In a few days, the Supreme Court will make a determination; whether homeowners who have filed bankruptcy are eligible to nullify a second mortgage. This is assuming that the property’s market value is lower than the amount owed on the first mortgage. Bank of America appealed twice to the Supreme Court. They were proclaiming that the second loans should not be “stripped off” when a homeowner files bankruptcy; even though the primary loan is well underwater.
The two cases that Bank of America is appealing are from homeowners in Florida. They have voided the second loan provided by them. Furthermore, the bank states that the rulings provided by the 11th Circuit Court of Appeals in which it certifies its validity is in discord with the Supreme Court’s paradigm. And, all other appellate courts that have contemplated it. Alabama, Florida, and Georgia are the states which the 11th Circuit binds. And, that have nullified hundreds, maybe even thousands, of underwater second mortgages since the court approved it 24 months ago.
RealtyTrac Data on Mortgage
According to the data compiled by RealtyTrac, a real estate research company, 28 percent of Florida homes that are mortgaged are worth much less than market value. In fact, Florida is the second state with the highest number of underwater mortgages. Nevada is number one. Moreover, a lien on the property secured the loans given to the debtors by Bank of America. This is true in both cases. The banks’ attorneys contend that the fact that the primary mortgage is underwater should not affect the lien secured to the second loan. However, the homeowner’s attorneys argue that in a foreclosure, the second mortgage would be completely worthless.
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