WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on
June 20 asked the U.S. solicitor general for comment on a bankruptcy case in
which the Bankruptcy Code and the Real Estate Settlement Procedures Act (RESPA)
are in conflict as it relates to a lender's right to require debtors to deposit
additional funds into escrow after they have filed for Chapter 13 bankruptcy (Countrywide
Home Loans Inc. v. Francisco Rodriguez, et al. No. 10-1285, U.S. Sup.).
Francisco and Anna Rodriguez filed for Chapter 13
bankruptcy and contended that their lender, Countrywide Home Loans Inc.,
violated the automatic stay by requiring them to deposit additional money into
their escrow account when those funds were needed to cover the debtors'
anticipated post-petition taxes, insurance and other escrow obligations.
Countrywide sought the funds because prior to filing for
bankruptcy, the Rodriguezes had missed eight consecutive mortgage payments.
A majority of the Third Circuit U.S. Court of Appeals
ruled that Countrywide violated the automatic stay pursuant to 11 U.S. Code
Section 362 when it exercised its rights under RESPA to reanalyze the debtors'
escrow account to determine how much money the couple needed to deposit in
order to cover post-petition taxes, insurance and other obligations.
Countrywide appealed the Third Circuit's ruling, alleging
that there is "an important, recurring and industry-wide issue" for
companies servicing residential mortgages and could affect more than 300,000
Chapter 13 cases each year.
Moreover, the lender contends that review by the U.S.
Supreme Court is needed because the Third Circuit's decision is in "direct
conflict" with precedent from other circuit courts.
[Editor's Note: Full coverage will be in the July 6
issue. In the meantime, the order is available at www.mealeysonline.com or
by calling the Customer Support Department at 1-800-833-9844. Document
#80-110706-012X. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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