2008-05-29 — blogspot.com
``Judge Leslie Tchaikovsky ruled that a National City HELOC that had been "foreclosed out" would be discharged in the debtors' Chapter 7 bankruptcy. Nat City had argued that the debt should be non-dischargeable because the debtors made material false representations (namely, lying about their income) on which Nat City relied when it made the loan. The court agreed that the debtors had in fact lied to the bank, but it held that the bank did not "reasonably rely" on the misrepresentations.''
HA HA! Translation: "You guys couldn't have been that stupid, and if you were, you deserve to lose these loans."
Mish does a good job of illustrating how the Bankruptcy Act of 2005 was meant to head off the consequences of the orgy of dumb lending; but that appears to have been wishful thinking against reality.
LoanCombat at 18:07 2008-05-30 said:Did I miss something?? How can the BK Judge discharge a secured debt? Was there a valuation of the property that essentially made the HELOC "unsecured"?? Suffice a 1st of $300k & a 2nd of $200k (total $500k), and a court appraisal of $275K?? Sounds like a "cram down"?? Comments!! Permalink
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