The Treatment of Residential Mortgages in Chapter 13 after NobelmanDaniel C. Fleming
|By Daniel C. Fleming, Esq.
American Bankruptcy Institute Law Review, Volume 2, Number 1 (Spring 1994)
One of the most common reasons for filing a Chapter 13 bankruptcy petition is to save the debtor’s home from foreclosure. The Bankruptcy Code recognizes this by granting Chapter 13 debtors special powers to save their homes. For instance, the filing of a bankruptcy petition stays the prosecution of a foreclosure action.1 In addition, Chapter 13 debtors may cure any defaults in their monthly mortgage payments, even after the mortgagee accelerates the amount due.2
Moreover, prior to 1993, many Chapter 13 debtors successfully argued for another special power: the right to “strip down” an undersecured home mortgage to the current value of the property.3 Under this “strip down” theory, even though section 1322(b)(2)4 prohibits a debtor from modifying claims “secured only by a security interest in real property that is the debtor’s principal residence,” an undersecured mortgage could be bifurcated into secured and unsecured claims pursuant to section 506(a),5 so long as the debtor did not attempt to modify the secured portion of the claim.6 The unsecured portion of an unsecured mortgage could be modified because it was not an allowed secured claim,7 and only allowed secured claims were protected from modification.8
The result for lenders was often disastrous, especially since 1990 when real estate values across the nation began to decline rapidly. Many Chapter 13 debtors successfully reduced their home mortgage obligations by substantial margins. Courts often confirmed Chapter 13 plans that offered mere pennies on the dollar for the unsecured portion of a home mortgage. The protection that the home lending industry thought it had bargained for in section 1322(b)(2) was no longer available.9
Relief for home lenders finally arrived in June 1993, when the Supreme Court issued its decision in Nobelman v. American Savings Bank,10 and seemingly eliminated the Chapter 13 debtor’s ability to bifurcate an undersecured residential mortgage into secured and unsecured claims.11 However, a number of courts have made an end-run around Nobelman; most notably Bankruptcy Court Judge David A. Scholl of the Eastern District of Pennsylvania. Irrespective of Nobelman, Judge Scholl has consistently held that many undersecured residential mortgages can be bifurcated into secured and unsecured claims12 because the security interest was secured by more than the debtor’s principal residence.13
According to Judge Scholl, the treatment of an undersecured residential mortgage in a Chapter 13 case often depends upon whether the mortgagee has taken an additional security interest in items such as fixtures, household appliances, hazard insurance, rents, profits, and proceeds. In his opinion, it makes no difference that these additional security interests are located on, attached to, or are substantially related to the real property that is the debtor’s principal residence. If the mortgagee has taken a security interest in any of these items, then Judge Scholl would find that the mortgage does not qualify for protection under section 1322(b)(2), because the mortgagee has taken an additional security interest.
The ramifications of Judge Scholl’s approach are substantial. It is rare that a home mortgage does not claim a security interest in one of the purported “additional security interests” such as rents, fixtures, appliances, machinery, equipment, or hazard insurance.14 If taking these additional interest allows the court to bifurcate the undersecured claim into secured and unsecured claims, hereby leaving home lenders without the protection of Nobelman and section 1322(b)(2), will lenders have to re-write their home mortgages and strike the offending security interests to regain these protections?15
A different group of courts have found another exception to Nobelman. They are converting second, or junior mortgages into wholly unsecured claims when the amount due under the first, or senior, mortgage exceeds the value of the home. They justify this “strip-off” of the second mortgage by pointing to dicta in Nobelman, which suggests that mortgagees must be at least partially secured, even if the secured portion of the claim is for one penny, to gain the protections of the anti-modification provisions of section 1322(b)(2). Under this theory, a Chapter 13 debtor can strip off their unsecured junior mortgage because section 1322(b)(2) only protects mortgagees whose claims are at least partially secured in the value of the home. Does this mean that lenders must employ tougher underwriting policies and require a higher loan to value ratio when taking a second mortgage as security? Should these lenders pay more money for a more detailed appraisal, ultimately passing the increased cost on to the homeowner? These are important questions for the second mortgage industry, which believes that the home equity loan market will increase significantly.16
The objective of this Article is to provide the framework for a Chapter 13 analysis to determine whether a mortgagee has in fact taken an additional security interest on more than just real property that is the debtor’s principal residence, when the mortgagee has a security interest in items which have some connection to the real property that is the debtor’s principal residence.17 Part I includes a discussion of the Nobelman approach to this issue. Part II discusses Judge Scholl’s approach to analyzing this issue and suggests that the bankruptcy courts should first look to state law before determining that a mortgagee has in fact taken an additional security interest in items commonly found on the real property that is the debtor’s principal residence. Part III analyzes Judge Scholl’s decisions in conjunction with state law and concludes that if Judge Scholl examined Pennsylvania state law, his decision may have been different. Finally, the Article will analyze the plight of a junior mortgagee whose only security interest is a house that is worth less than the amount due on any senior mortgages.
I. Nobelman v. American Savings Bank
In Nobelman v. American Savings Bank,18 Texas residents, Leonard and Harriet Nobelman filed a plan in their Chapter 13 petition, which sought to reduce their $71,335 home mortgage to $23,500, the value of their residence at the time they filed their plan. The Nobelmans argued unsuccessfully in the bankruptcy court, district court, court of appeals, and the Supreme Court that their plan did not violate section 1322(b)(2)’s prohibition against modifying home mortgages. The debtors asserted that under section 506(a), the mortgagee’s secured claims was only equivalent to the value of the home, and it was only the secured portion of the mortgagee’s claim that was entitled to the protection afforded by section 1322(b)(2)’s anti-modification clause. The Nobelmans claimed that the unsecured portion of their mortgagee’s claim, for which they planned to pay nothing, fell outside the scope of section 1322(b)(2)’s protections.
