FNMA wouldn’t have had an underwater asset had it not allowed (and promoted) inflated appraisals. The debtor relied upon the bank’s appraisal of the asset. The bank orders and hires the appraiser – not the borrower. It is a well known fact that banks intentionally inflated appraisals (a claim in almost every investor lawsuit and acknowledged by the appraisers’ association). The 2008 crash, which realized deflated real estate values, did not happen because the mortgaged real estate values were real figures. It happened because the banks mortgaged inflated real estate figures. In many cases real estate was inflated well over 200% of its actual value. Whatever the debtor’s real estate was valued today would likely reflect the value at the time of the original mortgage.
In bankruptcy debtors should be allowed to bring an AP and establish the appraised value prior to any mortgage after 2000. A 3%-6% value increase per year would be acceptable. Any unreasonable appraised inflated value used by the bank to establish loan value above a reasonable yearly increase should be allowed to be stripped in lieu of the fraud committed by the lenders.
The debtor sought confirmation of a plan of reorganization where the impaired accepting class consisted of two claims totaling less than $2400 which were to be paid over 60 days. The secured creditor objected that this did not satisfy the Bankruptcy Code confirmation requirements. The bankruptcy court initially confirmed the plan. After bouncing back and forth between the bankruptcy court and the district court, the case was dismissed and the automatic stay lifted. An appeal to the 6th Circuit followed.
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