The post California Dreaming: 3 Reasons Why Their New Foreclosure Law May Spread Across The Country appeared first on Baltimore Bankruptcy Lawyer.
]]>The law is only applicable to owner-occupied first mortgages.
Loan modifications are certainly a mixed bag. A recent TransUnion study showed that six out of 10 homeowners who received a loan modification stopped paying their mortgage again after 18 months. This study did not include statistics to address the many more homeowners who did not qualify for loan modifications. The question is: do loan modifications provide any real relief to borrowers? Perhaps the California law will finally force the mortgage industry to give meaningful focus on this process. The rest of the country will be watching.
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]]>The post Lien Stripping, Congress and the Supremes: The Glacier or the Snail? appeared first on Baltimore Bankruptcy Lawyer.
]]>In Chapter 13 the debtor could strip off that HELOC as described in this video. But in Chapter 7 most courts say no. Why? Because the US Supreme Court says so. For more details, see this article. The Supreme Court case that has caused this hardship (Dewsnup v. Timm for the legally minded) stems from 1992, more than 15 years before the current real estate and foreclosure crisis that has caused the loss of trillions of dollars of value in the residential home market.
This result makes no sense. Why should other unsecured creditors get a windfall by receiving coerced payments in Chapter 13 just because the debtors have a junior mortgage that is completely unsecured? The bankruptcy code is clear: “to the extent that a lien secures a claim against the debtor that is not an allowed secured claim (i.e., completely underwater) such lien is void.”
This result is especially wrong in light of the recent Atty. Gen. nationwide mortgage settlement which followed years of abusive foreclosure practices by the major mortgage servicers. Part of the settlement, which will be implemented in the months and years to come, is that mortgage companies need to adjust to the collapsed real estate market by writing down the principal on their loans when the property value does not support the mortgage.
The bankruptcy world should adapt to these realities and recognize that completely unsecured junior mortgages need to be stripped off in chapter 7 so that homeowners will be able to realize the appreciation in their properties and not simply pay rent or its equivalent to mortgage holders until the time comes that they are ready to abandon the home. Congress needs to amend the bankruptcy code to make clear that “void” means “void” and give homeowners real relief in chapter 7.
The post Lien Stripping, Congress and the Supremes: The Glacier or the Snail? appeared first on Baltimore Bankruptcy Lawyer.
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