• CRAMDOWN Revision -- Homeowner Affordability and Stability Plan
  • March 23, 2009 | Author: Kirsten B. Wegner
  • Law Firm: Patton Boggs LLP - Washington Office
  • (1) Good Faith Provision - Limiting Homeowner Ability to Ask Bankruptcy Judge for Help if They Have Already Received or Been Offered a Loan Modification Plan That Lowers Payments to Obama Administration Criteria Level. addition of a debtor good faith provision that the court must determine whether a reduction of the principal of the loan is made in good faith, including whether the holder of the claim has offered to the debtor a qualified loan modification that would enable the debtor to pay debts and the loan without reducing the principal amount

    (2) Preference for Judges to Reduce Interest Rate Rather Than Principal. a refinement to the ability of courts to modify terms and conditions of mortgages -- such that judges would be permitted in certain instances to approve plans that reduce interest rates but not the principal where the debtor’s income would be in accordance with the Administration’s Homeowner Affordability and Stability Plan (details about which to be released today);

    (3) Homeowner to Share With Lender Any Profit From Eventual Sale of Home if Bankruptcy Judge Lowers Principle Balance. The amendment includes refinements to the sliding scale within five years after the modification is the residence is sold in terms of percentages of profit-sharing of the difference between the sales price and amount of the claim; and

    (4) "Qualified Loan Modification". The amendment refines the definition of "qualified loan modification" to mean a loan modification agreement made in accordance with the guidelines of the Obama Administration's Homeowner and Stability plan (as expected to be implemented today) that satisfies other criteria including [paraphrasing here] a reduction in debtor's payment according to certain criteria, requirement of no fees or charges to be paid by the debtor to obtain modification, and one that permits the debtor to continue to make payments under the modification agreement notwithstanding the filing of a case.