Local Rule 3003-1: Procedures for the Disbursement of Conduit Mortgage Payments

Local Rule 3003-1 Procedures for the Disbursement of Conduit Mortgage Payments

(a) Definitions.

(1) "Debtor" is the Chapter 13 debtor.

(2) "Conduit Creditor" is the entity holding or owning an allowed secured claim by virtue of a mortgage, deed of trust, or other consensual lien on the real property of the Debtor that is the principal residence of the Debtor but does not include a loan that is also secured by other property in addition to the principal residence, a loan upon which the final contractual payment shall become due before the stated completion date for the Chapter 13 plan, or a loan that is classified as a home equity line of credit with variable monthly payments of principal and interest.

(3) "Conduit Mortgage Payments" are those mortgage payments that are paid by the Debtor to the Conduit Creditor through the Chapter 13 trustee. Conduit Mortgage Payments shall be equal to the post-petition monthly contractual payments due pursuant to the note or contract.

(4) "Pre-petition Arrearage" is the total amount past due on the Conduit Creditor's claim as of the date the case was filed.

(5) "Administrative Arrearage" is the total amount of three full post-petition mortgage payments.

(6) "Post-petition Claim Payments" shall mean those payments disbursed by the Chapter 13 trustee on claims of the Conduit Creditor that have been added to the case post-confirmation or pursuant to orders entered by the court that modify the monthly payment.

(b) Disbursement of Required Conduit Mortgage Payments. All Conduit Mortgage Payments owed by a Debtor to a Conduit Creditor as defined in this local rule shall be made by the Debtor to the Chapter 13 trustee for disbursement to the Conduit Creditor by the Chapter 13 trustee as Conduit Mortgage Payments unless the court orders otherwise.

(c) Duties of the Debtor.

(1) The Debtor may be excused from complying with any of the provisions of this local rule only upon the showing of good cause and extraordinary circumstances sufficient to warrant such an exception and the entry of an order of the court allowing the same. The burden of proof shall be on the Debtor to establish such good cause and extraordinary circumstances. The Debtor must file a motion and notice of hearing, with service on all parties in interest, within 7 days after the petition is filed. The § 341 meeting of creditors shall be continued if an order allowing or disallowing the motion has not been entered by the first scheduled § 341 meeting date. The additional cost associated with the Chapter 13 trustee's statutory commission charged for disbursing the Conduit Mortgage Payments shall not, by itself, constitute good cause and extraordinary circumstances for seeking an exception from the mandatory Conduit Mortgage Payment rules.

(2) The Debtor must complete and sign a Local Form 13 ("Authorization to Release Information to the Chapter 13 Trustee Regarding Mortgage Claim Being Paid by the Trustee") for each Conduit Creditor's claim for which the Conduit Mortgage Payments are to be disbursed by the Chapter 13 trustee as provided for herein and must file such document with the court.

(3) Post-confirmation plan modification motions to temporarily exclude conduit payments pending the completion of trial mortgage loan modification periods must include the following information:

(A) The calendar months that will be included in the trial period;

(B) The proposed modified monthly plan payment during the trial period;

(C) The amount of the modified monthly mortgage payment to be made by the Debtor directly during the trial period;

(D) If an existing mortgage arrearage claim provided for by the plan is to be included in the proposed modified mortgage loan, specify the treatment of the arrearage claim by the Chapter 13 trustee pending completion of the trial period. Options include directing the Chapter 13 trustee to: (i) continue to disburse cure payments; (ii) reserve cure payments; (iii) close the claim without reserve; or (iv) other treatment;

(E) Whether ad valorem tax claims provided for by the plan are to be paid in the proposed mortgage modification or will continue to be paid by the Chapter 13 trustee;

(F) The calendar month for which the Chapter 13 trustee is to resume making conduit payments and the amount of such modified monthly conduit payment; and

(G) The amount of the monthly plan payment following completion of the trial period.

(d) Duties of the Chapter 13 Trustee.

(1) The Chapter 13 trustee shall include for payment under the Debtor's plan an allowed Administrative Arrearage claim as defined in paragraph (a)(5) of this local rule for each Conduit Creditor for which the trustee shall disburse Conduit Mortgage Payments. The Administrative Arrearage claim shall be paid on a pro rata basis with non-conduit secured claims.

(2) The Chapter 13 trustee will not make payment to the Conduit Creditor on any claim until such time as the Conduit Creditor or the Debtor has filed a proof of claim, including all necessary supporting documentation, with the court and the Debtor's plan has been confirmed. If no proof of claim has been filed by, or on behalf of, the Conduit Creditor by the deadlines set forth in Federal Rules of Bankruptcy Procedure 3002(c) and 3004, the Chapter 13 trustee is authorized to release any funds then being reserved on account of such claim for general disbursement pursuant to the terms of the confirmed plan.

