Local Rule 3070-2: CHAPTER 13 – RESIDENTIAL MORTGAGE PAYMENTS

Rule 3070-2 CHAPTER 13 – RESIDENTIAL MORTGAGE PAYMENTS

(a) DEFINITIONS. As used in this Local Rule, the following definitions shall apply: (1) "Administrative Arrearage" is the total amount of two full post-petition mortgage payments and shall be in addition to any pre-petition arrearage claim. (2) "Conduit Payment" means a mortgage payment that is paid by a debtor through the chapter 13 trustee. The amount of a conduit payment shall be equal to the amount of the petition-date monthly contractual mortgage payment due pursuant to the note or contract subject to any subsequent change in such mortgage payment effectuated in compliance with this rule. (3) "Debtor" includes both debtors in a joint case. (4) "Mortgage Loan" is a mortgage, deed of trust or other consensual lien on the real property of the debtor that is the principal residence of the debtor, unless the confirmed plan or other order of the court provides for the surrender of the residence, the avoidance of the lien purportedly securing such loan, or such other treatment that is expressly inconsistent with the application of this rule. (5) "Mortgage Payment" means a regular, periodic payment that is owed by a debtor on a mortgage loan as set forth in the documents evidencing the loan that is the basis of the real property creditor's claim. (6) "Plan Payment" means the total amount that the debtor is required to pay to the chapter 13 trustee each month under the chapter 13 plan, which amount includes an amount sufficient to cover the conduit payments. (7) "Pre-Petition Arrearage" is the total amount past due on a real property creditor's claim as of the petition date. (8) "Real Property Creditor" is any entity holding or owning a secured claim on account of a mortgage loan, and including but not limited to any assignees, agents, servicers or successor as to such creditor.

(b) DISBURSEMENT OF REQUIRED CONDUIT PAYMENTS.

(1) Chapter 13 debtors shall remit all mortgage payments owed by them to the chapter 13 trustee for disbursement to the real property creditor.

(2) A debtor may be excused from the requirement of subparagraph (b)(1) in the discretion of the chapter 13 trustee or by order of the court. Confirmation of a plan providing for direct payments to a mortgage creditor excuses the debtor from the requirements of subparagraph (b)(1), in which case the provisions of paragraph (c) shall not apply.

(c) DUTIES OF THE DEBTOR AND OF THE CHAPTER 13 TRUSTEE.

(1) If the amount of the mortgage payment changes and results in the necessity for a modification of the plan payment, the chapter 13 trustee shall notify the debtor and the attorney for the debtor of the change and the extent to which it is necessary to modify the plan payment as a result of the mortgage payment change. If it is necessary to modify the plan payment as a result of a change in the mortgage payment, the debtor must make any increased plan payment to the chapter 13 trustee beginning with the plan payment next due after the later of (i) the trustee's notification to the debtor and counsel or (ii) the effective date of the mortgage payment change. Such a modification of the plan payment may be accomplished by consent order prepared and signed by counsel for the debtor(s) and signed by the chapter 13 trustee, provided that no other creditor or party in interest is adversely affected by such modification.

(2) A claim in the amount of the administrative arrearage shall be allowed and paid by the chapter 13 trustee under the chapter 13 plan for each mortgage loan for which the trustee disburses conduit payments. This amount shall be paid on a pro-rata basis with other allowed secured claims being paid through the chapter 13 plan, subject to the provisions of paragraph (c)(4) below.

(3) The chapter 13 trustee shall not disburse any amounts to a real property creditor on any claim until such time as the real property creditor, the debtor, or the chapter 13 trustee has filed a proof of claim including all necessary documentation and the chapter 13 plan has been confirmed, except as may otherwise be provided by order of the court.

(4) Unless otherwise ordered by the court, if during any month of the chapter 13 plan the debtor remits payments to the chapter 13 trustee in an amount that is insufficient to provide for all required disbursements to claimants, the chapter 13 trustee shall disburse all funds received from the debtor first toward payment of the conduit payment(s) due and unpaid for the current month and any prior month(s) before making disbursements to any other claimants. Such actions by the chapter 13 trustee shall not impair the rights of the other claimants to take any lawful action as a result of the failure to receive disbursements on their claims.

(5) The chapter 13 trustee shall continue to disburse conduit payments notwithstanding the filing or allowance of a motion for relief from stay filed by a real property creditor, unless notified in writing by the debtor that conduit payments are to be terminated in which case the chapter 13 trustee shall serve notice of such termination upon the debtor and the real property creditor.

(d) DUTIES OF THE REAL PROPERTY CREDITOR.

(1) Each real property creditor shall file a proof of claim as to each mortgage loan held or owned by it as to the debtor. The proof of claim must comply with Fed. R. Bank. P. 3001(c) and clearly specify the amount of the mortgage payment of the petition date, and the amount and effective date of any then known and anticipated change of such mortgage payment.

