If Lenders Say ‘The Dog Ate Your Mortgage’

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One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order.

So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can’t come forward with proof of ownership, and judges don’t look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free.

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• To keep a house with an $800,000 mortgage that’s appraised at $400,000 and pay it off. With interest that will come to about $1.7 million for a $400,000. That there’s the path to riches! Debt = wealth. Slavery = freedom.
• “It’s getting worse, but less quickly.”
• Lender beware. Don’t lend money that you don’t expect to get back.
• We need some changes in regulations for home mortgages.
• If the owner of the property can’t pay the mortgage, then how can thy pay the monthly lease?

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