Summary:
After Shellpoint began servicing the debtor's mortgage (paid through a conduit plan) in 2024 , it issued monthly mortgage statements listing unexplained fees (totaling $890) as “paid,” though no payments for those specific charges had been authorized or made by the debtor. The debtor eventually brought a motion for sanctions against Shellpoint. Shellpoint argued that even if prohibited from collecting the fees during or after a successfully completed Chapter 13 plan, that it could, nonetheless, collect those fees if the court dismissed the case.
In granting the debtor's motion for sanctions and attorney’s fees against Shellpoint Mortgage Servicing, the bankruptcy court found that Shellpoint violated both Bankruptcy Rule 3002.1 and N.C.G.S. § 45-91 by improperly assessing and attempting to collect unauthorized post-petition fees—including legal and property inspection fees—without notice, court approval, or compliance with required procedures, as the statements used misleading language such as "waiver" while simultaneously listing the charges as paid.
Shellpoint failed to file the required notice of these post-petition fees under Federal Rule of Bankruptcy Procedure (FRBP) 3002.1 or seek court approval under Local Rules and also failed to comply with North Carolina General Statute § 45-91, which requires clear disclosure and timely assessment of mortgage-related fees.
The court found that Shellpoint violated FRBP 3002.1, N.C.G.S. § 45-91, and the confirmed Chapter 13 plan by assessing fees without required notice or approval and created confusion for the debtor, undermining the integrity of the bankruptcy process. Accordingly, pursuant to 11 U.S.C. § 105 and FRBP 3002.1(i), the court imposed sanctions and awarded attorney’s fees. It further ordered that all post-petition fees assessed by Shellpoint (legal, inspection, and other charges) are disallowed and must be removed from the debtor’s mortgage account, enjoining it from assessing any future post-petition mortgage fees without compliance with applicable law and rules. Lastly, the court admonished Shellpoint that further non-compliance in future cases may result in significantly harsher sanctions.
Commentary:
Very nice job by Geoffrey Planer. This case is a welcome extension of the case law supporting both FRBP 3002.1 and N.C.G.S. § 45-91 (remaining to be asserted is that 12 U.S.C. § 2605(k)(E) and 12 C.F.R. § 1024.35(b)(5) also prohibit the "[i]Imposition of a fee or charge that the servicer lacks a reasonable basis to impose upon the borrower") in requiring mortgage servicers to notify homeowners in Chapter 13 of any and all fees and charges that it asserts are due, by preventing mortgage servicers from in essence keeping two sets of books, namely one if the debtor successfully complete Chapter 13 and another, with enhanced and often secret fees, that it will spring on the debtor in the event the case is dismissed. (It is not necessarily unfair to suspect that mortgage servicers try to assert these higher fees against homeowners with successful plans, just waiting a few months or until there is a transfer of servicing, so that judicial and attorney attention has faded.)
The admonition to Shellpoint is also helpful as it severely erodes any fairground of doubt that it might later assert that its errors, failures and misdeeds are innocent or a result of confusing or conflicting laws. Whether Shellpoint (and other mortgage servicers) will find it necessary to proactively clean their accounts of similarly confusing and erroneous mortgage statements likely depends on how broadly and systematically debtors attorneys and Chapter 13 Trustees seek information regarding compliance. Perhaps using the attached sample RFI...
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To read a copy of the transcript, please see:
To read a copy of the transcript, please see:
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