(2) Unless otherwise ordered by the court, pursuant to Fed. R. Bank. P. 3002.1(b) and (d) the real property creditor shall file and serve on the chapter 13 trustee, the debtor, and the attorney for the debtor a notice of any change in the amount of the mortgage payment at least 21 days before a payment in the new amount is. No change in the mortgage payment amount shall be effective unless and until notification of such change is served upon the chapter 13 trustee, the debtor, and the attorney for the debtor in accordance with this rule and Fed. R. Bankr. P. 3002.1(b) and (d). The effective date of such change in the mortgage payment shall be the later of: (i) the effective date specified in the notice of change provided by the real property creditor, or (ii) 21 days after the filing and service of the notice of change by the real property creditor.

(3) At least 21 days prior to the effective date of any change in the name or identity of the real property creditor or the entity servicing a real property creditor's claim (herein "Servicer") and/or the disbursement mailing address of a real property creditor or servicer, the real property creditor or the servicer shall file with the court a notice setting forth the requested changes with a copy served on the trustee, the debtor, and the attorney for the debtor.

(4) All payments made to a real property creditor or servicer shall be applied as provided under and subject to the provisions of 11 U.S.C. § 524(i).

(e) EFFECT OF AND PROCEDURE UPON PLAN COMPLETION.

(1) FOR CONDUIT MORTGAGE PAYMENTS. If post-petition mortgage payments have been made by the chapter 13 trustee by means of conduit payments, and if the plan has paid all required mortgage/conduit payments, allowed pre-petition arrearage claims, and other allowed claims related to a mortgage loan, then: (A) all pre-petition and post-petition defaults shall be deemed cured, the mortgage loan shall be deemed at least current as of the date of the disbursement by the chapter 13 trustee of the final plan payment to the real property creditor, and any right of the real property creditor to recover any amount alleged to have been incurred or become due since the petition-date, or to declare a default under the note, mortgage, deed of trust, or other loan documents based upon any and all events prior to the date of the disbursement by the chapter 13 trustee of the final plan payment to the real property creditor shall be extinguished; and (B) the chapter 13 trustee shall file and serve the notice referred to under Fed. R. Bank. P. 3002.1(f), which notice also shall set forth the total amount due on the mortgage loan as of a specific date identified in the notice.

(2) FOR DIRECT MORTGAGE PAYMENTS. If post-petition mortgage payments have been made directly by the debtor pursuant to the confirmed chapter 13 plan, the debtor shall be responsible for filing and serving any notice permitted under Fed. R. Bank. P. 3002.1(f). In the event the debtor files and serves this notice, it shall contain a statement that all mortgage payments and other permissible fees, expenses or charges accruing on the mortgage loan from the petition date through the date of the notice or other date specified therein have been made, set forth the total amount due on the mortgage loan as of a specific date identified in the notice, and be verified by the debtor.

(3) FAILURE BY HOLDER TO PROVIDE RESPONSE PURSUANT TO FED. R. BANK. P. 3002.1(g). In addition to the provisions of Fed. R. Bank. P. 3002.1(i), upon the failure by a real property creditor to timely file and serve the response required by Fed. R. Bankr. P. 3002.1(g), the real property creditor shall be deemed to have admitted that the mortgage loan is current, and the court shall enter an order providing that the mortgage loan is current (with no arrearage, escrow balance, late charges, costs, expenses or attorney fees owing) as of date of the disbursement by the chapter 13 trustee of the final plan payment to the real property creditor and stating the total amount due on the mortgage loan as of a specific date identified in the notice.

(4) MOTIONS TO DEEM CURRENT OR FOR DETERMINATION OF FINAL CURE. All motions to deem a Mortgage Loan to be current or for a determination of final cure pursuant to Fed. R. Bankr. P. 3002.1(h) must contain a statement that all Mortgage Payments and other permissible fees, expenses or charges accruing on the Mortgage Loan from the petition date through the date of the motion or other date specified therein have been made, set forth the total amount due on the Mortgage Loan as of a specific date identified in the motion, and be verified by the Debtor, as appropriate.

(f) SERVICE. All notices, documents and motions required to be given or served under this rule shall be served by first class mail, sufficient postage pre-paid, on all interested parties at the last mailing address of record filed in the case, and any service required to be made upon the Chapter 13 Trustee pursuant to subparagraph (d) of this rule must also include in the address line: "Attn: Mortgage Claim Administrator."

(g) OTHER APPLICABLE LAWS. Nothing in this rule shall relieve any party from complying with any obligation under the United States Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Rules of Practice and Procedure of the District and Bankruptcy Courts of the Eastern District of North Carolina, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the North Carolina Mortgage Servicing Act, any other applicable standing or administrative orders of the court, or any other applicable non-bankruptcy law or rule.