Writing for the Court, Justice Thomas disagreed with the Nobelmans’ analysis, concluding that the operative language of section 1322(b)(2), “a claim secured only by a [homestead lien],” included “both the secured and the unsecured components of the claim.”19 He reached this conclusion based upon section 1322(b)(2)’s focus upon the “rights” of a mortgagee. He further stated these rights could only be determined by reviewing the relevant state law.20 According to Texas law, those rights were found in the mortgage documents and included the term of the note, the interest rate and the amount of each monthly payment. These “rights” would be modified by the Nobelmans’ proposed bifurcation, and section 1322(b)(2) prohibits such modification.
A. Judge Scholl’s Approach to Avoiding Nobelman’s Impact
Less than one month after the Supreme Court issued its decision in Nobelman, United States Bankruptcy Judge David A. Scholl of the Eastern District of Pennsylvania rendered Hirsch v. Citicorp Mortgage Corp. (In re Hirsch),21 the first published decision distinguishing Nobelman. He allowed a Chapter 13 debtor to bifurcate an undersecured home mortgage into secured and unsecured claims notwithstanding the prohibitions contained in section 1322(b)(2).
In Hirsch, the Chapter 13 debtors sought to “strip down” the home mortgage of $122,898.39 to $88,000, the value of the home. Judge Scholl held that Nobelman only applies to a home mortgage that qualifies for protection under section 1322(b)(2), that is, the mortgagee takes a security interest only in the debtor’s home. The Hirsch mortgage, noted Judge Scholl, had also taken a security interest in “all the improvements now or hereafter erected on the property and all easements, rights, appurtenances, rents[,] royalties, mineral, oil and gas rights and profits, water rights and stock and all fixtures now or hereafter a part of the property” as well as all replacements and additions.22 According to Judge Scholl, the mortgagee had elected to take a security interest in more than just the debtor’s principal residence. Judge Scholl’s opinion did not use state law to reflect whether these items were in fact additional items of collateral. Rather, he relied upon the “ample authority,” which stated that taking a security interest in such items meant that the mortgage was “not a claim secured ‘only by… real property,’ and hence is not within the scope of §1322(b)(2).”23 The “ample authority” relied upon by Judge Scholl consisted of five published opinions authored by him in which he likewise concluded that similar mortgages referencing items such as rents, profits, fixtures, and the like removed the mortgage from the protections of section 1322(b)(2).24 In addition, Judge Scholl relied on an opinion which stated that “[i]f [rents, royalties, mineral, oil and gas rights and profits, water rights and fixtures] were taken as security in addition to the Debtor’s realty, this alone may be enough to take the mortgage out of the realm of §1322(b)(2).”25
Using State Law to Determine a Mortgagee’s Eligibility for Protection Under Section 1322(b)(2)
None of the cases permitting bifurcation of an undersecured home mortgage, by reason of the mortgagee having taken additional collateral, analyzes state law definitions of real property. This is significant because Nobelman, as well as other Supreme Court cases, suggest that courts should look first to state law when determining whether a mortgagee has in fact taken an additional security interest in something other than the real property that is the debtor’s principal residence.
The Supreme Court has often stated that “property” and “investments in property” are “creatures of state law” as opposed to federal law.26 In Nobelman, Justice Thomas emphasized that “we have specifically recognized that ‘[t]he justifications for application of state law are not limited to ownership interests,’ but ‘apply with equal force to security interests, including the interest of a mortgagee.’”27 The mandate from the Supreme Court is clear. If section 1322(b)(2) leaves an undersecured mortgage unprotected, it should be when state law dictates.
Recently, in In re Spano,28 the Connecticut bankruptcy court followed the Supreme Court’s mandate and applied state law principles to property interests and rejected a Chapter 13 debtor’s Hirsch-type argument regarding his home mortgage.29 Rejecting the mortgagee’s contention that the mortgage language on rents, fixtures, and the like was mere “boilerplate,”30 the court in Spano nevertheless concluded that these items were all “sticks” in the “bundle of rights that is real property” and therefore the mortgagee had not taken a security interest in anything other than the real property that was the debtor’s primary residence.31
A STATE LAW ANALYSIS OF JUDGE SCHOLL’S DECISIONS
Judge Scholl’s decision in Hirsch may have been different had he relied on Pennsylvania state law to determine whether a mortgagee’s security interest in rents and fixtures was additional collateral. Indeed, another bankruptcy court in Pennsylvania did reach a different result by using state law as a yardstick.32 In Miami Valley Bank v. Lutz (In re Lutz), the bankruptcy court rejected a Chapter 13 debtor’s effort to strip down a home mortgage that granted a security interest in rents and fixtures to the mortgagee.33 Relying on Butner v. United States,34 the Lutz court determined that it had to “look to Pennsylvania law to determine whether ‘improvements and fixtures,’ ‘additions or improvements,’ and ‘rents, issues, and profits’ constitute a security interest in something other than real estate which is the Debtor’s principal residence.”35
Pennsylvania considers unaccrued rents as “an ‘incorporeal hereditament’ and part of the reversionary real property.”36 They are “as much real property… as any other real property.”37Thus, it would appear that a home mortgagee who takes a security interest in the “rents, issues and profits” of the debtor’s residence does not take collateral that is different from or in addition to the real property.”38
Pennsylvania courts define the term “fixture” as “an article of personal property which by reason of physical annexation to a building becomes in legal contemplation a part of the real estate.”39 Pennsylvania courts acknowledge that “[a]ll fixtures are or were at one time personal property” but once they become fixtures, they become a part of the real property.40 In Lutz, the court concluded that “in Pennsylvania, all mortgages automatically apply to fixtures, improvements and additions which become part of the real estate as opposed to additional personal property.”41 Thus, a mortgagee’s security interest is not an “additional” security interest since it is part of the real estate, thereby providing such a mortgagee with the protections of section 1322(b)(2)’s anti-modification provisions.42
Appliances, Machinery, Furniture and Equipment
A more difficult question is whether a mortgagee takes an additional security interest in something other than the real property that is the debtor’s principal residence when its collateral also consisted of “any and all appliances, machinery, furniture and equipment (whether fixtures or not) of any nature whatsoever now or hereafter installed in or upon such premises.”43
In Hammond v. Commonwealth Mortgage Co. (In re Hammond), the district court allowed the Chapter 13 debtor to bifurcate his home mortgage into secured and unsecured claims – concluding that the mortgagee had taken an additional security interest in the appliances, machinery, furniture and equipment of the house.44
The Hammond court reviewed Sapos and Wilson, two pre-Nobelman cases in the Third Circuit that allowed bifurcation based upon (1) a section 506(a) analysis of the value of the collateral and (2) the inapplicability of section 1322(b)(2)’s anti-modification provision to a mortgagee who takes additional collateral.45 The court noted that a portion of Sapos and Wilson was still valid because Nobelman did not prohibit modification of a home mortgage when additional collateral existed. The court quickly concluded that the appliances, machinery, furniture and equipment of the house were additional security, thereby allowing modification.46 Notably absent from the court’s opinion was any analysis of state law principles of property.
