ABI Bankruptcy Blog Exchange » Miami Florida Bankruptcy Law » April 2009

Miami Florida Bankruptcy Law: U.S. Senate Fails to Pass Bankruptcy Mortgage Modification Bill

Thu, 30 Apr 2009 10:27:00 -0700

The S. Amdt. 1014 to S. 896, the "Helping Families Save Their Homes Act of 2009", failed to pass in the Senate today by a vote of 45 to 51 with 3 not voting.

Despite the lack of passage of these amendments to the bankruptcy code, there remain various measures that may be of assistance to a struggling South Florida homeowner, including the following.

1. A second mortgage on a principal residence that is wholly "underwater" is generally avoidable in chapter 13 or chapter 11 bankruptcy

2. Voluntary mortgage modification may be available under President Obama's "Making Home Affordable Program"

3. Modification of mortgages on non-principal residences is presently allowed under chapter 13 or chapter 11 bankruptcy

4. Chapter 12 allows certain modification for mortgages for "Family Farmers"

5. Mandatory mediation of homestead mortgage foreclosures as of May 1, 2009 in Miami-Dade County, FloridaJordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983

Miami Florida Bankruptcy Law: Vote Expected in Senate on Bankruptcy Mortgage Modification Bill

Wed, 29 Apr 2009 15:26:00 -0700

The Washington Post reports that a vote is expected tomorrow in the Senate on S. 896, the "Helping Families Save Their Homes Act of 2009". Senator Richard Durbin's amendments to S. 896 includes provisions for bankruptcy reform to allow certain modification of mortgages on primary residences.

The Wall Street Journal reports that a defeat it expected unless there is a last minute compromise. Senator Richard Durbin (D, Ill.) is reportedly continuing efforts to reach an agreement with banking leaders.Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983

Miami Florida Bankruptcy Law: Miami-Dade Circuit Court Mandates Mediation of Homestead Mortgage Foreclosures

Thu, 23 Apr 2009 11:27:00 -0700

As reported in the media, on April 9, 2009, Judge Joseph P. Farina, Chief Judge of the the Circuit Court of 11th Judicial Circuit in Miami-Dade County, Florida signed Administrative Order No. 09-08 establishing the "11th Circuit Homestead Access to Mediation Program ("Champ") and generally requiring mediation of residential homestead mortgage foreclosure cases filed on or after May 1, 2009. The mediation services though are available to mortgage foreclosures filed prior to May 1, 2009 on a case by case basis.

Pursuant to the administrative order and unless otherwise agreed, parties will be deemed to have agreed to referral of the foreclosure mediation to the "Collins Center for Public Policy" for mediation and assignment of a certified circuit civil mediator. No action will be taken by the Court to set a final hearing or enter summary judgment until certain requirements are met. The Collins Center's website provides and overview of the program, frequently asked questions, as well as a link to a video as to the establishment of its foreclosure mediation program.

Under the plan, the plaintiff mortgage lender is required to pay the fee of the Collins Center. Under the plan, the Collins Center is to contact the homeowner within 30 days and advise of the availability of financial counseling and mediation. The Collins Center may refer the homeowner to a HUD or National Foreclosure Mitigation Counseling Program agency which is to contact the homeowner within 21 days for counseling and to assist with the completion of financial documentation for use in renegotiating the loan. The lender and homeowner may register at the Collins Center's website and retrieve forms for financial documentation. Upon completion of the financial documentation, a mediation session is to be scheduled with the Collins Center to pay the certified mediators who have received additional training in foreclosure mediation. The mortgage holder's attorney and the homeowners are required to be physically present at the mediation with the mortgage lender's representative available with full authority to settle.

If the homeowner fails to appear at the mediation session or an impasse is reached, the mortgage foreclosure case may proceed to a final hearing. Within 10 days after completion of the mediation, the mediator is to file a report with the Court as to the lack of agreement or a signed written agreement. This mediation is available only once per case.

It is noted that Form "A" which includes the "Certificate of Plaintiff Regarding Status of Residential Property" and "Certificate of Plaintiff Regarding Representative at Mediation" requires that a copy of certain pooling or servicing agreements with investors (ie. as to securitized mortgages) are to filed with the foreclosure complaint and brought to the mediation session.
Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983

Miami Florida Bankruptcy Law: Mortgage Servicers Participating under the Home Affordable Modification Program

Wed, 22 Apr 2009 09:52:00 -0700

Makinghomeaffordable.gov lists that the following mortgage servicers have contracted with the government under the "Home Affordable Modification Program" as of May 22, 2009:

Financialstability.gov provides a link to the agreements with the participating servicers.

