Justices Side With Bank Of America’s Fantasy That Second Lien Stripping Is Unnecessary Because Property Values Will Rebound To Antediluvian Levels
The U.S. Supreme Court dealt a killer blow to homeowners in bankruptcy Monday by ruling that homeowners who declare bankruptcy can’t void a second mortgage through Second Lien Stripping even if the home is underwater and is worth less than what is owed on the first mortgage.
The justices overturned a ruling in two Florida cases from the 11th U.S. Circuit Court of Appeals that affirmed in both cases that bankrupt homeowners can’t “strip off” a second loans to Bank of America even if they are underwater on the first loan.
Both cases involved property owners were allowed by lower courts to nullify second loans held by Bank of America.
The Atlanta-based 11th U.S. Circuit Court of Appeals affirmed both cases, but Bank of America said the rulings conflicted with Supreme Court precedent.
The company argued that even if the primary mortgage is underwater, that should not affect the lien securing the second loan. The bank said the second loan might be repaid eventually if the property’s value rises in the future. therefore, there was need to strip it.
Bankruptcy Court has always been the last resort for Florida homeowners in foreclosure from losing their homes when they can not resolve their cases through Florida’s judicial foreclosure system.