Wednesday, September 18, 2013

"The Honest But Unfortunate Creditor"

Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055.

In her law review article, Professor Juliet M. Moringielo of the Widener School of Law wrote an article entitled "Mortgage Modification, Equitable Subordination, and the Honest but Unfortunate Creditor" , Fordham Law Review, Forthcoming; Widener Law School Legal Studies Research Paper No. 10-10.

Professor Moringielo suggested that the Bankruptcy Court's power of "equitable subordination" under section 510(c) of the Bankruptcy Code may give the Bankruptcy Court to modify mortgages on principal residences in which the mortgage lender has engaged in abusive lending practices. It is noted that, otherwise, mortgages secured only by a principal residence are not modifiable, unless wholly unsecured (ie. "underwater").

Professor Moringielo reviewed that mortgage lending in recent years little resembles the traditional lending practices of thirty years ago when the Bankruptcy Code was enacted. Moringielo notes the 2% downpayment, introductory teaser rates of interest, the interest-only mortgage, the 80/20 loan, and the Option ARM that allowed for negative amortization and reduced or no documentation loans. Professor Moringielo suggests that it "strains belief to think that Congress and the [Supreme] Court intended that lenders that engage in abusive lending practices should be entitled to these protections."