Ch. 13 2nd mortgage cram down AP

[hdcpt]

I filed Ch. 13 and included in my plan was a cram down on my 2nd mortgage. I have an AP hearing coming up where my credit union is challenging the value of my home and contesting my 2nd mortgage should not be considered unsecured debt in my Ch. 13 plan. At my 341 my attorney submitted a certified market analysis showing the current value of my home is lower than what I owe on my first mortgage.

I am in the process of having an appraisal completed and feel confident my appraisal will be lower than what I currently owe on my first mortgage thereby making my 2nd mortgage unsecured debt.

My questions are:

Is this a clear cut issue in that if my appraisal is lower than my first mortgage does the AP judge have to accept that amount and accept 2nd mortgage in the cram down?

What if the credit union has an appraisal showing a higher value?


Has anyone else gone through an AP hearing on this issue?

My attorney is leaning towards trying to settle with the bank on an amount to avoid the AP hearing.

Any advice would be greatly appreciated.

[Pandora]

My questions are:

Is this a clear cut issue in that if my appraisal is lower than my first mortgage does the AP judge have to accept that amount and accept 2nd mortgage in the cram down?

What if the credit union has an appraisal showing a higher value?


Has anyone else gone through an AP hearing on this issue?

My attorney is leaning towards trying to settle with the bank on an amount to avoid the AP hearing.

Any advice would be greatly appreciated.

Answering in order:

1. In general, a certified appraisal will stand over a CMA or BPO; make sure to get a copy of your real estate appraisers license to include in your submission of evidence to strip the 2nd.

2. Credit unions are notorious for this, however generally - again the cert. appraisal will trump everything else. The 2nd lein holder will always have the value higher to try to stop a strip; par for the course.

3. Yes - anyone that strips the 2nd either has to do so by Motion or by AP, from the sound of it PA requires it by AP. It's not as bad as it sounds - if your lawyer submits all required paperwork and it is indeed lower (the cert. appraisal) than the 1st - you will have to go to court unless the 2nd decides to concede, which then allows the strip to happen.

4. If your attorney is caving at this point in the game before anything has been done, perhaps he/she isnt as experienced in stripping subordinate liens as he/she made you believe. Its way too early to start offering to settle anything at this point. What is the cost your attorney is charging you for the AP? When you met / hired your attorney, all of this should have been discussed with you / attorney as that is a major sticking point with a Ch. 13 and a 2nd mortgage.

I'm sure others will chime in on this as well.

[hdcpt]

my attorney is charging me additional fees to defend this AP (app $1500). He did tell me in the beginning any challenges will be additional, however he was vague in the sense that he told me there is no way to tell if and how many will be challenged. (which I understand)

I didn't really like it when my attorney brought up the part about the settlement. In his defense he did bring it up as an option and said I would have the final say.

If my certified appraisal is lower than my first mortgage I don't see the advantage to settle prior to hearing, unless of course the judge has discretion and doesn't have to accept the appraisal amount. I am getting (2) appraisals from different agencies to submit and one of the appraisers is willing to testify and has experience testifying at these proceedings.

[justbroke]

I wouldn't settle at this time. I'd get a certified appraisal and see what happens at trial. Ankle biters, credit unions, are a pain in the neck. They are trying to protect their members, including you, and usually have more bark than bite. I personally would have NEVER EVER submitted a CMA or BPO in an Adversary Proceeding (AP) on a Complaint to Determine Secured Status and Avoid Lien... ever. Probably if your attorney had started with an appraisal on a URAR form, the bank may have backed off.

It's not clear cut because in such hearings, it's always best evidence. A certified appraisal on appropriate form (URAR) will always trump BPOs and CMAs. However, direct testimony of a licensed appraiser or "expert witness" will always trump all the other things. It comes down to credibility at that point. Even though CMAs are not the "best" and certified appraisals from licensed appraisers (on URARs) are better, the best will remain direct testimony from an expert. Be aware that you may need your appraiser to testify if the credit union gets their own certified appraisal and the amounts are different.

Still bothering me that your attorney didn't nip this in the bud in the beginning by getting a certified appraisal. Sorry, just bothering me. When I submitted my lien strip (Motion to Determine Secured Status and Avoid Lien), I submitted it with an appraisal on a URAR and my appraiser was prepared to testify at the hearing. (In Florida, we can lien strip by motion (contested matter), and don't need to go through the formal complaint procedure (adversary proceeding).)

[despritfreya]

Typical scenario:

You get an appraisal and if it is way below the amount owed to the 1st, 2nd will stipulate to the strip.

You get an appraisal and if it is close to the amount owed to the 1st, the 2nd will get its own appraisal. If its appraisal is below the 1st, 2nd will stipulate to the strip. However, if its appraisal is above the amount owed to the 1st, it will calculate the average between the 2 and if there is any equity it will continue the fight unless some other deal is cut.

Has the lender gotten an appraisal, or even asked to gain access to the property?

Des.

[justbroke]

Des, I know what you mean. I have read too many cases where even in the middle of the matter, the dumb bank still has only obtained a BPO or CMA and then try to challenge a certified appraisal from the debtor. However, sometimes this is just more about an argument rather than any real substance over the value.

[shark66]

I'm in a somewhat similar boat...and my original train of thoughts was - and still is:

a) Get all the ducks in the row to make the best of AP, spend $$$ on professional appraisal, if the lien gets stripped, that was money well spent.

b) If the lien strip is unsuccessful, dismiss Ch. 13 and walk if needed. Depends on a variety of circumstances.

I would NOT attempt to settle the second. Not that the idea has ever crossed my mind prior to reading the OP's situation, not while in active Ch. 13 anyway.

My $0.02 only...

Good luck.

[hdcpt]

Thanks for the advice-I am waiting on the results of the appraisals and should have them in the next few days. I will update later and seek opinions on the best direction. I am confident in speaking with the appraisers they will be below the amount of currently owed on my first mortgage.

[hdcpt]

UPDATE-

I was just confirmed yesterday!

The credit union withdrew their objection the day before the hearing when my attorney informed them of our intention to fight the AP. My attorney submitted a CMA (which I used at my 341) (2) certified appraisals, and had an appraiser prepared to testify at the hearing. Obviously, the CMA and appraisals came in under what I owe on my primary mortgage.

The credit union was not happy because they had an appraisal from 2009 which they conducted to approve the loan. They were using this as the basis for their objection and quickly found out it was grossly inflated and could not be defended.