After the events in the New Hampshire real estate market over the last several years, many homeowners in the state are in possession of a home that is worth less than they paid for it. This can have dire effects on the debtor’s ability to repay the mortgage, as the mortgage may be taken out for more than the value of the home on the open market. Mortgages such as these are referred to by the term “underwater,” and they are the subject of a current case brought before the United States Supreme Court.
The case of Bank of America v. Caulkett relates to whether or not a court had the right to reduce the amount of a second mortgage on an underwater property to an amount that a bankrupt debtor is more likely to be able to pay. While examining this case, the court had occasion to recall a decision from 1992 called Dewsnup v. Timm. The court appeared to strongly favor the idea of using their current decision to alter the precedent set by Dewsnup.
The question goes to the heart of mortgage law, as it examines the precise meaning of the concept of a lien on property. This definition is an extremely fine point of legal distinction, and the interpretations and effects of the court’s ruling in this case may change the way mortgages and bankruptcies interact across the U.S.
Individuals who are having difficulty with their mortgage may choose to consult an attorney to seek methods of mortgage modification and debt remediation. Bankruptcy filings may be of use in certain circumstances.
Source: Forbes, “Second-Mortgage Case Has Justices Second-Guessing An Old Decision,” Daniel Fisher, March 24, 2015