Congress recently approved the Consolidated Appropriations Act, 2021 (CAA 2021), which has several temporary modifications to the bankruptcy code embedded in its Title X. These temporary changes and how it affects the lending business for private lenders are briefly discussed.
Temporary Modification 1: Late Supplemental Proofs of Claim can be filed by lenders.
Section 1001(d) allows lenders to submit additional proof of claim for mortgage installments affected by the CARES Act, even if the claim bar date has passed. Importantly, the assistance provided by the CARES Act also applies to federally guaranteed mortgages. A detailed account of the underlying forbearance agreement or loan modification, as well as a copy of the forbearance agreement or loan modification if one exists, must be included in these extra proofs of claim.
Temporary Modification 2: CARES Act Measure conform regardless of former bankruptcies.
Lenders should be aware that discrimination based on a current or previous bankruptcy process in a borrower’s history is prohibited by Section 1001(c) of Title X of the CAA 2021. The practical result of these revisions is that a borrower cannot be denied CARES Act remedies, such as a foreclosure moratorium or forbearance, just because they are now or have previously filed for bankruptcy.
As we advance, lenders need to put operational processes in place as related to these provisions to ensure that they file any important additional proofs of claim for borrowers receiving CARE Act forbearance relief, modify their day-to-day processes to accommodate the updates of the chapter 13 procedures and do not deny CARES Act relief to clients because of the past bankruptcy filing. To read more on the provisions of the Consolidated Appropriations Act, click here.
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