Pennsylvania divides property into three categories. First, furniture is personalty if it is “not particularly fitted to the property with which it is used.”47 Second, items are realty if they are annexed to the property in a manner that prevents their removal “without material [physical or economic] injury to the real estate or to themselves.”48 Third, and perhaps most importantly for a section 1322(b)(2) analysis, chattels that are physically connected to the property but which can be removed without causing destruction or material injury to the chattels or to the property can be either personalty or realty, “depending on the intention of the parties at the time of the annexation.”49
The determination as to whether appliances, machinery, furniture and equipment are personalty or part of the realty is, for the most part, a question of intent. In other words, did the parties intend to create a real property security interest solely in a house (covering the four walls, floor and roof) or home (covering the component parts that make a house livable, like appliances, furniture, oil burners, etc.)?
Applying these principles to the security interests taken by the mortgagee in Hammond, it is quite possible that the Pennsylvania state courts would not agree that these security interests were separate from the realty. For instance, is household furniture considered personalty under the first category if it is particularly fit for use in a home? Also, might the furniture, appliances, machinery, and equipment become part of the realty under the second category if the value of the house would diminish materially without them?
Finally, and most importantly, under the third category, if it was the mortgagee’s intent to consider the furniture, appliances, machinery and equipment as part of the realty, is it not appropriate to consider them realty? Indeed, if all of the so-called “additional” security interests referenced in a mortgage are simply the items needed to preserve the house (like insurance), or to live in the house (like furniture, appliances, machinery and equipment), are these items truly personalty as between the mortgagor and mortgagee?
Mortgagees might prove their intention to take a security interest in only the realty by showing that they never filed a UCC Article 9 financing statement on the personalty. Those few pre-Nobelman courts rejecting this type of argument have failed to analyze whether intent is an issue under state law.50 Further mortgagees might prove their intention not to take a security interest in personalty if their mortgage document is a form document and the parties did not specifically bargain for the creation of additional security interests. Again, those few pre-Nobelman cases rejecting this type of argument have failed to analyze whether intent is an issue under state law.51
A determination that furniture, appliances, machinery and equipment are part of the realty does not mean that the mortgagee has a perfected security interest in those items.52 It merely defines the relationship as between mortgagor and mortgagee. Also, it does not mean that debtors will lose items like their furnishings if the plan fails or their case is converted into Chapter 7. For instance, debtors will retain their furnishings if they list them as exempt property under section 522(d),53 as is commonly done, and the mortgagee fails to object in a timely manner.54
Consumer protection laws may also suggest that security interests on refrigerators, ovens, and furnishings are invalid. Under section 444 of the Federal Trade Commission’s rules on credit practice it is an unfair credit practice for a lender55 in connection with the extension of credit to consumers to take an obligation that “constitutes or contains a non-possessory security interest in household goods56 other than a purchase money security interest.”57 If the original attempt to create a security interest in the personal property is invalid, one has to wonder whether it is appropriate to presume that the mortgagee/creditor intended to create a security interest in the debtor’s personal property.
Since Nobelman, several bankruptcy courts have held that Chapter 13 debtors may strip off their junior mortgages to wholly unsecured claims when the home’s value as of the bankruptcy filing fails to exceed the amount due on the senior mortgage. Under this approach, section 1322(b)(2)’s anti-modification provision applies only to those home mortgages in which there is at least a partial secured claim under a traditional section 506(a) analysis. These courts believe that the following passage in Nobelman sanctions the strip off of wholly unsecured junior mortgages:
“Petitions were correct in looking to §506(a) for a judicial valuation of the collateral to determine the status of the bank’s secured claim. It was permissible for petitioners to seek a valuation in proposing their Chapter 13 plan, since §506(a) states that ‘[s]uch value shall be determined… in conjunction with any hearing… on a plan affecting such creditor’s interest.’ But even if we accept petitioners’ valuation, the bank is still the “holder” of a “secured claim,” because petitioners’ home retains $23,500 of value as collateral. The portion of the bank’s claim that exceeds $23,500 is an “unsecured claim componen[t] under §506(a)…”58
In In re Lee,59 the bankruptcy court stripped off the second mortgage from the debtor’s residence because the value of the home was less than the amount due on the first mortgage. The court found that “it is evident from Nobelman that for a mortgagee to claim protection against modification under §1322(b)(2), it must qualify as the holder of a secured claim to some extent.”60 The Lee court also took notice of Justice Stevens’ concurring opinion in Nobelman, which stated that the intent of Congress was to provide “ ‘favorable treatment of residential mortgagees… to encourage the flow of capital into the home lending market.’”61
However, in citing another post-Nobelman case,62 the Lee court noted that such concerns are not present when dealing with the second mortgage market.63 The court held that “the modification prohibition of §1322(b)(2) is held inapplicable only when the second [or] subsequent mortgage is wholly unsecured. The holding of Nobelman continues to apply to all undersecured as opposed to wholly unsecured, second or subsequent mortgages, irrespective of the degree to which they are undersecured or of the nature of the transaction in which the lien was obtained.”64 The court acknowledged that its holding may in some cases produce what appear to be incongruous results. For example, this reading of Nobelman would prohibit the modification of a mortgagee’s claim, no matter how slight, so long as that claim is only secured by a security interest in real property that is the debtor’s principal residence and it is found to have some value pursuant to section 506. It found, however, that despite this apparently inequitable result for a second mortgage lender, the intent of the Bankruptcy Code in regard to Chapter 13 debtors could not be effectuated if the anti-modification provision is applied to second mortgage lenders whose secured claim may be “as little as one dollar.”65
