Big bank's second mortgage cases head to Supreme Court

by MPA17 Nov 2014
The U.S. Supreme Court announced this morning it will decide whether homeowners who declare bankruptcy can void a second mortgage if the home's value has dropped below the amount they owe on the first mortgage.

Bank of America is bringing the two cases, Bank of America v. Toledo-Cardona and Bank of America v. Caulkett, to the nation’s highest court. The lender is arguing that bankrupt homeowners should not be able to strip off a second loan even if they are underwater on primary loans, according to Bloomberg.

The homeowners in the two cases, David Caulkett and Edelmiro Toledo-Cardona, both won the cases before the regional appeals court that oversees Florida. However, Bank of America says the rulings conflict with Supreme Court precedent and every other appeals court to consider the issue.

The Supreme Court’s decision could affect thousands of similar cases in lower courts, according to Bank of America. If the U.S. Justices uphold the decision, the lender loses its ability to foreclose on the property even if its value increases.

Approximately 28% of houses in Florida are worth less than their mortgages, ranking the state second to Nevada in underwater mortgages, according to RealtyTrac.

The court is slated to reach a decision by summer 2015.


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