Hope Now's website contains a directory of links to mortgage companies.

Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983

Miami Florida Bankruptcy Law: Madoff May Face Involuntary Bankruptcy

Fri, 10 Apr 2009 12:27:00 -0700

Judge Louis L. Stanton of the District Court of the Southern District of New York granted a motion for partial relief from injunction to allow certain alleged creditors to file an involuntary bankruptcy against Bernard L. Madoff in the case 08-Civ-10791 of Securities and Exchange Commission vs. Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC.

The movants argued that although Bernard L. Madoff Investment Securities LLC ("BLMIS") is presently being liquidated under SIPA in case 08-1789 in the Bankruptcy Court of the Southern District of New York, no bankruptcy case has yet been commenced against Madoff individually nor has a receiver apparently been appointed for Madoff's individual property. The movants further argued that a bankruptcy proceeding against Madoff individually could be coordinated with the present SIPA case pending in Bankruptcy Court against BLMIS.

The motion was opposed by the SEC, the U.S. Attorney, and the Trustee of Bernard L. Madoff Investment Securities LLC ("BLMIS") under SIPA. These parties questioned the utility of a bankruptcy proceeding as to Madoff's individual assets that are not criminally forfeitable. The SIPA Trustee claimed that he alone could "deliver maximum relief to victims." The U.S. Attorney emphasized that the criminal forfeiture is an independent system of recovery and distribution in which Madoff's general unsecured creditors would not have standing and that the criminal forfeiture processes are not subject to bankruptcy's automatic stay. A criminal forfeiture order divests the defendant of forfeited property and the property does not become part of the defendant's bankruptcy estate. United States v. Pelullo, 178 F.3d 196, 203 (3rd Cir. 1999).

The Court noted that although Madoff's assets have been frozen, they are not subject presently to any form of receivership. The Court further noted the distinction that a distribution under SIPA would be to those who invested in the BLMIS's "customers" rather than to those "whose losses stemmed from investments made through intermediaries."

The Court stated the opponents to the motion did not offer "as familiar, comprehensive, and experienced a regime as does the Bankruptcy Code for staying the proliferation of individual lawsuits against Mr. Madoff individually, marshaling his personal assets other than those criminally forfeitable, and distributing those assets among his creditor according to an established hierarchy of claims." The Court found that the concerns of increased administrative costs or delay were merely speculative and outweighed by a Bankruptcy Trustee's ability for orderly and equitable administration of assets.

The Court ruled that the moving parties should be able to pursue an involuntary bankruptcy against Madoff as to property that is neither criminally forfeitable nor subject to liquidation of BLMIS under SIPA. The Court suggested in a footnote that the Attorney General "might consider delegating forfeited property to the bankruptcy estate."Jordan E. Bublick, Miami, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983

Miami Florida Bankruptcy Law: Professor Hu on the "Empty Creditor"

Fri, 10 Apr 2009 11:02:00 -0700

Professor Henry T.C. Hu writes in today's Wall Street Journal of the concept of the "empty creditor." Professor Hu coined the term "empty creditor" to help explain "otherwise-puzzling creditor behavior toward troubled debtors" when credit default swaps and other products are used.

Professor Hu explains that traditionally the law assumes that the package of economic, contractual, and legal rights flowing from debt ownership are bundled together. Another assumption would be that creditors generally would seek to "keep solvent firms out of bankruptcy and to maximize their value." Hu submits that these assumptions cannot be relied upon when credit default swaps and other like products are used to allow a creditor "avoid any actual exposure to financial risk" from a debt default while at the same time still maintaining his formal contractual rights under the agreement and its legal rights in bankruptcy. Hu states that the creditor may "simultaneously have control rights" and at the same time incentives to cause the debtor firm's value to fall, ie. a "decoupling." Professor Hu suggest that an "empty creditor" may have less incentive to cooperate with troubled businesses and may cause "substantive and disclosure complexities in bankruptcy."

Among his writings, Professor Hu reviews the concepts of the "empty creditor" in his jointly authored article Abolition of the Corporate Duty to Creditor, 1324 COLUMBIA LAW REVIEW 1321 (2007).Jordan E. Bublick, Miami, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983