The firm’s Jeffrey S. Berlowitz, who has focused much of his work on helping community associations to contend with unit owners who attempt to wipe away association liens by filing for bankruptcy, was quoted extensively in an article in today’s edition of the Daily Business Review on the implications of the recent ruling by the U.S. Supreme Court in the case of Bank of America v. Caulkett. The court ruled that homeowners who are underwater on their first mortgage cannot void second mortgages by filing for Chapter 7 bankruptcy, and the ruling also appears to apply to other secured lienholders including community associations.
The article reads:
Jeffrey Berlowitz is optimistic that within the risky realm of second mortgages, the Supreme Court’s ruling may help refresh the lending stream that dried up in the market crash.
“You may see second mortgages being extended if there’s equity,” said Berlowitz of Coral Gables-based Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, which represents community associations.
Still, a divisive footnote in the decision suggests if only the debtors had asked the court to overrule its 1992 decision in Dewsnup v. Timm, the court would have obliged. Three justices didn’t join Thomas’ footnote, meaning they could be outvoted 6-3 if the right case came along.
Dewsnup rejected one form of lien-stripping. The footnote quotes Thomas’ concurrence in a 1999 opinion: the “methodological confusion created by Dewsnup has enshrouded both the Courts of Appeal and … Bankruptcy Courts.”
Berlowitz said, “Thomas’ comments could lead us to believe the court could overrule Dewsnup down the road.” Then lien-stripping would be available in Chapter 7 cases, allowing debtors to void wholly unsecured mortgages. And partially unsecured mortgages could be stripped down to the property’s market value.
For now, Berlowitz is happily sharing the ruling with his condo board clients. They’ve been frustrated by homeowners who fail to pay their fees through months or years of foreclosure and bankruptcy while the association maintains the community.
“There’s such animus for the folks who aren’t paying while their neighbors are,” he said. “I had to explain to our clients this is the law, I’m not making it up.”
Our firm congratulates Jeffrey for sharing his insight into this ruling and its implications for community associations with the readers of the Daily Business Review, which is South Florida’s exclusive business daily and official court newspaper. Click here to read the complete article in the newspaper’s website (registration required).