Lien Strip a Second after Modifying the first?

[wp99]

Hi. New member here.
Quick background: I recently filed Chapter 13 after nearly two years fighting against filing BK. I was a victim of bad investments, poor economy, and a wife's lost job. While I qualified for a Chapter 7, the 13 made more sense because of the Adversarial Proceeding option (Lien Strip) and the fact that my monthly payment ended up being only $100/month which I can afford it. I'm currently awaiting my 341 meeting.

I modified my 1st mortgage earlier this year with the bank after a year long tug-o-war. The original loan on the 1st was around $411K. After the modification was finalized it became $433K as stated on my mortgage statements. They added back in the year and a half of missed payments and perhaps a few other fees.

My professional appraisal came in at $420K for the lien strip.

My question is... will the $420K appraisal hold up to proof a negative equity position to strip the 2nd mortgage if the ORIGINAL loan was only $411K?

I know I need to contact my lawyer on this but thought I'd ask for input here as well.

Thanks.

[momofthree]

It doesn't matter what the original loan amount was. All that matters is your current balance at the time of filing.

[wp99]

Thank you 'momofthree' for your quick reply. Your response gives me comfort. Did you have any experience with a lien strip yourself?

[momofthree]

I am doing a lien strip, but I don't think my attorney has sent in the motion for it yet.

[Pandora]

I am doing a lien strip, but I don't think my attorney has sent in the motion for it yet.

Momof3 - you've been confirmed and your AP for the 2nd hasnt been done yet? How is that possible? I thought that had to be done before confirmation was approved.... ? How is your 2nd reading on your plan - secured or unsecured - and does it say "Lien Avoided" ? Wow - I'd be flipping a gasket if we were confirmed but the lien situation wasnt settled yet. Our Trustee at our 341 would not approve confirmation until the AP was filed to strip; we just had the official appraisal done last week because our 2nd did a BPO and valued the house wayyyy higher than what we paid for it 3 years ago. So now we have another hearing next week for confirmation and a pre-trial for the AP motion to strip. If they dont contest the valuation, we'll be confirmed finally. If they do contest it (again... ) then we go in front of the judge and have HIM decide, then we'll get confirmed following that.

wp99 - what Momof3 stated is correct, but be prepared for your 2nd to come in with an appraisal of their own and fight you on it. We have enough proof to show our house is and has always been valued less than what the 1st was/is at as when we bought it was right before the market crashed by just a few months. We had it appraised 7 months after we bought it back in 2007 and it dropped then below what the 1st was for. At the time, we thought "Oh No!" - but now... we're thankful it has because we can prove without a doubt the house value from 2 years ago with the 2nd contesting. Our loan was an 80/20.

[justbroke]

Generally speaking, lien strips are usually adjudicated before confirmation. How a lien strip is achieved varies by District. in Florida (and the 11th Circuit), we can lien strip by Motion (contested matter). In some Districts, lien stripping can only be achieved through Adversary Proceeding (complaint).

Also, for lien strip purposes, it's the balance of the loan at the time of filing that is used. So even without the modification, you probably still "owed" (had a balance of) more than $420K. Whether the 2nd will challenge the valuation is anyone's guess. Just have your appraiser prepared to testify if necessary.

[catleg]

I think the "valuation" used will not just be the appraisal, 420k, but you are allowed to take off expense of sale (realtor commission) which would be 6% or $25k bringing you down to $395k. And the real estate market is very soft right now, in spite of record low mortgage rates. I think to sell you'd have to price it 10% under the appraisal. (just sayin' what my realtor told me). Sounds like it should work out ok for you.

[wp99]

Sounds good. Thanks for all your input.
I'm prepared to have my appraiser testify in court if needed. I live in Utah. An adversarial proceeding is required to lien strip. My lawyer says its possible that the 2nd will fight back but unlikely, especially when its with a large bank like Wells Fargo. We'll see. Just got notice of my 341 meeting. July 30th. Wish me luck.

[wp99]

Just got the official word back from my attorney. He said quote "The Court will look at the current balance of the loan, not what the original balance was."

So that's good news for me. Now I just hope that the bank doesn't try and fight it. Does anyone have any experience with the bank fighting a lien strip? Any statistics as to the likelihood that I'm in for a fight?

