Law Office of Allan E. Dunaway, PLC

Mortgage settlement funds help some borrowers in Kentucky

The mortgage crisis was a massive disaster for thousands of families. The bubble of real estate prices placed thousands of Kentucky homebuyers in the unfortunate circumstance of having to pay greatly inflated prices for their homes, only to see those prices collapse. The collapse damaged the economy, driving many companies out of business and leaving many employees out of work.

Borrowers saddled with overpriced mortgage loans resorted to part-time work, took jobs with greatly reduced salaries or hours and struggled to make payments on those mortgages. While some were able to hang on, the pressure was often too great and the borrowers would begin to fall behind on their mortgages, leaving them with the prospect of foreclosure or bankruptcy.

The misconduct that what went on during the mortgage debacle prompted litigation by many state attorneys general against large banks that participated and profited from the fraud. According to Kentucky's Attorney General, the state received $58 million as part of the $25 billion settlement. He notes that 65,000 Kentucky borrowers lost their homes to a mortgage foreclosure.

While this settlement will help some, for many, bankruptcy still may be necessary. A Chapter 13 may allow a borrower to repay their mortgage arrears through the plan. This and the reduction of some unsecured debt may provide enough extra cash to enable them to keep their home.

For those who have lost their home, a Chapter 7 can allow them to discharge a deficiency balance that remains after they had to abandon their home due to a foreclosure or short sale.

Source: KyForward.com, "Mortgage settlement funds will help create affordable housing for Lexington families," September 25, 2013

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