The United States Bankruptcy Court for the Eastern District of North Carolina has interpreted Nobelman in a similar vein. In In re Brown,66 the value of the debtor’s home was likewise less than the outstanding first mortgage. In stripping off the second mortgage from the property, the court noted that “[t]he limitation in §1322(b)(2) only applies with respect to the holder of a claim secured by the debtor’s residence. The [second mortgagees] are not the holders of a secured claim under §506(a), and the prohibition against modifying the lien on the residence does not prevent the avoidance of the lien under §506(d).”67
In In re Hornes,68 the court also found the second mortgagee was unsecured because the value of the debtor’s home was less than the amount due on the first mortgage. The court found that the second mortgage was “wholly ‘unsecured’ in the sense that at the commencement of this case, there was no equity to secure [the second mortgagee’s] claim.”69 The single issue addressed by the court was whether the debtors could treat the second mortgagee’s claim as unsecured notwithstanding the protection from modification provided by §1322(b)(2) as defined in Nobelman.70
The Hornes court acknowledged that Nobelman focused upon the unalterable rights of a home mortgagee as set forth in the mortgage contract and stae law, but held that those rights are not triggered after a section 506(a) analysis determined that the mortgagee was at least partially secured.71 In addition, the court undertook a detailed review of the legislative history of the “other than” clause and found no suggestion of any intent to extend the protections of §1322(b)(2) to wholly unsecured claims.72 Thus, the first mortgage was found not to be subject to the modification provisions of section 1322(b)(2) because value remained in its claim, and the second mortgagee whose claim had no value was found to be the holder of an unsecured claim that could be modified.73
Perhaps the best argument for the strip-off of junior mortgages is found in In re Plouffe.74 Similar to the other case, the amount of the debtor’s residence in Plouffe was less than the amount of the first mortgage and thus, no value remained for the second mortgagee. The court found it evident from the Nobelman ruling that for a homestead mortgagee to claim the protection against modification granted by section 1322(b)(2), the mortgagee must qualify as the holder of a secured claim to some extent as determined by section 506(a).75 It found no rational basis by which a creditor who holds a completely unsecured claim could be protected from the modification provisions of section 1322(b)(2), “simply because the creditor had obtained a lien on the homestead pre-petition.”76 Furthermore, the court took note of Justice Stevens’ statement in his concurring opinion in which he noted the intent of Congress to encourage the flow of capital into the home lending market.77 The Plouffe court found that no such concerns are present when dealing with the second mortgage market. The court concluded that it would be inconsistent with Chapter 13’s statutory scheme to assume that a junior mortgagee could insist that its claim be treated as a secured claim, based on none other than its pre-petition contractual arrangements with the debtor.78
Did Nobelman really give its blessings to a strip-off of wholly unsecured junior mortgages? These cases appear to be a wake-up call for potential second mortgagees to undertake a detailed appraisal of the value of the property. Should second mortgagees strengthen their loan to protect against strip-offs? Perhaps not.
Other portions of the Nobelman opinion suggest that 1322(b)(2) prohibits the strip-off of junior residential mortgages that are unsecured by reason of the lack of equity in the home, notwithstanding the results of a section 506(a) valuation of the mortgage. For instance, the Court noted that “[b]y virtue of its mortgage contract with [the Chapter 13 debtors], the bank is indisputably the holder of a claim secured by a lien on [the debtors’] home.”79 The Court also noted that a section 506(a) analysis of the Nobelmans’ mortgage, which would have bifurcated the bank’s claim into secured and unsecured claims, “does not necessarily mean that the ‘rights’ the bank enjoys as a mortgagee, which are protected by §1322(b)(2), are limited by the valuation of its second claim.”80 If the focus of Nobelman was solely upon the “rights” of a mortgagee, the only appropriate criteria for determining when a mortgage is entitled to the protections of section 1322(b)(2) is whether the creditor holds a home mortgage. Other pre-Nobelman courts have noted that §1322(b)(2) “does not specifically limit its protection to a secured claim secured only by a security interest in such real property,”81 but rather creates “[c]ertain rights to payment…which… will not [be] disturb[ed] by the general application of 11 U.S.C. §506.”82
Protecting wholly unsecured junior mortgages from modification may also be consistent with prior case law. The Supreme Court has often stated that “[o]rdinarily, liens and other secured interests survive bankruptcy.”83 In Dewsnup v. Timm,84 the Supreme Court noted that “there is nothing in the Code’s legislative history that reflects any intent to alter [the pre-code] law” that preserved the lien on undersecured property.85 Recent proposed amendments to the Bankruptcy Code also indicate that Congress intended that section 1322(b)(2) protect junior mortgages from modification. Senate Bill 540 and House Bill 2326 both amend section 1322(b)(2) to provide that the right of holders of a security interest in real property may not be modified pursuant to section 506 except for a junior security interest that is undersecured at the time the interest attached and only to the extent that the interest remains unsecured.86 The senate committee report for the predecessor87 to the current legislation notes that this amendment is a “clarification of current law” in order to enhance the protection of first mortgages and recognizes that some secondary mortgages deserve such protection.88
Why did the Hammond and Hirsch courts fail to follow the Supreme Court’s oft-repeated mantra89 that state law is the litmus test for any analysis of property interests?90 Was it an innocent oversight or liberal compassion?91 With a state law analysis, the decision in Hirsch would have been different. The decision in Hammond might have been different, depending on what the parties intended to do when they created or attempted to create a security interest in furniture and appliances.
Because Nobelman now precludes the use of section 506(a) to bifurcate an undersecured home mortgage into secured and unsecured claims, a Chapter 13 debtor’s last bastion of hope is that the mortgagee took an additional security interest in property other than the real property that is the debtor’s principal residence. If the additional security interest relates to property that can be found on the real property that is the debtor’s principal residence, then under Supreme Court precedence, the bankruptcy court should analyze state law to determine whether the security interest is truly an additional interest or is instead part of the “bundle of rights” which relate to an interest in the real property that is the debtor’s principal residence.92 If the alleged additional security interest is part of the real property, then it is appropriate to apply section 1322(b)(2) and protect the undersecured mortgagee from bifurcation of his claim into secured and unsecured claims.