[justbroke]

Just got the official word back from my attorney. He said quote "The Court will look at the current balance of the loan, not what the original balance was."

That's what I wrote above.

Does anyone have any experience with the bank fighting a lien strip? Any statistics as to the likelihood that I'm in for a fight?

They usually do not fight. If they do, it's best evidence and if you have an appraisal and they don't, you'll win with that as best evidence. If they have someone testify at an evidentiary hearing on the matter, that will trump your appraisal.

Again, these are rarely disputed, although there is some rumbling when the number is close.

[Pandora]

That's what I wrote above.

They usually do not fight. If they do, it's best evidence and if you have an appraisal and they don't, you'll win with that as best evidence. If they have someone testify at an evidentiary hearing on the matter, that will trump your appraisal.

Again, these are rarely disputed, although there is some rumbling when the number is close.

Okay JB - explain please. Our confirmation was just continued again today (pretrial for AP was held today as well) due to our 2nd not wanting (or actually not being prepared I should say) to agree to the strip even though we have the appraisal. They're lawyer wasnt ready.. *eye roll* So...... I thought the next part would be the judge decides if come our next hearing date the 2nd still refuses? What is this "trump" card you speak of

Oh god... please tell me they cant win with their lame BPO over our appraisal among other items we've proven and provided! What happens if we have someone testify on our behalf and/or provide a written statement to the lawyer (like if they cannot appear in court - but provide the letter) Will that trump whatever they come at us with?

[justbroke]

Okay JB - explain please... What is this "trump" card you speak of

Testimony of an expert witness at a trial will usually trump an appraisal.

I think your 2nd is just taking its time and figuring out whether they even have a case. They will probably order their own appraisal. A BPO is not going to trump a professional licensed appraiser issuing an appraisal on the Universal Residential Appraisal Report (URAR).

However, if they have an "expert" come to testify at the trial, and you only had your paper appraisal and not your appraiser ("expert") to defend the appraisal, you are likely to lose because they can't cross examine a report. Anyhow, you'd know well in advance and I'm sure your attorney will contact your appraiser and subpoena them to testify.l

A BPO is garbage against a true appraisal on the appropriate forms, with the appropriate licensed individual asserting via affidavit that they performed the appraisal personally.

I wouldn't worry. If your mortgage BALANCE on the first is higher than what the place is worth (by a non-negligible number like > 2%), then I don't see their argument. But, you know, it's money and your second is probably an ankle biter.

[Pandora]

Testimony of an expert witness at a trial will usually trump an appraisal.

I think your 2nd is just taking its time and figuring out whether they even have a case. They will probably order their own appraisal. A BPO is not going to trump a professional licensed appraiser issuing an appraisal on the Universal Residential Appraisal Report (URAR).

However, if they have an "expert" come to testify at the trial, and you only had your paper appraisal and not your appraiser ("expert") to defend the appraisal, you are likely to lose because they can't cross examine a report. Anyhow, you'd know well in advance and I'm sure your attorney will contact your appraiser and subpoena them to testify.l

A BPO is garbage against a true appraisal on the appropriate forms, with the appropriate licensed individual asserting via affidavit that they performed the appraisal personally.

I wouldn't worry. If your mortgage BALANCE on the first is higher than what the place is worth (by a non-negligible number like > 2%), then I don't see their argument. But, you know, it's money and your second is probably an ankle biter.

thanks justbroke for the heads up, much appreciated. I'm hoping we're all in the clear on this entire lien strip - all our ducks have been in a row from the beginning and are pretty solid (we're roughly -28K from value to 1st mortgage). Guess it'll come down to our expert vs. their expert because I know their BPO was a joke

you're right though - our 2nd (a credit union) is being an ankle biter for sure

[justbroke]

you're right though - our 2nd (a credit union) is being an ankle biter for sure

How did I know it was an ankle biting credit union? Only they and really small banks put up all this fuss.

[Pandora]

How did I know it was an ankle biting credit union? Only they and really small banks put up all this fuss.

cuz you're psychic? :P

hey - did you see my post re: yesterdays meeting - can you answer my ? for me that I posted?