Modify This: How To Pay Off Your Mortgage In Two Years

By Mike Appleton, Guest Blogger

As it did for many people, the current recession produced serious financial difficulties for William and Mary Hoagland.  So they did what thousands of other families do each year and filed a petition for relief under Chapter 13 of the Bankruptcy Code.  Chapter 13 does for individuals what Chapter 11 does for corporations; it enables a family to keep its property and pay all or most of its debts over a period to time under court protection.

Chapter 13 even provides a method for reducing or eliminating secured debt in some cases.  For example, if you have a second mortgage on your home, and your home’s value does not exceed the value of the first mortgage, the lien of the second mortgage can be “stripped” in a process known as “cramdown,” converting the holder of the second mortgage into an unsecured creditor.  The problem is that cramdown is not available for a residential first mortgage, regardless of how far a homeowner is underwater.  Chapter 13 can provide breathing space to catch up with arrearages on a first mortgage, but if you want to keep your home, the first mortgage will have to be honored according to its terms, unless the lender will agree to a modification.  In the case of Mr. and Mrs. Hoagland, a modification agreement with Bank of America may have enabled them to satisfy a $227,000.00 first mortgage in slightly less than two years.

Mr. and Mrs. Hoagland filed their Chapter 13 petition in March of 2010 in the bankruptcy court for the Middle District of Florida.  In January of 2011, they received a letter from Bank of America (BOA) informing them that their loan modification application had been approved and enclosing documents for their signature.  They promptly complied and secured a court order formally approving the modification agreement.  The terms of that agreement were incorporated into their Chapter 13 payment plan and confirmed by the court in April of 2011.

One month later, BOA notified the Hoaglands that their modification proposal had been denied and was being cancelled at their request.  They immediately contacted their lawyer, who immediately filed a motion asking the court to enforce the modification agreement.  BOA failed to appear at the hearing on the motion and it was granted by the court.

Notwithstanding the court order, however, BOA sent a notice to Mr. and Mrs. Hoagland in November of 2011 advising them that their monthly mortgage payment was being increased from $1,262.92 to $1,793.69, a breach of the express terms of the modification agreement.  When objections from the Hoaglands’ lawyer produced no response from BOA, he filed another motion with the court and scheduled a hearing in January of 2012.  Once again BOA failed to attend the hearing, and once again the bankruptcy judge ordered BOA to comply with the modification agreement or suffer possible sanctions.

Over the course of the following year, BOA continued to ignore the modification agreement and the prior court orders.  The Hoaglands received various notices asserting the existence of arrearages, demanding payments beyond those required in the modification agreement and charging an interest rate exceeding the agreed rate.  By the end of 2012, BOA was holding more than $12,000.00 in payments which it had classified as “unapplied funds.”  When the Hoaglands’ lawyer eventually filed a second motion to enforce the modification agreement,  the only response from the bank was a new notice of payment change, increasing the monthly mortgage payment to $1,855.25.

The Court heard the second motion to enforce on March 5, 2013.  In accordance with its by now well-established practice, BOA did not attend the hearing.  On March 15, 2013, Judge Karen S. Jennemann entered an order reciting the tortured history of the bank’s actions and granting the motion to enforce.  But the order did even more.  Paragraph 2 of the order reads in part, “The Court further Orders and awards Debtors Sanctions against BOA in the amount of Two Hundred and Twenty Thousand Dollars ($220,000.00). . .  .”  Absent a timely objection from the bank, a recorded certified copy of the court order “shall serve as a full and complete Satisfaction and Release” of the Hoaglands’ mortgage.

Lawyers who have worked with distressed homeowners in negotiating mortgage modifications over the past few years will find nothing unique in the frustrations experienced by Mr. and Mrs. Hoagland.  But they will applaud Judge Jennemann for doing what too few judges have been willing to do, imposing serious consequences for serious wrongdoing by financial institutions.  I join in that applause.

24 thoughts on “Modify This: How To Pay Off Your Mortgage In Two Years”

  1. Bud,
    Greed has kept me from being out of work for the past four decades. I am in a business where it would be great if I worked myself out of a job. That will never happen. It is greed and money that keeps the drug trade going. If there were no money in it, criminal gangs and drug cartels would have to find another line of work. Speaking of drugs, it is greed that motivates big pharma to sink money and effort trying to keep generics from competing with their high-priced drugs.

  2. OS,
    $36.8 million is a joke, I agree.
    In your professional practice as psychologist have you ever witnessed a drug or addiction of any kind as powerful and destructive as money and greed?
    It strikes me that there is no other reason for some people/groups for living.