While this type of state-by-state analysis of section 1322(b)(2)’s applicability may produce facially inconsistent results among the states,93 home mortgage lenders already know that they face potentially disparate treatment among the states when foreclosing on defaulted loans. The Supreme Court has given no indication that it will countenance the development of a body of federal common law defining property interests. Furthermore, while treatment of property interests among the states may vary, “[u]niform treatment of property interests by both state and federal courts within a State serves to reduce uncertainty, to discourage forum shopping, and to prevent a party from receiving a ‘windfall merely by reason of the happenstance of bankruptcy.’”94 Uniform treatment by state and federal courts within a state is necessary “to ensure that the mortgagee is afforded in federal bankruptcy court the same protection he would have under state law if no bankruptcy had ensued.”95
As for the second mortgage industry, recent case law developments favor the elimination of the junior mortgagee’s secured claim in its entirety when the amount due on the senior mortgage exceeds the value of the house. However, Nobelman’s emphasis on the “rights” of a mortgagee suggests that it is the existence of a mortgage contract, as opposed to the existence of equity in the home to make the junior mortgagee partially secured, that determines which claims gain the protections of section 1322(b)(2). Recent proposed amendments to section 1322(b)(2) would also protect junior mortgagees to the extent they were secured when the security interest was created.
Copyright © 1994 Wong Fleming, P.C.
1 11 U.S.C. §362(a) (1988).
2 11 U.S.C. §1322(b)(5) (1988); see, e.g., In re Taddeo, 685 F.2d 24 (2d Cir 2982) (discussing application of §1322(b)(2), (b)(3), and (b)(5)).
3 See BENJAMIN WEINTRAUB & ALAN N. RESNICK, BANKRUPTCY LAW MANUAL, ¶9.12, at 9-36 (1992 Cumulative Supplement).
4 11 U.S.C. §1322(b)(2) (1988). Section 1322(b)(2) states that a plan may “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims.” (emphasis added). This highlighted portion of §1322(b)(2) is commonly referred to as the “other than” clause.
5 11 U.S.C. §506(a) (1988). Section 506(a) provides:
[a]n allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor’s interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.
6 Courts have allowed Chapter 13 debtors to modify the unsecured portion of their home mortgage based on a section 506(a) and (d) argument. See, e.g., Bellamy v. Federal Home Mortgage Corp. (In re Bellamy), 962 F.2d 176 (2d Cir. 1992); Eastland Mortgage Co. v. Hart (In re Hart), 923 F.2d 1410 (10th Cir. 1991); Wilson v. Commonwealth Mortgage Corp., 895 F.2d 123 (3d Cir. 1990); Houghland v. Lomas & Nettleton Co. (In re Houghland), 886 F.2d 1182 (9th Cir. 1989); Brouse v. CSB Mortgage Corp. (In re Brouse), 110 B.R. 539 (D. Colo. 1990); In re Hill, 96 B.R. 809 (S.D. Ohio1989); In re Harris, 94 B.R. 832 (D. N.J. 1989).
7 11 U.S.C. §506(d). Section 506(d) provides: “[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless – (1) such claim was disallowed only under section 502(b)(5) or 502(e) of this title; or (2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of claim under section 501 of this title.” Id.
8 11 U.S.C. §1322(b)(2) (1988) (allowing plan to modify rights of secured claims).
9 In affirming the rights of debtors to modify their home mortgage under 11 U.S.C. §506(a), the Third Circuit noted that “although it is clear that the anti-modification provision of the Act was inserted on behalf of the home mortgage industry, the fact that the provision itself was a compromise suggests that the residential mortgage providers did not emerge with all the protection they may have sought.” Wilson, 895 F.2d at 128. Wilson’s legislative history analysis is somewhat inaccurate. The “compromise” at issue was whether section 1322(b)(2) should insulate all real estate mortgages from modification, or just residential mortgages. See 124 CONG. REC. H1109 (daily ed. Sept. 28, 1978) (statement of Rep. Edwards), reprinted in 1978 U.S.C.C.A.N. 6436, 6481 & 6550.
11 Id. (holding that 1322(b)(2) prohibits Chapter 13 debtor from relying on section 506(a) to reduce secured homestead mortgage to fair market value of mortgaged residence).
12 See, e.g., Hirsch v. Citicorp Mortgage Corp. (In re Hirsch), 155 B.R. 688 (Bankr. E.D. Pa. 1993); Oglesby v. Associates Nat’l Mortgage (In re Oglesby), 150 B.R. 620 (Bankr. E.D. Pa. 1993); Taras v. Commonwealth Mortgage Corp. of America (In re Taras), 136 B.R. 941 (Bankr. E.D. Pa. 1992); In re Klein, 106 B.R. 396 (Bankr. E.D. Pa. 1989); In re Ford, 84 B.R. 40 (Bankr. E.D. Pa. 1988); Caster v. United States (In re Caster), 77 B.R. 8 (Bankr. E.D. Pa. 1987). Prior to Nobelman other courts held that a homestead mortgage could grant an additional security interest in personal property. See, e.g., In re Jakes, 99 B.R. 393 (Bankr. M.D. Tenn. 1989) (holding mortgagee took additional security interest in “all improvements and fixtures on property and proceeds from the sale of any such fixtures.”); In re Stiles, 74 B.R. 708 (N.D. Ala. 1987) (taking additional security interest in life insurance policy); In re Reeves, 65 B.R. 898 (N.D. Ill. 1986) (taking additional security interest in fixtures by real property mortgage and Uniform Commercial Code security interest).
