Sub-Prime Mortgage Crisis Continues - Another Brick in the Wall, Part ???
By Eugene S. Melchionne, Connecticut Bankruptcy Attorney on Aug 6, 2007 in Bankruptcy Cases of Interest, Connecticut, Foreclosure Issues, General Bankruptcy Information, Mortgages
American Home Mortgage Corp. of New York filed for Chapter 11 Bankruptcy relief in Delaware today deepening the housing market depression. The Wall Street Journal has amassed a list of the collapsed companies who have either filed for bankruptcy, gone out of business or have been acquired by other companies. In addition, some companies have simply ceased making new mortgage loans while they revise their standards to fit current market conditions.
The untold story is what happens when a mortgage company files for bankruptcy. Just like any consumer, the mortgage company gets the benefit of the automatic stay. That means that any action to be taken against the bankrupt company must stop immediately. Think about what that does: Any attempt to foreclose any property where the bankrupt mortgage company has a loan or sell or refinance that property must stop until the Bankruptcy Court in Delaware says it’s OK.
More bankruptcies by other distressed mortgage companies could create complete collapse of the real estate market while the various Bankruptcy Courts determine who goes first, refinance of an old loan, a sale of a property to a buyer, or foreclosure for non-payment of any mortgage loan, taxes, or other lien on a piece of residential property.
Can you spell GRIDLOCK?
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