Confiabilidad del Instrumento para Evaluar el Clima Laboral

5.8.1 Chapter 7

The key to successful management of a Chapter 7 bankruptcy involving a current mortgage loan is to closely monitor the case and take appropriate action, when necessary, to ensure

that no pleadings are filed or other actions taken that would adversely affect the Agency’s security interest in the property. For example, if the borrower intends to retain possession of the property, the Servicer should attempt to enter into a Reaffirmation Agreement with the borrower. The Servicer must closely monitor the payment status of the mortgage loan and, if it becomes 60 days delinquent, refer it to a bankruptcy attorney within 2 weeks from the 60th day of delinquency.

The key to successful management of a Chapter 7 bankruptcy involving a delinquent mortgage loan is determining the borrower’s intentions for the security property as soon as possible and obtaining either payments or bankruptcy release in a timely manner. If the borrower submits payments to reinstate the loan, the Servicer should attempt to enter into a Reaffirmation Agreement.

5.8.2 Chapter 11

When a Chapter 11 bankruptcy is filed, the borrower formulates a plan of reorganization to provide for the repayment of the creditors. Generally, the borrower remains in control of his/her affairs as a borrower-in-possession and has most of the same powers and duties of the court-appointed trustee.

5.8.2.A The Reorganization Plan

The key to the successful management of a Chapter 11 bankruptcy—regardless of whether the mortgage loan is current or delinquent—is ensuring that NCHFA’s interest is adequately protected pending the filing of the Reorganization Plan. For this reason, the Servicer must refer a Chapter 11 case to a bankruptcy attorney within two weeks of the filing of the bankruptcy case and direct that the attorney file a Notice of

Appearance. Once the proposed Plan of Reorganization (which describes the term for repayment of all claims against the borrower) is filed, the bankruptcy attorney must review it and the Disclosure Statement. The Disclosure Statement describes the effect and viability of the proposed Reorganization Plan on creditors and compares the proposal to the results that will probably be obtained under Chapter 7 proceedings for the same individual. The review of these documents is critical since they reveal whether the Reorganization Plan seeks to modify the terms of the mortgage loan. A borrower’s request for cramdown in a non-routine litigation must be reported immediately to NCHFA. The attorney must actively participate in the plan’s

confirmation process and file an objection to any plan that modifies the right NCHFA has under the security instrument or that is not otherwise in NCHFA’s best interest. When appropriate, the bankruptcy attorney must object to the Disclosure Statement in order to preview the court’s ruling on an important issue or to prevent the

confirmation of the plan. In cases in which the borrower will not receive a discharge upon confirmation of the Reorganization Plan, the attorney must attempt to negotiate termination of the automatic stay upon confirmation of the Reorganization Plan.

5.8.2.B Servicing After Confirmation of the Plan

When a Reorganization Plan that modifies the original terms of a mortgage loan is confirmed, the Servicer must send either the mortgage loan modification documents or a copy of the Reorganization Plan that sets out the modified terms of the mortgage loan to NCHFA.

Generally, NCHFA will change its investor reporting system records to reflect the secured portion of the debt and establish a receivable amount for the unsecured portion of the debt.

In Chapter 11 cases, the Bankruptcy Code provides that borrowers generally will not receive a discharge until completion of all payments under the Plan. The automatic stay will remain in effect after confirmation until the borrowers receive a discharge or the case is closed or dismissed. In cases where the automatic stay remains in effect, the stay can be lifted or the case can be dismissed if the borrower defaults under the provisions of the Reorganization Plan. As a result, the Servicer must keep the case active in its system until the discharge is entered. If the borrower becomes 60 days delinquent in making the payments required under the Reorganization Plan, the Servicer must either refer the case to a bankruptcy attorney within two weeks of the 60th day of delinquency or, if already referred, advise the bankruptcy attorney to seek relief from the automatic stay or dismissal of the case. The Servicer remains responsible for ensuring that all previous payments have been properly applied and for verifying the borrower is 60 days delinquent before sending the referral. When the automatic stay is lifted or the case is dismissed for a delinquent mortgage loan, the Servicer must

immediately send any required breach letter to the borrower (if not previously sent) and refer the mortgage loan to an attorney to initiate or resume foreclosure proceedings, keeping in mind the possibility of arranging a foreclosure prevention alternative.

5.8.3 Chapter 13

When a Chapter 13 bankruptcy is filed, the borrower attempts to reorganize his financial affairs by proposing a repayment arrangement that dedicates all of his disposable income over a specified period of time to the repayment of creditors. A court-appointed trustee

supervises the bankruptcy by monitoring all aspects of the case and by collecting and disbursing plan payments to the creditors.

5.8.3. A. The Reorganization Plan

The key to the successful management of a Chapter 13 bankruptcy – regardless of whether the mortgage loan is current or delinquent – is assessing the feasibility of the borrower’s Reorganization Plan and requesting relief from the automatic stay and/or dismissal of the case if the plan is not feasible or the borrower fails to make mortgage payments as provided by the plan. The Servicer or attorney should review the

borrower’s Statement of Affairs and Schedule of Assets and Liabilities to verify that the borrower’s Reorganization Plan is not only feasible, but also is proposed in good faith. The plan generally must not modify the terms of the mortgage loan in any way; it should result in the full repayment of the mortgage loan arrearage (including any applicable costs) within a reasonable period of time and provide for repayment of the proper claim amount, which is the amount required to fully reinstate the mortgage loan, including all recoverable interest and charges.

If the terms of the Reorganization Plan are unacceptable and the borrower is not willing to amend the plan to adequately address the unacceptable provisions, the bankruptcy attorney must file an Objection to Confirmation of the Plan or a motion to dismiss the case. Reasons for filing an objection or a request for dismissal may include, among other things, the failure of the plan to provide for complete repayment of all arrearages within five years, the failure of the borrower to make post-petition mortgage payments, a lack of feasibility in the terms of the plan, a bad faith filing (multiple bankruptcies involving the same property), or inclusion of an improper provision for modifying the terms of the mortgage loan (a cramdown) as a part of the plan.

5.8.3. B Pre-Petition and Post-Petition Payments

The Reorganization Plan must require the borrower to remain current on all contractual mortgage obligations coming due after the date of the bankruptcy petition, while curing the pre-petition arrearages under the terms of the repayment arrangement. The Servicer will need to monitor and separately account for all pre-petition and post- petition payments. If trustee payments to the Servicer are not received timely, the Servicer must access the trustee’s website or contact the trustee’s office to determine if the borrower is in compliance with the requirements of the plan.

The Servicer must maintain detailed records of any payments it receives during the confirmation process: the type of payment (pre-petition or post-petition), the amount received, the receipt date, the source of the payment, and the allocation of the payment (principal, interest, late charges, etc.). The Servicer should generally hold any pre- petition payments it receives as “unapplied” funds until an amount equal to the full monthly payment due under the Note is available for application to the mortgage loan balance.

The automatic stay can be lifted if the borrower defaults under the provision of the Reorganization Plan that requires the borrower to keep post-petition payments current. In addition, the case can be dismissed if the borrower is clearly unable to make the pre- petition payments required by the Reorganization Plan. If the borrower becomes 60 days delinquent in making the contractual post-petition payments, the Servicer must refer the case to a bankruptcy attorney within two weeks of the 60th day of delinquency to seek relief from the automatic stay. The Servicer is responsible for ensuring that all previous payments have been properly applied and for verifying that the borrower is 60 days delinquent before sending the referral.