2nd Mortgage Objections(?)

[Nanzee]

Can anyone tell me how often 2nd Mortgage objections are successful? Our 2nd filed an objection day before our confirmation hearing so we come back in March. Our attorney told us not to expect it to be resolved by March either, but he does not seem concerned. My question of course is how concerned should my husband and I be? Thanks again for any replies!

[MSbklawyer]

What are you trying to do with the 2nd mortgage? What is their objection based on?

[Nanzee]

Oh, I apologize - we are trying to cram it down.

[MSbklawyer]

Oh, I apologize - we are trying to cram it down.

What is the basis for their objection? Do they claim there is equity in the house above and beyond the first? You're taking the position there is no equity above the first?

[Nanzee]

I have not received my copy of their objection yet. I am assuming they are questioning the value of the house - like everyone else's home, our house is valued way, way below what we paid for it. We have only owned the home for 4 years.

[momofthree]

Are you trying to cram it down or strip the lien altogether? I was under the impression that mortgages were all or nothing, that they couldn't be crammed down, only stripped....I could be wrong though...

[Nanzee]

LOL, I really should not type before that first cup of coffee - I should just start this all over again! We are trying to STRIP the 2nd mortgage, and they put in an objection the day before our confirmation hearing (at 4:30 pm in the afternoon!) So, that is my question (hope to god this is the right information this time).

[MSbklawyer]

You can only strip off a second on your primary residence if there is no equity for the mortgage to attach. If there is even one penny of equity above the first mortgage, you cannot strip the second mortgage.


So what it sounds like is you are going to have to have an adversary proceeding to establish the value of the house. Your appraiser will testify that the house is underwater even on the first mortgage. The bank's appraiser will testify that there is substantial equity. Sometimes, courts appoint an independent appraiser in addition to the other two and orders the parties to split the costs.

There's no way to gauge a success rate on these things. It depends on what the judge believes about the value of your house.

[bkstuff]

wow!

So, if the "strip" does not go through, what does that mean for the bankruptcy? Can one decide at that point to let the house go to foreclosure...and if so, would the 2nd lien holder be able to sue for deficiency even if you file a 13?

Interesting.

[MSbklawyer]

So, if the "strip" does not go through, what does that mean for the bankruptcy? Can one decide at that point to let the house go to foreclosure...and if so, would the 2nd lien holder be able to sue for deficiency even if you file a 13?

Interesting.

Yes, the owner/mortgagor/debtor could then decide to let the house go into foreclosure. Bankruptcy would preclude the second mortgage holder from pursuing a deficiency against the debtor.

[NoTomatoCan]

If the lien strip is unsuccessful, can you then just continue to pay (or catch up on past due payments) as part of your payment plan?

Would you then have to revise you entire payment plan to account for this?

[justbroke]

Yes you can continue to pay. Most Districts require that a Plan includes payments for the stripped mortgage until the lien is actually stripped. This keeps from unpleasant surprises and it actually protects the debtor from a Motion for Relief from Stay (MRFS) on the 2nd... causing issues with a potential foreclosure. You and your attorney will need to use local practice to determine if you pay the second until the strip is approved.

In my District, I wasn't required to provide adequate protection (payments) to the 2nd while my motion to determine secured status and avoid lien was being litigated.

[NoTomatoCan]

My attorney said to NOT include it in the plan because we are attempting to strip. Said that was the local custom.

So I guess it makes sense that it goes back in the plan if the strip is unsuccessful. (Which WILL be a very unpleasant surprise of about $1650 per month).

Since we are proposing paying less than $1650 per month WITHOUT this $1650, would we get a chance to revise everything or does the trustee just take the plan we submitted and add an additional $1650 expens?

[justbroke]

Since we are proposing paying less than $1650 per month WITHOUT this $1650, would we get a chance to revise everything or does the trustee just take the plan we submitted and add an additional $1650 expens?

You would submit a new plan. If the plan isn't yet confirmed, this is an easy exercise. If the plan has been confirmed, then you have to file a motion to modify the confirmed plan and your attorney would deal with getting the Trustee and Court's approval.