Kentucky borrowers and those who have had difficult times with their mortgages in an extremely fluid market may be interested in recent developments in a case before the Supreme Court. The case of Bank of America vs. Caulkett appears to have larger ramifications than the specific suit, which concerns whether or not a court of appeals should have allowed Caulkett and one other individual to use bankruptcy to modify of their second mortgages. The Supreme Court appears to be considering the use of this case to overturn a decision from 1992 that now seems deficient.
A reading of 1992’s Dewsnup v. Timm shows that it prevents any lower court from stripping the value of an underwater mortgage, or a mortgage that uses a home for security when the home in question cannot be sold for the amount left on the mortgage. Dewsnup does not allow the court to adjust the mortgage to market level, but instead holds the mortgagee to the original value.
When examining the case before it now, the court has shown a strong preference to re-examine Dewsnup and change the rule so that any mortgage that goes through bankruptcy can be brought down to the market cost. This case has many veteran observers of the Supreme Court hesitant, inciting arguments between justices on both sides of the issue.
The assistance of a lawyer may make a difference when attempting to navigate complex bankruptcy filings. Whether the issue is with unusual assets, special circumstances such as second mortgages on underwater properties or other difficult questions, the lawyer may be able to provide useful advice and legal representation when necessary.
Source: Forbes Magazine, “Second-Mortgage Case Has Justices Second-Guessing An Old Decision,” Daniel Fisher, March 24, 2015