The recent decision in the Olivares case [2016 WL 6810716 (Bankr. S.D. Fla. 2016) reminds lenders of the perils of being a second mortgage holder where equity is questionable.
A lender that held a second mortgage on real property owned by the chapter 13 debtor objected to the debtor’s proposed plan on the basis that the debtor’s plan was filed in bad faith, not feasible and the debtor proposed to pay the first mortgage holder with out participating in the mortgage modification mediation program. The debtor filed a motion to value the property and determine the secured status of the lender.
Unfortunately for the second mortgage holder, the decision of the Court came down to one issue, the determination that there was no equity in the property in excess of the first mortgage. The lender conceded that there was no equity in the debtor’s real property. Specifically, the property was valued at $459,544.00 and the amount owed on the first mortgage is $823,372.03.