Modifying mortgages in Wonderland

10 Apr Modifying mortgages in Wonderland

I got a taste of the present, bizarre aspect of bankruptcy law this week when I could help one new client strip down an underwater second mortgage on an investment property, but could not do the same for the next client’s family home.

What’s wrong with this picture when the investor who buys a single family home gets more bankruptcy relief than a homeowner? What is it about the identity of the family living in the home that allows one owner to reduce the mortgage debt in bankruptcy and not another? Why is it public policy that we support investment (or vacation homes, since mortgages there can be stripped as well) and not homeownership?

This is all the more poignant for me since the modification to the Bankruptcy Code that would have permitted bankruptcy judges to write down mortgage loans on family homes was pulled from the supposed foreclosure rescue bill in Congress.

Policywise, we’ve tumbled down the rabbit hole and are wandering the blighted neighborhoods in Wonderland.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.

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