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Chapter 13 debtors may face unauthorized mortgage changes

When people in Tyler have a mortgage, they expect that the terms of the mortgage will remain the same. In fact, lenders are not permitted to change the terms of a mortgage in a way that lengthens the amount of time a mortgage must be paid or change the amount to be paid each month, if the borrower has not agreed to do so. However, one lender, Wells Fargo, did just that to borrowers who were in the bankruptcy process and is now facing a lawsuit.

According to the lawsuit, Wells Fargo filed included a payment-change notification to a loan-modification notification, which are both usually filed if the borrower files for Chapter 13 bankruptcy. These forms authorize adjustments to the debtor's mortgage that have been preapproved. But, Wells Fargo reportedly did not go through the appropriate channels to bring monthly mortgage payments down and lengthening how long borrowers had to pay the mortgage. This meant that borrowers would then be responsible for paying thousands of dollars in additional interest.

It remains to be seen how this lawsuit will be resolved, but it serves as a good reminder to Chapter 13 debtors to keep an eye on their mortgage, particularly if their state of residence permits a trustee to pay the mortgage for them. If a debtor receives information from their mortgage lender that makes it seems like the lender is changing the terms of the mortgage, they should have their attorney review it.

It may become simpler to review one's mortgage starting in April 2018, when a new rule promulgated by the Consumer Financial Protection Bureau becomes effective. Under the new rule, mortgage lenders must provide regular statements to borrowers who have filed for bankruptcy.

In the end, it is important to keep in mind that the terms of a mortgage constitute a contract, and can only be altered if both the borrower and lender give permission to do so. Chapter 13 debtors who are concerned that their mortgage has been changed without their consent may want to contact their attorney, so that the appropriate steps can be taken.

Source: The Seattle Times, "How to protect yourself from unauthorized mortgage modifications," Amanda Dixon, July 8, 2017

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