13 Certain pre-Nobelman cases rejected this approach. See, e.g., Houghland v. Lomas & Nettleton Co. (In re Houghland), 93 B.R. 718 (D. Or. 1988), aff’d, 886 F.2d 1182 (9th Cir. 1989) (mortgagee took an interest only in real property even though mortgage created security interest in “all rents, issues, royalties, and profits of property.”); In re Ireland, 137 B.R. 65, 66 (Bankr. M.D. Fla. 1992) (mortgagee took interest only in real property even though mortgage created security interest in “all improvements now or hereafter erected on the property, and all easements, rights, appurtenances, rents, royalties, mineral, oil and gas rights and profits from water, water rights, and water stock, and all fixtures now or hereafter attached to the property, all of which, including replacements and additions thereto.”); Wright v. C & S Family Credit, Inc. (In re Wright), 128 B.R. 838, 843 (Bankr. N.D. Ga. 1991) (mortgagee took interest only in real property even though mortgage created security interest in machinery, apparatus, equipment, fittings and fixtures, including all trade, domestic and ornamental fixtures, actually or constructively attached); In re Diquinzio, 110 B.R. 628, 629 (Bankr. D.R.I. 1990) (taking interest only in real property even though mortgage created security interest in credit life insurance policy); In re Ross, 107 B.R. 759, 762 (Bankr. W.D. Okla. 1989) (taking interest only in real property even though mortgage created security interest in insurance, rents, profits, buildings, and improvements).
14 See Caster, 77 B.R. at 11 (noting that language in mortgage document, containing security interest in “rents, issues and profits,” came from form book).
15 See Mortgage is Reduced to Value of the Home, LAWYER’S WEEKLY USA, Aug. 16, 1993, at 11. The attorney who represented the losing mortgagee in Hammond stated that the Hammond decision “will cause mortgage lenders to protect themselves by going over their mortgage forms and taking out any suggestion that a mortgage is secured by property other than real estate.” Id.
16 According to the Second Mortgage & Home Equity Loan 1994 annual report from SMR Research Corporation, the boom in first mortgage refinancing since 1991 has created an untouched home equity loan market potential of more than 10 million households (or 20% of existing real estate loans) for the near-term future. SMR believes that when interest rates begin to rise, the households who refinanced their home mortgages at an interest rate of 7% or lower will be unlikely to refinance again. As these consumers need cash in the future, home equity loans are likely to be the borrowing vehicle of choice.
17 It is not the purpose of this Article to discuss those cases where the home mortgagee has taken a security interest in property that has no connection to the real property that is the debtor’s principal residence. See., e.g., In re Bouvier, 160 B.R. 24 (Bankr. D.R.I. 1993) (undersecured home mortgage bifurcated into secured and unsecured claims since mortgagee took additional security interest in business assets of corporation controlled by debtors, placing mortgage outside protections of §1322(b)(2) anti-modification provisions); In re Saglio, 153 B.R. 4 (Bankr. D.R.I. 1993) (collateral was not debtor’s principal residence).
18 113 S. Ct. 2106 (1993).
19 Id. at 2111.
20 Id. at 2107.
21 155 B.R. 688 (Bankr. E.D. Pa. 1993).
22 Id. at 689.
23 Id. at 690.
24 Oglesby v. Associates Nat’l Mortgage (In re Oglesby), 150 B.R. 620, 625 (Bankr. E.D. Pa. 1993) (mortgagee took additional security interest in oven, dishwasher, fan vent in home, rents, issues and profits); Taras v. Commonwealth Mortgage Corp. of America (In re Taras), 136 B.R. 941, 951 (Bankr. E.D. Pa. 1992) (mortgagee took additional security interest in “all appliances, machinery, furniture and equipment (whether fixtures, or not)”.); In re Klein, 106 B.R. 396, 400 (Bankr. E.D. Pa. 1989) (mortgagee took additional security interest in hazard insurance proceeds, heating equipment, and rents); In re Ford, 84 B.R. 40, 42 (Bankr. E.D. Pa. 1988) (mortgagee took additional security interest in plumbing, heating, rents, issues, and profits); Caster v. United States (In re Caster), 77 B.R. 8, 11 (Bankr. E.D. Pa. 1987) (mortgagee took additional security interest in “all appliances, machinery, furniture and equipment (whether fixtures or not) of any nature whatsoever now or hereafter installed in or upon said premises” as well as rents, issues, and profits).
25 Luzerne Nat’l Bank v. Kelly, (In re Kelly), 150 B.R. 121, 122 (Bankr. M.D. Pa. 1992) (dictum). Judge Scholl also relied upon two Third Circuit decisions, which were overruled, at least in part, by Nobelman. See Sapos v. Provident Inst. Of Sav., 967 F.2d 918, 922 (3d Cir. 1992) (mortgagee took additional security interest in appliances and wall-to-wall carpeting); Wilson v. Commonwealth Mortgage Corp., 895 F.2d 123, 124 (3d Cir. 1990) (mortgagee took additional security interest in “appliances, machinery, furniture and equipment (whether fixtures or not) of any nature whatsoever now or hereafter installed” on his home).
26 Barnhill v. Johnson, 112 S. Ct. 1386, 1389 (1992) (quoting Butner v. United States, 440 U.S. 48, 54 (1979)).
27 Nobelman, 113 S. Ct. at 2110 (quoting Butner v. United States, 440 U.S. 48, 55 (1979); see also Ohio v. Kovacs, 469 U.S. 274, 285-86 (1985) (O’Connor, J., concurring) (“Because ‘Congress has generally left the determination of property rights in the assets of a bankrupt’s estate to state law,’ the classification of Ohio’s interest as either a lien on the property itself, a perfected security interest, or merely an unsecured claim depends on Ohio law.”) (quoting Butner v. United States, 440 U.S. 48, 54 (1979)).
28 161 B.R. 880 (Bankr. D. Conn. 1993).
29 Id. at 884. The debtor sought to bifurcate his home mortgage into secured and unsecured claims because the mortgage took an “additional” security interest in rents, issues and profits, fixtures “now or hereafter attached to or used in connection with the premises,” household appliances, and hazard insurance. Id. at 883.
