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Big bank's second mortgage cases head to Supreme Court

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Mortgage Professional America | 17 Nov 2014, 11:38 AM Agree 0
Should a second mortgage on an underwater home be voided during bankruptcy if the home’s value has dropped below the first mortgage’s balance?
  • Pjd19 | | 17 Nov 2014, 01:11 PM Agree 0
    How can the houses be worth less than their market value? Isn't market value what a thing IS worth.
  • NICK | | 17 Nov 2014, 01:28 PM Agree 0
  • ns711 | | 17 Nov 2014, 02:12 PM Agree 0
    what they mean by what the home is worth is the market value minus the liens on the property.
    so the equity the owner has in the home is dramatically lower than the market value
  • Mr Lender | | 17 Nov 2014, 02:15 PM Agree 0
    When a bank sells a heloc using an inflated AVM or BPO that is poor lending policy by the lender who played that Second
  • Cheryl | | 17 Nov 2014, 02:15 PM Agree 0
    PJD, the bank put a mortgage on the home (inflating the market value) due to an appraisal for a much higher value than what the home was worth. This is what happened in 2005,2006,2007 that the market and industry standards are being regulated, this is no longer happening. But, we still have homes out there from 2006 where their mortgages are 40% greater than their "fair market value" This is what the "big banks did... And NICK, any bankruptcy judge can discharged whatever he or she d%&m well pleases in their court rooms. I just had a District Court discharge on a $40,000 second from Wells Fargo, customer had discharge in hand and same was filed in clerk of court also the first lien was being modified by "the judge" too. Some banks are actually discharging 2nd's mortgages without the bankruptcy factor even being in play...the banks of which failed to follow HAMP's 2mp programs on those 2nd mortgages. So I guess those big banks don't believe "the sanctaty of contract" and yes it could possibly "destroy the foundation of all american law." For now lets just call it "unfair trade practices and other related violations of law."
  • GracieLewis | | 17 Nov 2014, 03:17 PM Agree 0
    What will become of the home improvement mortgage? If you borrowed the money, you owe the money. Loss of employment, equity, value, etc., is something you as a borrower needs to consider prior to making a promise to repay a mortgage. As we all have witnessed "stuff happens". If the Supreme Court rules in favor of the borrower not being responsible for repayment it may be impossible to obtain a second on your home.
  • Ex MortgageBankRep | | 17 Nov 2014, 04:17 PM Agree 0
    Simply put, a house is called "underwater" when the borrower's mortgage amount(s) exceed the price the house will fetch in the current market. An honest, competent appraisal should be relied upon to determine this value. If a borrower is unable to keep up the payments on these mortgages, the mortgage(s) language demands that you forefit the collateral, which was deemed sufficient to cover the mortgage, or the mortgage should not have been granted.
    Any 2nd mortgage lender knows his mortgage could become "unsecured" if the property value falls, or the appraised value was inflated. Sure, the risk is somewhat offset by the higher interest rate charged on the 2nd mortgage, but if the second mortgage is held by the same company as the first, the deal begins to smell like a "fee generation" technique doesn't it? All this being said, if the property's value falls below the FIRST mortgage amount, that sort of suggests the 2nd was weak to begin with. In this bankruptcy scenario, does the borrower get to roll on the first and second and stay in the house? That should not be allowed. The borrower plegded the property, the bank evaulated the property and in bankruptcy, it should be forfitted and the bank take its loss, which it WILL write off.
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