Abstract:
Mortgage creditors struggle to properly service mortgages in chapter 13 cases, as evidenced by numerous cases describing violations of Bankruptcy Rule 3002.1. The consumer bankruptcy system, however, is not calibrated to compel system wide compliance from these large, institutional repeat actors. This Essay argues that the Consumer Financial Protection Bureau (CFPB) is well-suited to support the consumer bankruptcy system by exercising its monitoring and enforcement powers to promote, and even compel, mortgage creditor compliance in chapter 13 cases.
Commentary:
The CFPB has previously waded into bankruptcy mortgage waters, notably with its promulgation of forms for Periodic Monthly Statements (PMS) for mortgage accounts. While initially inapplicable to mortgages that were involved in bankruptcy, whether Chapter 7 or Chapter 13, eventually after extensive stakeholder meetings (in which I participated) the CFPB developed a model PMS for home mortgages that with remarkable clarity for homeowners provides accurate information about their mortgage, whether reaffirmed or not, including distinguishing pre- and post-petition payments and arrearages.
A further advantage of engaging the CFPB with oversight of mortgage in bankruptcy would be that it improves the recognition in its non-bankruptcy enforcement actions that there is almost certainly a bankruptcy component to a settlement or resolution. Too often those actions fail to compel mortgage servicers to take actions, including amending proofs of claim, in bankruptcy cases to reflect those settlements.
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