30 Id. Accord Hirsch v. Citicorp Mortgage Corp. (In re Hirsch), 155 B.R. 688, 690 (Bankr. E.D. Pa. 1993).
31 Id. at 890. Departing from Hirsch and its progeny, the Spano court found little significance in the fact that the mortgage might identify other security interests located on the property: “[T]he fact that the respondent’s mortgage may have used many words to describe component parts of the real property when the words ‘real property’ may have sufficed, does not mean that the respondent has a security interest in something other than the ‘real property that is the debtor’s principal residence.’” Id. at 884.
32 Miami Valley Buck v. Lutz (In re Lutz), 1994 WL 61623 (Bankr. W.D. Pa. Feb. 26, 1994).
33 Specifically, the home mortgage in Lutz granted the mortgagee a security interest in the debtor’s residence,
[t]ogether with all and singular the buildings, improvements and fixtures on said premises, as well as all additions or improvements now or hereafter made to said premises, streets, alleys, passages, ways, waters, water courses, rights, liberties, privileges, hereditaments, and appurtenances whatsoever thereunto belonging, or in any wise appertaining, and the reversions and remainders, rents, issues, and profits thereof, and in addition thereto the following described household appliances, which are, and shall be deemed to be fixtures and a part of the realty, and are a portion of the security for the indebtedness herein mentioned, namely [no personal property itemized] provided, however that the Mortgagor shall be entitled to collect and retain the said rents, issues and profits until default hereunder.
Id. at *1.
35 Lutz, 1994 WL 61623 at *5.
36 Marine Nat’l Bank v. Northwest Pa. Bank & Trust Co., 455 A.2d 67, 70 (Pa. Super. Ct. 1982) (citations omitted).
38 The Lutz court likewise concluded after reviewing Pennsylvania law on rents that “[t]he right of a mortgagee to receive rents, even in the presence of an assignment of rents clause, is grounded in possession of real property, and not a personal property right.” Lutz, 1994 WL 61623 at *6.
39 Noll v. Paddock Pool Builders, Inc., 611 A.2d 219, 223 n.3 (Pa. Super. Ct. 1992) (citing 16 P.L.E. Fixtures Section 1 (1959 & Supp. 1982); Catanzaro v. Wasco Products, Inc., 489 A.2d 262, 265, n.4 (Pa. Super. Ct. 1985)).
40 Commonwealth v. Seltzer, 334 A.2d 834, 838 (Pa. Commw. Ct. 1975); see also Robzen’s Inc. v. United States, 515 F. Supp. 228, 234 (M.D. Pa. 1981) (discussing non-removable property as part of realty).
41 Lutz, 1994 WL 61623 at *5.
42 See In re Defense Plant Corp., 39 A.2d 713, 717 (Pa. 1944) (“Any adequate definition [of real property] must take account of the doctrine of fixtures…”); Klaus v. Majestic Apartment House Co., 95 A. 451 (Pa. 1915) (suggesting furniture, household furnishing, and tableware in hotel could be construed as realty as between mortgagee and mortgagor).
43 See Hammond v. Commonwealth Mortgage Co. (In re Hammond), 156 B.R. 943, 948 (E.D. Pa. 1993).
44 Id. at 948. Shortly after Judge Scholl’s decision in Hirsch v. Citicorp Mortgage Corp. (In re Hirsch), Hammond was decided. The district court of the Eastern District of Pennsylvania also ruled that a Hirsch argument survives Nobelman so that a Chapter 13 debtor can strip down his home mortgage when the mortgagee takes a security interest in “any and all appliances, machinery, furniture and equipment…” Laws v. New York Guardian (In re Laws) 1994 WL 39083 (E.D. Pa. Feb. 2, 1994).
45 See supra note 25 and accompanying text.
46 Judge Reed concluded that because Nobelman “did not expressly disturb this second holding in Wilson, I am constrained to find that the additional security interest described in the mortgage here, which is identical to the additional security interest in the mortgage at issue in Wilson, removes [the mortgagee’s] claim from the ambit of the anti-modification clause of section 1322(b)(2).” Hammond, 156 B.R. at 948.
47 Clayton v. Leinhard, 167 A. 321, 322 (Pa. 1933).
48 Id. Pennsylvania courts have explained that the damage “does not necessarily have to be physical damage. Our supreme court in Central Lithograph Co. v. Eatmor Chocolate Co., 175 A. 697 (1934), found a material injury had been caused to the realty by the removal of certain personalty (candy making equipment) because the manufacturing plant’s value would be materially diminished without the equipment.” Canon-McMillan School District v. Bioni, 533 A.2d 179, 183 n.9 (Pa. Commw. Ct. 1987).
49 Id. The Pennsylvania Supreme Court summed up:
Chattels used in connection with real estate are of three classes: First, those which are manifestly furniture, as distinguished from improvements, and not particularly fitted to the property with which they are used; these always remain personality. Second, those which are so annexed to the property, that they cannot be removed without material injury to the real estate or to themselves; these are realty… Third, those which, although physically connected with the real estate, are so affixed as to be removable without destroying or materially injuring the chattels themselves, or the property to which they are annexed; these become part of the realty or remain personality, depending on the intention of the parties at the time of annexation…” Id. at 182 (citations omitted).
50 See, e.g., Wilson v. Commonwealth Mortgage Corp., 895 F.2d 123, 129 (3d Cir. 1990) (“Furthermore, we attach little significance to [the mortgagee’s] failure to file financing statements on the debtors’ personality… [The mortgagee’s] subjective desire to obtain an interest in the property is irrelevant.”)
51 See Caster v. United States (In re Caster), 77 B.R. 8 (Bankr. E.D. Pa. 1987).
52 Under the Uniform Commercial Code, a creditor normally must file a financial statement with the state to perfect his security interest in goods. If there is no filing the creditor’s security interest can be compromised under sections 544 and 547, leaving the mortgagee with an enforceable security interest only in the debtor’s residence.
53 11 U.S.C. §522(d)(3) (1988). The debtor may claim as exempt property: “The debtor’s interest, not to exceed $200 in value in any particular item or $4,000 in aggregate value, in household furnishings, household goods, wearing apparel, appliances, book, animals, crops, or musical instruments, that are held primarily for the personal, family or household use of the debtor or a dependent of the debtor.” Id. (emphasis added). Pursuant to 11 U.S.C. §522(d)(3), the debtor can also claim as exempt an additional $400 (or as much as $3750 of his unused house exemption under 522(d)(1)) in furnishings, appliances, and the like. Id.