  3. Bud,
    The fact that BoA will pay out $36.8 million is chump change to them. They really need to take it directly out out of CEO Brian Moynihan’s compensation package. With perks, salary and gimmicks to avoid taxes, he gets about $7.4 million a year, so it should not take long for him to pay it off.

    It is people like the ones running BoA that give psychopaths a bad name.

  4. Good for Judge Jennemann and congratulations to the Hoaglands for having an lawyer who didn’t back down.

    My ch 13 bk attorney failed to file a motion with the court and didn’t tell me about it until it was too late. My subsequent mortgage fraud and foreclosure fraud attorneys said it was the worse case of mortgage fraud they’d seen. I had over $1m equity in my long time primary residence. It didn’t help. I was homeless and destitute, the unlicensed predatory lenders laughing all the way to the bank. They had a handsome payday for an illegal loan.

    A friend had a BoA loan. While working out a re-payment plan, they sold his home WITHOUT notice in the mail nor a notice attached to the door. He found out about it after the foreclosure sale. My 75 yr old friend ended up homeless and on social security. He had substantial equity in his home – the person who obtained it at the foreclosure sale secured an estimated $3m property for $200K. The mortgage was $140K, The last time I saw my friend, BoA hadn’t refunded the difference.

    My friend and I went to the FBI in 2009. They did nothing. Senator Michael Bennet’s office also did nothing with these horrific situations. We both had substantial equity yet we both lost our homes.

    There should be more judges like Judge Jennemann.

  5. Mike A,

    I’ll defer to you…. It takes quite a bit of arrogance on the part of the bank to get sanctioned…..

  6. AY:

    Good question. The answer is that a first mortgage on your primary residence cannot be modified in bankruptcy, regardless of how much the principal balance exceeds your home’s fair market value. That’s precisely the problem facing many homeowners today. I’ve argued for sometime that permitting cramdown of residential first mortgages would have ended the foreclosure crisis several years ago and stabilized the market. Ironically, the courts can modify mortgages on vacation homes or investment properties. The restrictions apply only to your primary residence.

  7. Good for them…. Mike A, are you sure that the priority lien cannot be modified…. People do not understand the authority the bankruptcy courts have….

  8. Essentially a judgement by default. Good for the Hoaglands. For artistic expression the judge should have held BOA in contempt of court and if they did not show up again, they would be subject to a $500,000.00 penalty. It would have served justice well if they failed to appear for that.

  9. I am curious if the Bank of America loan had originally been one issued by Country Wide bank. After B of A took over Country Wide, their attention to the loans in their newly acquired portolio was slim and none. The purchase of that bank and their slew of bad loans was a horrendous mistake by B of A. Recently the B of A sold off many of the Country Wide loans to NationStar Mortgage.
    Country Wide Mortgage had what they termed The A-B Loans. The A portion was the five percent down payment and the B portion was the balance. The loaned the buyer a hundred percent of the purchase price in these two simultaneous quick transactions and then promptly sold the loan off and securitized it with a bundle of other loans. The chinese investors bought this muddle. Country Wide did not have any risk on these sold off securitiezed bundled loans.

    One thing that the plaintiffs in this case here could do when the B of A shows up in court, is to aver that the Bank if now estopped to object to the judge’s sanction order by their Default and failure to appear. Estoppel is an interesting defense and legal animal. Just a dog talking here.

  10. You set a record with me Mike, your article made my day and it’s not even 2 hours into it yet! I hope there are follow-ups to this particular story I’d like to know if this odyssey of lawbreaking by BoA against the Hoagland’s is at an end or will continue. BoA in its rush to foreclose homes have foreclosed on homes they did not even own:

  11. Great Article Mike A,

    This maybe a little off topic: To all the attorneys & employees working for financial institutions, like Skank of America (from the Bill Maher Show): How do you sleep at night, while working for a company like this? Where is your sense of dignity or pride? What do you say to the wife & kids when you come home from work: “hey honey, I just tried to ripoff, kick-out, or illegally change the terms of a family’s mortgage, so that I can get promoted or get my bonus. What did you do today?”

  12. raff, the contempt citation will come when the bank sends another notice for an increased mortgage payment.

  13. Great article and an amazing story Mike! Kudos to the Hoagland’s and their attorney. Judge Hennemann should have ordered BOA into court and held them in contempt for not complying with the orders, in addition to the financial penalty.

  14. JENNEMANN, JENNEMANN, JENNEMANN! I say JENNEMANN for president. This judge knows how to stand up to BOA which is something neither our President, nor the AG he appointed no Congress knows how to do. JENNEMANN!

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