Aside From Non-Collection Letters Required By Law You Cannot Lift The Stay To Foreclose On A Home And Continue To Call The Debtor

Mortgage lenders continue to push the envelope in bankruptcy case.  They believe they can imagine exceptions for their conduct, even though not supported by law, and make them so.  There seems to be a disconnect in the thought of mortgage lenders in what they can and cannot do in a bankruptcy process, and that if they cannot adapt their technologies that they should not be held responsible for their conduct.  No doubt this is aggravated by the sub-prime and mortgage default situation, which, unlike before BABCPA, they are wanting to avoid the specter of foreclosure (in this case, even though the stay was lifted).

In what is a simple decision from Bankruptcy Judge Thomas L. Saladino of District of Nebraska, the Court distinguishes from letters sent to borrowers facing foreclosures as required by non-bankruptcy law and the attempt to continue harassing the Debtors as to their house debt by the use of telephone calls in which the stay is lifted to foreclose.

In In re Whitmarsh, Case No. 07-80185 (Bankr. Nebraska (1-7-2008), GMAC Mortgage sought and obtained an order from the Court lifting the stay so that it may proceed with a foreclosure on the Debtors' home.  In what I found to be a useful variation from what we typically see, the stay also allowed GMAC "to provide debtors with information regarding a potential Forbearance Agreement, Loan Modification, Refinance Agreement and other loss mitigation agreements".  I think most of us can agree that we would not have see such pro-active efforts on the part of GMAC or other mortgage servicing companies to forestall foreclosures even a year ago.  Now they want to work until the last minute to save a house even when the Debtors do not want to save the house.

Despite this Order lifting the automatic stay, GMAC sent the Debtors 11 different letters and called the Debtors approximately 22 times over a 6 month period without foreclosing on the home.

In a close review of the letters the Court found that none of the letters "clearly" constituted a prohibited demand for payment. Although, I think most attorneys would understand that 11 letters is excessive.

But, the Court could not excuse the 22 phone calls because phone calls to the Debtors are NOT required by other federal laws in order to proceed with a foreclosure.  The Court found that "It may very well be that the lender was simply trying to contact Debtors were fully aware of all of their options to avoid foreclosure.  However, it does not take 22 calls to do so, and many of the phone calls threatened to take legal action.  Furthermore, Debtors (through their attorney) made it very clear that the lender should discontinue such contacts and the lender was fully aware that Debtors had vacated and surrendered the Property".

As shown time and again in these cases, once a large creditor organization has unleashed the hounds of hell, they cannot seem to control the situation.  Computers take over and start directing calls and connecting them with the call centers.

The Court awarded the Debtors the $3,640.00 in attorneys' fee requested and $1,000.00 in general damages to the Debtors.

(Picture is of the Honorable Thomas L. Saladino)

Comments

[lucas law]

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LLC