The Second Lien Strip Strategy

**Luckybustert** · 12-20-2009, 11:00 PM

http://www.oregonlive.com/business/i...eowners_f.html

To be eligible, homeowners must owe more on their first mortgage than their house is worth. That's an increasingly large segment of the population. Recent studies indicate that 20 to 25 percent of Americans are "underwater" on their home mortgages.

The strategy works like this: Homeowners must first file Chapter 13 bankruptcy and file a motion asserting their home's value has diminished to the point that it's worth less than they owe on the first mortgage. If the motion prevails and the lender doesn't challenge, the court will then cancel the lien the second-mortgage lender holds on the home. The lender's secured debt is converted to unsecured debt, which most often is eliminated in full in the bankruptcy process.

What are your thoughts on this?

**NikoSan999** · 12-20-2009, 11:15 PM

I say Yay!!!!!!!!!!!!!! Totally agree. Second mortgage companies are a big reason the modifications aren't going thru. To bad so sad...Now it's their turn.

**Greebo** · 12-21-2009, 08:27 AM

If it's the difference between doing this and losing the home, that's one thing.

If you can afford the payments, however, you made your bed. Lay down in it.

**NikoSan999** · 12-21-2009, 08:20 PM

Originally Posted by Greebo

If it's the difference between doing this and losing the home, that's one thing.

If you can afford the payments, however, you made your bed. Lay down in it.

K, this I totally agree with you on. But for the ones that can't I say Yay!!!
As you said if it's the difference in losing the home. But if you can afford the payments that is different story

Thank goodness this is one loan we don't have. We paid cash for home improvements.

**littleplum** · 12-22-2009, 07:01 PM

Originally Posted by Luckybustert

http://www.oregonlive.com/business/i...eowners_f.html

What are your thoughts on this?

IMO? It's legalized theft.

The loan was, in most cases, sought out by the homeowner. They may have been marketed to, but a lender will not start an application until a borrower ASKS.

The homeowner put the asset (the house) up as collateral in case they renege on the loan. They took the money and spent it on something; either cash out to buy goods/services they enjoyed, or medical care, or just shelter that they have benefited from.

Now they are asking for a judge to break the contract, and essentially give them the money. I mean, that's what will happen if they get the judge to rewrite their contract to a non-collateralized loan and then they go and declare bankruptcy.