December 06, 2018

MONTH-IN-BRIEF: Business Regulation & Regulated Industries

Lynette I. Hotchkiss

Consumer Finance

Eleventh Circuit Holds That a Chapter 13 Plan That Did Not “Provide For” Mortgage Was Not Discharged

By Eric Tsai, Maurice Wutscher LLP

The U.S. Court of Appeals for the Eleventh Circuit recently held that a mortgage with a post-plan maturity date was not discharged in a Chapter 13 bankruptcy because the plan did not “provide for” the debt and modify the repayment terms of the mortgage.  At the time she filed bankruptcy, the debtor was current on her payments for the creditor’s two mortgages on her home.  The debtor’s Chapter 13 plan stated that she would make payments directly to the creditor.  The plan did not set repayment terms for the creditor’s secured claims.  The debtor fell behind on her payments to the creditor, and upon completion of her plan payments, the bankruptcy court entered a Chapter 13 discharge.  The creditor foreclosed on the debtor’s home under the second mortgage and sought a personal judgment against the debtor on the first mortgage.  The bankruptcy court and the district court both concluded that the first mortgage was not discharged. 

On appeal, the Eleventh Circuit observed that the U.S. Supreme Court in Rake v. Wade, 508 U.S. 464 (1993) interpreted the term “provide for” more narrowly to require that the plan either stipulate to or make a provision for the debt.  In the Eleventh Circuit’s view, “the mere reference to a secured creditor’s claim on a debtor’s primary residence” was insufficient to find that the claim was “provided for” by the plan and included in the discharge.  The Eleventh Circuit also held that the debt was not discharged because discharge would violate 11 U.S.C. § 1322(b)(2)’s anti-modification provision for mortgages secured by the debtor’s principal residence.  Accordingly, the Eleventh Circuit affirmed the orders of the bankruptcy court and the district court.  This ruling clarifies the rights and obligations of secured creditors and borrowers with respect to a mortgage after a Chapter 13 discharge.

FCC Establishes a Single Reassigned Numbers Database with a TCPA Safe Harbor

By Jennifer Majewski, Pilgrim Christakis

On December 12, 2018, the Federal Communications Commission adopted a new rule to establish a single reassigned numbers database. Phone service providers will be required to report permanent disconnections on the 15th of each month and will not be able to reassign a number for 45 days after disconnection. Callers will be able to check the database to determine if a phone number has been disconnected since they last spoke with a consumer. Importantly, the rule establishes a safe harbor from TCPA liability for callers who can demonstrate that they checked the most recent update of the database and it erroneously reported that a number had not been disconnected. However, the database will not be active until the FCC locates an administrator, which could take more than a year.

Lynette Hotchkiss

EVP/General Counsel & Corporate Secretary; Rabobank, N.A

Lynette Hotchkiss is EVP/General Counsel & Corporate Secretary for Rabobank, N.A., where she also previously served as Associate General Counsel. Prior to joining Rabobank, Lynette was with OneWest Bank, N.A, where her responsibilities included monitoring and reporting on regulatory developments impacting the bank’s operations and providing legal support for regulatory compliance matters. Before that, Lynette was an attorney in the Financial Practices Division of the Federal Trade Commission, where she focused on mortgage servicing issues. For much of her career, Lynette used her knowledge and experience in consumer finance laws and regulations to build compliance tools to help financial institutions comply with the complex array of federal and state requirements, first acting as the lead compliance attorney at CFI ProServices Inc. (now Finastra) to develop the Laser Pro® loan documentation system and later leading the legal team at Mavent Inc. (now part of Ellie Mae) to develop the Mavent Expert System, an automated compliance system for mortgage origination.