Of those with junior mortgages, about 73% were wholly unsecured, meaning the first mortgage balance exceeded the listed home value.
In Florida and Ohio, with far fewer homeowners with junior mortgages, less than one in three plans proposed a strip off.
(87) The amended rules that now simplify the motion practice to strip off junior mortgages, and perhaps some standardization of attorney fees for these services, should increase the use of this important tool.
Total junior mortgage debt grew from $606 billion at the end of 2000 to more than $1 trillion by the end of 2009.
When there is absolutely no equity remaining after the first mortgage to support the junior mortgage, then the junior mortgage holder does not hold a secured claim according to [section]506(a).
There are three procedures a chapter 13 debtor might use to strip off a junior mortgage lien.
(44) The Central District of California bankruptcy court provides a local form motion and order, (45) as well as a local form for an adversary complaint (46) to strip off an unsecured junior mortgage. Apparently, the selection of the proper form depends on the particular judge's preference.
(49) This distinction might also account for some underutilization of the junior mortgage strip off.
Although the solution becomes more complex when the junior mortgage is considered, the result is much more in line with market evidence.
The sum of the present values of payment savings from equations 2, 3, and 4 ($8,689.09) is the estimated value of the loan assumption, including the effect of the junior mortgage required to make the purchase possible.
Also, it should be noted that the value of the assumed loan reaches the $14,383 amount calculated ignoring the junior mortgage only when the junior mortgage effect is reduced to zero (A/P ratio = 80% of price, loan-to-value ratio = 0.57, and interest rate spread = 0).
However, measures of assumable financing value that have ignored the need for a junior mortgage to bridge the gap between the assumable loan amount and the buyer's equity overestimate the value of assumable financing.