Since late 2016, the United States Bankruptcy Court for the Central District of California (“CACB,” for short) has offered the Loan Modification Management (LLM) program for debtors at risk of foreclosure. The program is designed to provide a forum for homeowners and their mortgage companies to reach a mutually agreeable resolution under the supervision of the CACB when a home is at risk of foreclosure.
Until now, bankruptcy in California didn’t provide much in the way of home loan modification help. Instead, your mortgage arrears were simply paid back through your Chapter 13 repayment plan while you were left with the same mortgage terms you entered the case with. With this new program, however, people struggling with mortgage payments have new reason to hope.
Article at a Glance
- The LMM program can help debtors who file bankruptcy in the Central District of California (which includes Los Angeles) protect their homes against foreclosure.
- Under the LMM program, debtors and creditors must participate in good faith in an effort to reach a home loan modification that both parties are content with.
- Contact an experienced Los Angeles bankruptcy attorney to determine whether the LMM program can help you keep your home.
How the Loan Modification Management Program Works
Anyone who has attempted a loan modification knows that they are very difficult to obtain. Simply put, in spite of years of promises by mortgage servicers all over the country, the loan modification process is a mess. It usually begins with long phone calls to the lender that are mostly spent waiting on hold only to be passed around between people who seem overworked and completely uninterested in your situation.
If you are lucky, you then begin to submit documents that never seem to end up in the hands of the right person only to be told you have to resubmit the same documents over and over again. Lenders rarely offer any kind of real loan modification help. Frustration doesn’t even begin to describe the typical loan modification process.
The LMM program allows debtors to seek permission from the bankruptcy court to communicate directly with their lender through an independent third party web portal for the purposes of modifying their mortgage terms. The third party portal tracks all documents and communications between the parties, and the creditor is required to participate in good faith. No longer can a lender say they did not receive your documents. No longer do you have to play telephone tag with the person handling your loan modification application within the mortgage company. Communications are direct and verifiable.
The LMM Program: Eligibility and Commencement
The CACB explains the LMM program procedures online. There, it describes the following rules for eligibility to participate in the program:
- The debtor must have a case pending in the CACB. It doesn’t matter what chapter of the Bankruptcy Code is used.
- The loan to be modified must have been in foreclosure prior to filing for bankruptcy, and must be secured by real property in which the debtor holds an interest.
- The bankruptcy filing fee must have been paid in full before a motion to participate in the LMM program is filed.
- The debtor must set aside $230 for various fees related to the LMM program.
The debtor can seek referral to the LMM program by completing and filing a Certification of LMM Eligibility and Readiness, signing up for the Document Preparation Software and using it to prepare other required documents, and filing a Motion to Commence LMM.
Caution: Although some help in commencing the LMM program is available for pro se debtors (debtors without a lawyer), pro se bankruptcy is a bad idea. The court allows it, but the better option is to work with an attorney throughout your bankruptcy case. In addition to making sure your all necessary documents are properly prepared and filed and that your bankruptcy case has the best chance of success, an experienced bankruptcy lawyer can also act as your loan modification attorney, negotiating with your creditor through the LMM program on your behalf.
Although the LMM program was initially launched in 2016, it is still a pilot program, so you can only participate if your case is assigned to one of the following judges:
- Los Angeles Division: Judge Julia W. Brand, Judge Neil W. Bason, or Judge Deborah J. Saltzman
- Northern Division: Judge Deborah J. Saltzman
- Riverside Division: Judge Scott H. Yun
- Santa Ana Division: Judge Catherine E. Bauer
- San Fernando Valley Division: Judge Martin R. Barash
If you are assigned to one of these judges, talk to your attorney about whether the program might benefit you. It may make all the difference in whether you get to keep your home!
Can the LMM Program Help You Keep Your Home?
If you are not currently in a bankruptcy case and have unsuccessfully attempted to modify your home mortgage, or wish to apply for a mortgage loan modification, consult with a bankruptcy attorney to see if the LMM program will work for you. While the program does not guarantee a loan modification to someone who is not otherwise eligible, it will certainly help to cut through the current nonsense that is involved in this complicated process and get a definitive answer.
If you’re struggling with mortgage payments, we are here to help you evaluate your options and create a plan (through bankruptcy or otherwise) to get you back on track. Come in for a free consultation to start your journey toward financial health!