there are similarities in the way they’re structured and implemented by the bankruptcy courts, there are also a number of differences amongst the programs. The states and districts which recently adopted such programs have had the benefit of observing more long-standing programs to determine what works and what does not in order to implement more functional and efficient programs.

The United States Bankruptcy Court for the Central District of California is one of the recent districts to implement a court supervised loss mitigation program and in so doing; it has incorporated several distinct features which offer the potential for an improved, more streamlined review process.  As indicated by its name, the Loan Modification Management Pilot Program (“LMM Program”) is currently only a pilot program with a small number of selected judges participating though the program recently expanded to include several additional judges. According to the LMM Program procedures, the goal of the program is to facilitate communication and the exchange of information in a confidential setting and to encourage the parties to finalize a feasible and beneficial agreement under the supervision of the Bankruptcy Court for the Central District of California.

One of the primary distinguishing characteristics of the LMM Program is the role of the program manager. The person in this role is both experienced in bankruptcy loss mitigation and actively involved from the commencement of the program in facilitating the exchange of information and documentation between the parties to ensure the process moves forward in an expeditious manner. Furthermore, unlike many other districts which appoint a mediator at the outset and permit multiple mediation hearings, the LMM Program does not appoint a mediator unless mediation is requested at the completion of the review process which likely results in fewer required mediation hearings.

The LMM Program also utilizes mandatory forms for its motions and orders which simplifies the process required to commence and terminate the LMM Program, as well as the process for obtaining court approval to enter into a finalized loan modification agreement. All of these factors combine to make the LMM Program one of the most efficient and user-friendly court supervised loss mitigation programs available.

Given their popularity and unique ability to provide a transparent yet confidential forum to conduct the loss mitigation review process under the supervision of the bankruptcy courts, loss mitigation programs similar to the LMM Program in the Central District of California will likely continue to expand to other districts and states across the country. Furthermore, if the LMM Program is any indication, bankruptcy courts interested in adopting similar loss mitigation programs in the future will have a strong vantage point to design better, more efficient processes based on their ability to analyze and review the successful features of currently existing programs. 
 


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Tags:  Bankruptcy  Loan Modification Management Pilot Program  United States Bankruptcy Court for the Central Dis 

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