489 B.R. 638
Bankr. D. Md.2013Background
- Debtor Griffin, as personal representative and 50% co-heir of his mother Dora Griffin, owns a principal residence (Fredcrest Road) in Baltimore subject to a reverse mortgage (FNMA) with an acceleration triggered after Mrs. Griffin’s death.
- The note/deed of trust provide for interest payments and full repayment upon certain events; acceleration occurred March 14, 2012, after Mrs. Griffin died March 8, 2011.
- FNMA filed a Motion for Relief from Stay and an Objection to Confirmation; Griffin proposed an amended Chapter 13 plan to pay the debt over time.
- Value of Fredcrest Road is disputed but the Debtor asserts substantial equity (> debt) and the property remains his principal residence.
- FNMA contends the loan cannot be modified since it was accelerated and the property is a debtor’s principal residence; Griffin argues 1322(c)(2) allows modification to pay over the plan.
- Court addresses whether 11 U.S.C. §1322(c)(2) permits modification of a secured claim arising from a reverse mortgage secured by a principal residence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1322(c)(2) permits modification of a reverse mortgage on a principal residence. | Griffin relies on §1322(c)(2) to modify payments and pay over the life of the plan. | FNMA contends the loan is accelerated and cannot be modified, and that principal-residence rule blocks modification. | Yes; plan may modify the secured claim under §1322(c)(2). |
| Whether co-heir’s absence from bankruptcy prevents modification due to necessary parties. | Modification benefits the estate and co-heir; no complete lien avoidance required. | Lack of sister as a debtor or necessary party prevents modification. | No; modification permitted notwithstanding sister’s non-filing. |
| Whether the plan’s interest rate resolution is appropriate or requires evidentiary hearing. | Rate to be set or determined through plan terms. | Rate dispute should be resolved, possibly via evidentiary hearing if not settled. | Interest rate to be resolved; possible evidentiary hearing if needed. |
Key Cases Cited
- In re Witt, 113 F.3d 508 (4th Cir. 1997) ( §1322(c)(2) permits modification to cure default on principal-residence mortgage)
- Nobelman v. American Savings Bank, 508 U.S. 324 (U.S. 1993) (limits bifurcation under §506(a) for principal-residence claims)
- In re Gianguzzi, 145 B.R. 792 (S.D.N.Y. 1992) (pre-1322(c)(2) case; distinguishable post-enactment)
- In re Brown, 428 B.R. 672 (Bankr.D.S.C. 2010) (supports modification of accelerated principal-residence mortgage under §1322(c)(2))
- In re Wilcox, 209 B.R. 181 (Bankr.E.D.N.Y. 1996) (treats modification of mortgage debt under plan where secured by principal residence)
- In re Litton, 330 F.3d 636 (4th Cir. 2003) (cites treatment of cure under §1322(b)(5) and related implications)