By Ryan C. Wood
Mortgage companies have an obligation to notify their customers who are in an active bankruptcy case that their mortgage payments have changed and/or provide notice if there have been any fees, expenses or charges added to their mortgage account or balance. Failure to do so may result in the bankruptcy court awarding appropriate expenses or attorney fees to the customers who are in the active bankruptcy case. See Federal Rules of Bankruptcy Procedure Rule 3002.1.
In a lot of cases we run into clients that have incurred numerous fees from their mortgage companies due to the fact that they have been late in paying their mortgage. A lot of fees and expenses are racked up and sometimes it is difficult to weed out what fees are appropriate. In the case of In Re: Olga Roife, Case No: 10-34070 (Bankruptcy Court for the Southern District of Texas) the mortgage customer fought back against some of these fees. In this case, Ms. Roife objected to the Notice of Post-Petition Mortgage Fees, Expenses and Charges that her mortgage company (Midfirst) filed with the court. Midfirst provided the Notice of Post-Petition Mortgage Fees, Expenses and Charges to her under Rule 3002.1. The Notice included late fees in the amount of $142.26 and legal fees in the amount of $125.00. Midfirst contended that their bankruptcy attorneys were entitled to their legal fees in preparing the Notice because the Bankruptcy Code requires that they send out the Notice and that failure to do so will result in sanctions for Midfirst. The bankruptcy court in this case agreed with the cases In re Boyd, 2013 WL 1844076 (Bankr. S.D. Tex. 2013) and In re Carr, 468 B.R. 806, 807 (Bankr. E.D. Va 2012). The Boyd case indicated that fees should not be charged for filing a Fee Notice because the creditor has a duty under non-bankruptcy law to inform their customers of the amounts due under a mortgage. In the Carr case the court decided that no fees should be charged because the Fee Notice can be easily derived and can be obtained from the creditors records with no significant burden on the creditor, that the Fee Notice is a business function and the preparation of the notice is not a practice of law and does not require any legal analysis.
The moral of the story is to always look through the documents that your bankruptcy attorney provides you to be sure the fees are correct. The mortgage companies may try to slip in a few expenses or fees they are not entitled to, such as fees to prepare notices required by the court. If you do not look at the documents you may end up paying more than you should be for your mortgage payments. If your mortgage payments include the payment of property taxes and insurance be sure to verify the amounts listed. You look through your property tax statement to see that it is consistent with what the mortgage company sends you. If you are lazy and decide to not double-check these figures you may end up overpaying.