How to Keep Your House during Bankruptcy with The Mortgage Modification Mediation (MMM) Program

On October 1, 2020, The Southern District of Ohio launched a new mortgage modification mediation (MMM) program to help homeowners deal with bankruptcy and foreclosure. This is excellent news, especially for active and potential Chapter 13 debtors. Mortgage Modification Mediation is a negotiation that can help homeowners keep their houses after declaring bankruptcy. A court-appointed mediator works with the homeowner who is filing for bankruptcy and their attorney to establish an amended mortgage agreement. This allows the individual to stay in their home instead of being forced to foreclosure. If you’re going through the mortgage modification mediation program and need assistance, the bankruptcy professionals at Sheppard Law Offices can help. We work extensively with a variety of different forms of bankruptcy and can help you stay in your home. 

This new mortgage relief program is available to all Chapter 7, 11, 12, and 13 debtors with an open case, whether pre-confirmation or post-confirmation. The goal of the mortgage modification mediation program is to facilitate communication, to exchange information confidentially, and to encourage parties to finalize a feasible and beneficial agreement under U.S. Bankruptcy Court supervision. This program helps those who have mortgage arrears who are in foreclosure or about to face foreclosure. It also helps those who are struggling to keep their mortgage payments current. In tandem with Chapter 13 bankruptcy which helps debtors resolve unsecured debt issues, this program can help lower an individual’s secured mortgage payments.

Whether in foreclose or not, the biggest problem consumers face in seeking a loan modification is the overwhelming amount of timely documentation needed by the lender to review their financial situation and to make a decision. Time and time again, we hear from people how lenders would lose paperwork, or the lenders would not work with them as the lenders needed more and more information. People get frustrated in the loan modification process. Now, although substantial information is still needed, people can utilize the help of a bankruptcy attorney to aid them in the loan modification process. 

In Florida, for example, where this program originated, 66% of loan modifications are approved through the bankruptcy court because of this MMM program. Compare that to state foreclosure proceedings where less than 5% of loan modifications are approved. The reason for the difference is that the consumer is usually not represented by counsel in most state foreclosure proceedings. Consumers routinely fail to provide all the necessary documents in a timely fashion to the lender. 

In the United States, we experienced a spike in foreclosure proceedings in the second quarter of 2020. Due to COVID-19, the federal government placed a moratorium on foreclosures based on federally backed mortgage loans, such as Fannie Mae, Freddie Mac, National Mortgage Settlement, and VA loans. States soon thereafter followed by placing a foreclosure moratorium on non-federal back mortgage loans. The federal moratorium ends on December 31, 2020. Most non-federal backed mortgage loan moratoriums have ended or about to end. For example, Stark County, Ohio ends their state foreclosure moratorium on Monday, October 5, 2020. The time is ripe for a significant increase in foreclosure proceedings to recommence or become initiated. We will start seeing an increase in foreclosures by first position lenders, subordinate position lenders, county treasurers, and even homeowner associations.

The mortgage modification mediation process exists to help mitigate this upcoming wave of foreclosures. There are a variety of benefits to the MMM program through the bankruptcy process, including:

  • It holds the parties accountable with timelines;
  • It resolves unsecured debt issues which are important for lenders as they consider the different available loan modification options – i.e. it helps with affordability by the debtor;
  • Borrower stays in the home with a new affordable mortgage payment;
  • Creditors can report a performing loan on their books

The lost document issue as referenced above becomes obsolete as the MMM Program makes the process transparent. The Bankruptcy Attorneys at Sheppard Law Offices can now utilize a portal where the lender’s attorney is in direct communication with the bankruptcy attorney to facilitate the loss mitigation process. Deadlines are set and must be followed; otherwise, the bankruptcy court gets involved. This will end the lender’s excuse of lost or missing documents. The lender will now be obligated to make a timely underwriting decision. This entire process takes approximately 150 days.

The mediator, also known as the facilitator is paid $500 split evenly between the lender and the debtor. Additionally, the debtor must pay $80 for administrative costs. The average attorney fees for this matter is $2,000, which a portion of that can be paid through the Chapter 13 plan.

While this program is available to many, if a person’s current monthly mortgage payment is more than 31% of gross income, it will be particularly helpful to the debtor. If the debtor is at imminent risk of default on their mortgage and they want to keep their home, this MMM program can help make a non-performing loan or a potentially non-performing loan into a performing new loan.

If you’re struggling with bankruptcy, unpaid debts or are contemplating the Mortgage Modification Mediation, the bankruptcy experts at Sheppard Law Offices can help. We work with you to determine the best course of action and make sure that it’s effective. Whether you’re dealing with foreclosure or bankruptcy, we can make it easier. Contact us today to learn more.