NACTT Mortgages Best Practices

The National Association of Chapter Thirteen Trustees put together a committee of Chapter 13 trustees, mortgage servicers, mortgagees and creditors' and debtors' counsel to come up with best practices for servicing mortgages in Chapter 13. Click here for the NACTT Mortgages Best Practices on the NACTT's website. The best practices are repeated below:

MORTGAGE BEST PRACTICES

NACTT Mortgage Committee

The NACTT Mortgage Committee is comprised of Chapter 13
trustees, mortgage servicers, mortgagees and creditors' counsel. The committee's
mission is to foster communication between the parties, resolve differences and
to recommend best practices of conduct for all stakeholders. Our goal is to
improve the bankruptcy system. Although the committee recommends the practices
set forth below, we recognize that there may be other acceptable procedures.
Therefore, we remain open to further discussion and review.

BEST
PRACTICES FOR TRUSTEES and MORTGAGE SERVICERS IN CHAPTER 13

If
servicers/mortgagees include a flat fee cost in the proof of claim for review of
the Chapter 13 plan prior to confirmation and for the preparation of the proof
of claim, it should be reasonable and fairly reflect the attorney's fee
incurred.

If Servicers/mortgagees include attorney fees for pursuing
relief from stay, such fees should be clearly identified as well as how such
fees are to be paid in any agreed order resolving a Motion for Relief from Stay
or any other matter before the court.

Servicers/mortgagees should
analyze the loan for escrow changes upon the filing of a bankruptcy case and
each year thereafter. A copy of the escrow analysis should be provided to the
debtor and filed with the Bankruptcy Court by the servicers/mortgagee or their
representative each year.

Servicers/mortgagees should not include any
pre petition cost or fees or pre petition negative escrow in any post petition
escrow analysis. These amounts should be included in the prepetiton claim amount
unless the payment of such fee or cost was actually made by the servicer.

Servicers/mortgagees should attach a statement to a formal notice of
payment change outlining all post petition contractual costs and fees not
previously approved by the court and due and owing since the prior escrow
analysis or date of filing whichever is later. This statement need not contain
fees, costs, charges and expenses that are awarded or approved by the Bankruptcy
Court order. In absence of any objection or challenge to such fees, the trustee
should take appropriate steps to cause such fees to be paid as part of Debtor's
Chapter 13 plan.

Servicers/mortgagees should supply and maintain a
contact for debtor's counsel and trustee's for the purpose of restructuring,
modifying a mortgage, or other loss mitigation assistance including a short sale
or deed in lieu of foreclosure. The contact should be an individual or group
with the ability to implement or assess with objective criteria a loss
mitigation modification after filing of a chapter 13 petition with the goal of
keeping the Debtor in the house and the success of the bankruptcy.

Mortgage servicers should provide a dedicated phone line and contact for
Chapter 13 Trustee inquiry use only.

Mortgage servicers should monitor
post petition payments. If the mortgage is paid post petition current then the
servicers/mortgagees should not seek to recover late fees. No late fees should
be recovered or demanded for systemic delay but should be limited to actual
debtor default.

Pre petition payments should be tracked as applied to
pre petition arrears, post petition payments should be tracked as applied to
post petition ongoing mortgage payments.

Servicers/mortgagees should
file a notice and reason of any payment change with the court and provide same
to the Debtor

Servicers are required to file with court a notice of any
protective advances made in reference to a mortgage claim, such as non escrow
insurance premiums or taxes. Such notice should be provided to the debtors and
filed with the court.

Servicers/mortgagees should review the Trustee web
site or NDC for payment discrepancies with their system prior to the filing of a
Motion for Relief from Stay in Trustee pay jurisdictions.

Servicers/mortgagees should review the Trustee web site or NDC at the
close or discharge of the bankruptcy for payment discrepancies with their system
in Trustee pay jurisdictions.

Servicers/mortgagees should clearly
identify if the loan is an escrowed or escrowed loan and break out the monthly
payment consisting of Principal, Interest, Escrow and PMI components.

Servicers/mortgagees should identify nontraditional mortgage loans in
their proof of claims. Loans with options should identify on the proof of claim
the type of loan as well as the various contractual payment options available
during the bankruptcy to the borrower/Debtor.

Trustees should initiate a
communication with mortgage servicers when questions arise in a review of a post
petition escrow analysis.

United States Trustees and Trustee Education
Network should modify the requirements of the financial management class
regarding adjustable rate mortgages, the calculation of mortgage escrows and, in
particular, the potential of increased mortgage payments resulting from
increased taxes, interest rate hikes and/or mortgage premiums.

Trustee
voucher checks, check stubs or vouchers provided with any other form of payment
contain the following information, except to the extent prevented from doing so
by local rule:


1. The Name of the debtor and case number.


2. The trustee's claim number.


3. The mortgagee's
account number (to the extent provided on the proof of claim).


4. If
the mortgagee account number is not available, e.g. not contained on the proof
of claim, at least one other piece of identifying information e.g., property
address.


5. The amount of the payment.


6. Whether the
payment is for the ongoing mortgage payment or the mortgage arrearage.


7. If for the mortgage arrears, the balance owing on the arrears
claim after application of the payment.


8. If the trustee has set up
a separate claim for post-petition charges of the mortgagee, that the voucher
clearly identify that fact.


9. If any portion of the payment on
arrears is intended to pay interest on the mortgage arrears, the amount of that
interest portion of the payment.


10. If the mortgage is to be paid
off during the bankruptcy under the confirmed plan through payments by the
trustee, e.g., a total debt claim, the portions of each payment which represent
principal and interest, and the balance owing on the claim after application of
the payment.

There is a movement among servicers to redact all but the
last four numbers of the mortgagors' loan numbers on proofs of claim, because
those claims are public records. While mortgage servicers in general want as
much information as possible on the vouchers, the mortgage servicers on the
Working Group felt that if the voucher had the bankruptcy case number, the name
of the debtor and the redacted loan number from their filed claim, they would be
able to post the payment. Using the account number to the extent provided in a
filed proof of claim also insures that trustees are not disclosing information
on their website that is not already disclosed in the public record.

Voucher Narrative re Payments: The Working Group places particular
emphasis on No. 6 above. The voucher should identify if a payment is for the
regular mortgage payment or for the mortgage arrearage in consistent language.
While Chapter 13 trustee disbursement applications focus on the claims to be
paid, mortgage servicer computer systems focus on their mortgagor account
number. Posting of receipts, whether or not the account is in bankruptcy, is
typically handled by a Cash Processing group or department of the mortgage
servicer. Those departments focus on the account number on the voucher and the
narrative on the voucher for that account number to determine if the payment is
for the regular mortgage payment or the mortgage arrearage.

Mortgage
Arrearage Claims: When filing their initial proofs of claim, mortgage servicers
should state their mortgage arrearage up to the date of the filing date of the
bankruptcy petition, unless the plan or trustee indicates otherwise, or local
rule provides otherwise. The Chapter 13 Trustee will use the mortgage arrearage
claim to set up the arrearage balance on the claim, which in turn will show up
as the "balance" on the voucher check, absent objection to the claim.