Mortgage Forgiveness and Bankruptcy
Bank of America mortgage forgiveness and bankruptcy
Recently we have written about Bank of America forgiving second mortgages and the National Mortgage Servicer Settlement. Many homeowners facing foreclosure are anxious to find out if their second mortgage will be forgiven by Bank of America.
Well, it appears that one pattern may have emerged. Many homeowners who have already filed bankruptcy are receiving letters stating that their 2nd mortgage will be forgiven. Great news, right? Maybe. Some of these debtors are in active bankruptcy (chapter 7 & chapter 13). Some debtors have already received a bankruptcy discharge and are no longer personally liable for their mortgages. Other debtors have “stripped” their 2nd mortgages and BOA will likely receive much less than 100% of what is owed on the 2nd mortgage.
Not So Good
- It appears that BOA may receive credit, against the amount it owes under the National Servicer Settlement Agreement, by forgiving mortgages they can could no longer collect or only collect a portion of. This may lead to fewer distressed homeowners actually benefiting from the Settlement.
- There may be tax issues (the advice of a tax professional may be necessary).
- Distressed homeowners who are not in bankruptcy are receiving letters from BOA stating that their 2nd mortgages are being forgiven. This will make it easier for some homeowners to avoid foreclosure.
- Debtors in bankruptcy who are paying back 100% of the arrears on their 2nd mortgages and their full 2nd mortgage payment have received notification that their loan is being forgiven. This could alleviate the need for a chapter 13 bankruptcy altogether.
- Some homeowners may find themselves with instant home equity.
Nassau County Foreclosure Attorney
If you have any questions about this or other legal issues, call The Law Firm of Vaughn, Weber & Prakope, PLLC, at 516-858-2620, for a free consultation!
+This is not tax or legal advice.