Sixth Circuit Beware
In re Talbert, 344 F.3d 555, Bankr. L. Rep. P78, 920 was handed down by the sixth circuit recently that effectively allows junior lien holders in an upside down property to fair better in banktuptcy than in a foreclosure action. Worth taking a read as this may change things for the short seller, sub-2 and auction buyer.
What does this change about
- Short Sales? NOTHING!
- Sub-2s? NOTHING!!
- Auctions? NOTHING!!!
imho
But You CanSEARCH TROUGH IT YOURSELF @:
http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=search&case=/data2/circs/6th/03a0343p.html
I think it will likely change the position of the mortgage note holder in negotiating their position if they know that they will not get stripped in a Chap. 7, it may also increase involuntary filings. It is definately something that people should be aware of if they are doing business. Instead of telling post readers that it meant nothing, I wanted to give them the opportunity to judge that for themselves, that is why I POSTED THE REPORTER citations, so that everyone could access it, and I managed to do so without using all caps.
JHG:
No OFFENSE INTENDED by my CAPS just for emphaisis not to shout -xcuse my laspe in net-etiquette.
Anyway...imho Most Jr. Lenders won't invoke In-Vol BK onto a borrower for the simple fact that it would severly impact their CRA credit and HUD availability to loan insured funds.
Being a former lender myself BK sounded the END (not shouting) of the foreclosure-bound non-performing asset and FREES UP $$$ (again not shouting) to be loaned to other hopefully more creditworhty borrowers.
You seek picking a fight in court is something the ATTYs like but Bankers Abhor...we'd just rather collect on timely reprayment of our principal and interest lent.
BTW- Write Offs on bad loans have less significant impact than putting the screws to hapless-down-on-their-luck customers forcing them into BK and STEALIN AWAY Their Homes = BAD PR in the lending industry leading to class action suits ask HFC, Fairbanks, conseco and the other lowlife scum lenders with no scruple.
I guess I'm getting a little off topic.
The 6th Circuit merely uphold (read not watershedded) a previsous decision.
MEANING:
The Jr. Lien holder WON'T Lose secured interest (be stripped off) by BK provision 506.
However they CAN Still be stripped off via Foreclosure by the 1st lien holder.
It seems to be that the t alberts were seeking to Keep their home and 1st mortgage while asking the BK Court to remove the 2nd Mtg as a secured lien...thus wiping out the debt in the Chap7 discharge...(2nd lienholder cried FOUL and the Judge agreed)
JHG: I just don't see the relevance of this and it's impact on the Short Sale, Subj-2 or Auction process as NOTHING (again Emphasis) has Changed???
Pls help me with a scenario as I could be wrong...I've been known to make a mistake or two this Millennium...
Thanks for sharing!
Derrick
Derrick: I appreciate your lender perspective.
JHG:
YOU WELCOME!!!
Always NICE to make A new FRIEND!
Best of SUCCESS to YOU!
Derrick
Very interesting, as I read it 6th Circuit just confirmed things as they are.
A second lender is always aware of the service required by the pre existing lst Mortgage or Trust Deed. It is a consideration taken at time of lending. If the first starts to foreclose the second cures and includes in his costs the advances and costs made to cure the prior foreclosure. I think that is why we file at time of recordation of a Mortgage or Trust Deed a request for notice with the prior Mortgage Holder. I cheat, during the time I am servicing or collecting on a second TD, I always make calls to the first just in case of a bobble. That way I avoid costs. I have never yet seen an action which stripped a secondary mortgage/trust deed away. Other then fraud.
Of course in foreign climes it is different. While herding sheep, just outside of Tirana the only town in Albania which had a flush toilet,a matter of great local pride, they pointed out to me a recently deceased human who was hanging from a tree. He tried to foreclose on somebodies farm. Something about improper tender. Seems there is a law about hypothication of property outside the family or tribal group. I decided not to lend money in Albania. Tunjateta!
Cheers Lucius