(3) If a proof of claim is filed either by the Conduit Creditor or the Debtor without all required forms properly completed and attached, the Chapter 13 trustee, at confirmation, may determine the monthly post-petition Conduit Mortgage Payment to be the amount provided by the Debtor on Local Form 4 (Chapter 13 plan) at Part 3.1. The Chapter 13 trustee may use such monthly Conduit Mortgage Payment amount throughout the plan term unless and until a properly conforming proof of claim is subsequently filed by the Conduit Creditor or the Debtor. If a properly conforming amended proof of claim is subsequently filed, the amount of the Conduit Mortgage Payment shall be deemed to be the amount as set forth in the amended proof of claim; provided, however, that any Conduit Mortgage Payments made prior to the filing of such amended proof of claim are deemed to have been disbursed in the proper amounts and accepted by the Conduit Creditor. In addition, if a properly conforming amended proof of claim is not filed prior to confirmation, the amount of the pre-petition arrearage will be determined by the amount provided by the Debtor on Local Form 4 at Part 3.1, unless and until a properly conforming amended proof of claim is filed.

(4) Unless the court orders otherwise, if the Debtor makes a partial payment during any month of the plan, the Chapter 13 trustee shall disburse all funds received from the Debtor (less the trustee's statutory commission) to the Conduit Mortgage Payment(s). No payment may be distributed to any other claimant until all Conduit Mortgage Payment(s) are current through the month of that distribution. Such disbursements by the Chapter 13 trustee shall not impair the right of any other claimant to take any lawful action as a result of the failure to receive timely monthly disbursements on its claim.

(5) The Chapter 13 trustee shall have at least 28 days following the effective date of the formal transfer of a Conduit Creditor's claim pursuant to Federal Rule of Bankruptcy Procedure 3001(e)(2) to begin making disbursements to the new, substituted claimant of record.

(e) Duties of the Conduit Creditor.

(1) All Conduit Creditors shall credit the first Conduit Mortgage Payment disbursed by the Chapter 13 trustee to the calendar month and year as set forth in the Order Confirming Plan. Should any Conduit Creditor object to the commencement date for the credit of Conduit Mortgage Payments as designated in the Order Confirming Plan, it shall file such objection with the court within 14 days following the entry of the Order Confirming Plan and serve copies on the Chapter 13 trustee, the Debtor, and the attorney for the Debtor. A hearing, with appropriate notice, shall be held on any objections.

(2) If the Conduit Creditor does not timely file a properly conforming proof of claim and the Debtor files a claim with all the requisite forms fully completed and attached, the proof of claim filed by the Debtor shall establish the correct and valid claim in the Chapter 13 proceeding and shall be the effective proof of claim for purposes of the Federal Rules of Bankruptcy Procedure, unless otherwise ordered by the court.

(3) At least 21 days prior to the effective date of any change in the name of the Conduit Creditor or its servicer and/or the Conduit Creditor's or its servicer's disbursement mailing address, the Conduit Creditor or its servicer shall file with the court a fully executed Local Form 12 ("Notice of Case-Specific Name and/or Address Change") or an amended proof of claim setting forth the requested changes as required by Local Rule 2002-1(a).

(f) Effect of Plan Completion.

(1) The Chapter 13 trustee shall provide the Debtor, the attorney for the Debtor, the Conduit Creditor, and the attorney for the Conduit Creditor, if any, with a notice of completion of required Conduit Mortgage Payments under the plan and file such notice with the court.

(2) If the Debtor's plan pays all the required Conduit Payments, Pre-petition Arrearages, post-petition arrearages, and all other mortgage-related claims as specified in the plan as confirmed and with any post-confirmation amendments, then all pre-confirmation and post-confirmation defaults shall be deemed cured and the mortgage loan, together with the note and any other loan documents or amended loan documents, will be deemed current at least as of the date of the disbursement of the final plan payment or such later date as ordered by the court. Such completion of the plan shall extinguish any right of the Conduit Creditor or its servicer to recover any amount alleged to have arisen since the date of confirmation or to declare a default of the note, mortgage, deed of trust, or other loan documents based upon any and all pre-confirmation or post-confirmation events.

(3) If the Debtor has made all of the post-petition payments required under a Conduit Mortgage Payment plan, the Chapter 13 trustee shall file the notice and motion required by Federal Rule of Bankruptcy Procedure 3002.1(f) and (h). The notice and motion shall be combined into one consolidated pleading and served on the Conduit Creditor, the Debtor, and the attorney for the Debtor on a no protest notice basis. The Chapter 13 trustee shall provide at least 45 days' notice of the date, time, and location of any hearing that may be requested by an affected party in interest.

(4) If post-petition payments to a real property creditor have been made directly by the Debtor, rather than by the Chapter 13 trustee, the Debtor may file the notice and motion required by Federal Rule of Bankruptcy Procedure 3002.1(h).

(g) Loan Modification Management. The Loan Modification Management Program ("LMM Program") is designed to function as a forum for Debtors and creditors to reach a consensual resolution when a Debtor's property is at risk of foreclosure. The goal of the LMM Program is to facilitate communication and the exchange of information in a confidential setting under the supervision of the court. The procedures governing and forms implementing the LMM Program are incorporated into these Local Rules and can be found in Appendix C.