54 See Taylor v. Freeland & Kronz, 112 S. Ct. 1644 (1992) (holding debtor’s claim of exemption is valid if trustee fails to object within 30 days after conclusion of creditors’ meeting, even if debtor lacks colorable basis for asserting exemption); see also FED. R. BANKR. P. 4003(b).
55 16 C.F.R. §444.1(a). A lender is defined as a “person who engages in the business of lending money to consumers within the jurisdiction of the Federal Trade Commission.” Id.
56 16 C.F.R. §444.1(i). Household goods are defined as:
Clothing, furniture, appliances, one radio and one television, linens, china, crockery, kitchenware, and personal effects (including wedding rings) of the consumer and his or her dependents, provided that the following are not included within the scope of the term “household goods”: Works of art; Electronic entertainment equipment (except one television and one radio); Items acquired as antiques; and Jewelry (except wedding rings). Id.
57 FTC Credit Practices Rule, 16 C.F.R. §444.2(a)(4) (1993). This section states in relevant part: (a) In connection with the extension of credit to consumers in or affecting commerce, as commerce is defined in the Federal Trade Commission Act, it is an unfair act or practice within the meaning of Section 5 of that Act for a lender or retail installment seller directly or indirectly to take or receive from a consumer an obligation that: (4) Constitutes or contains a non-possessory security interest in household goods other than a purchase money security interest. Id.
58 Nobelman v. American Sav. Bank (In re Nobelman), 113 S.Ct. 2106, 2110 (1993).
59 In re Lee, 161 B.R. 271 (Bankr. W.D. Okla. 1993).
60 Id. at 272.
61 Id. at 273 (quoting Nobelman, 113 S. Ct. at 2112).
62 See In re Plouffe, 157 B.R. 198, 200 (Bankr. D. Conn. 1993).
63 Lee, 161 B.R. at 273.
66 1993 WL 544385, *1 (Bankr. E.D.N.C. Oct. 26, 1993).
68 In re Hornes, 160 B.R. 709 (Bankr. D. Conn. 1993).
69 Id. at 710.
71 Id. at 715.
72 Id. at 717-18.
73 An abbreviated discussion was provided by the court in In re Kidd, 161 B.R. 769 (Bankr. E.D.N.C. 1993). The court there undertook a considerably brief analysis in regard to an unsecured second mortgagee. It distinguished the facts in Nobelman, which did not involve an unsecured second mortgagee, from the matter before it which did involve a junior mortgagee whose claim was left with no present value. The Kidd court simply noted that, “[t]he limitation in §1322(b)(2) only applies with respect to the holder of a claim secured by the debtor’s residence. [The mortgagee] is not the holder of a secured claim under §506(a), and the prohibition against modifying the lien on the residence does not prevent the avoidance of the lien under §506(d).” Id. at 770-771.
74 157 B.R. 198 (Bankr. D. Conn. 1993).
75 Id. at 200.
79 Nobelman v. American Sav. Bank (In re Nobelman), 113 S.Ct. 2106, 2109 (1993).
81 See In re Hynson, 66 B.R. 246, 253 (Bankr. D.N.J. 1986).
83 Farrey v. Sanderfoot, 500 U.S. 291, 295 (1991).
84 112 S. Ct. 773 (1992).
85 Id. at 777.
86 See H.R. 2326, 103d Cong., 1st Sess., §2(g) (1993). Proposed section 2(g) of H.R. 2326 would amend §1322(b)(2) to provide that the debtor may: [M]odify the rights of the holders of secured claims, but the plan may not modify a claim pursuant to section 506 of a person holding a senior or a junior security interest in real property that is the debtor’s principal residence, except that the plan may modify the claim of a person holding such a junior security interest that was undersecured at the time the security interest attached to the extent that the interest remains undersecured. Id. Section 306 of Senate Bill 540 would amend §1322(b)(2) to provide that: “[T]he plan may not modify a claim pursuant to section 506 of a person holding a primary of junior security interest in real property or a manufactured home (as defined in section 603(6) of the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. 5402(6)) that is the debtor’s principal residence, except that the plan may modify the claim of a person holding such a junior security interest that was undersecured at the time the interest attached to the extent that the interest remains undersecured.” S. 540, 103d Cong., 1st. Sess., §306 (1993).
87 S. 1985 passed the Senate by a vote of 97-0 in 1992 but failed to pass the House in the final hours of the 1992 session.
88 Committee Report, S. 1985, Section 310, page 41.
89 See Nobelman v. American Sav. Bank (In re Nobelman), 113 S. Ct. 2106, 2107 (1993); Barnhill v. Johnson, 112 S. Ct. 1386, 1389 (1992); Ohio v. Kovacs, 105 S. Ct. 705, 710 (1985); Butner v. United States, 440 U.S. 48, 54 (1979); McKenzie v. Irving Trust Co., 323 U.S. 365, 370 (1945).
90 The Hammond court was especially interested in the fact that the Nobelman debtors may have granted “additional collateral” to the mortgagee because “[t]he mortgagee in Nobelman also had a ‘security interest’ in an undivided .67% interest in the common areas of the condominium complex, escrow funds, proceeds of hazard insurance, and rents.” Hammond v. Commonwealth Mortgage Co. (In re Hammond), 156 B.R. 943, 948 (E.D. Pa. 1993). The “additional collateral” argument was not an issue before the Supreme Court. Id. at 947. A review of Texas statutory and case law suggests, however, that there was no additional collateral because Texas considers real property to constitute more than simply the land itself. Texas law finds rents and fixtures to be incidents to the ownership of real property. Tree Top Apartments General Partnership v. Oyster, 800 S.W.2d 628, 629 (Tex. Ct. App. 1990) (discussing whether rents were conveyed with the real property at foreclosure sale). In Tree Top Apartments, the court noted that “rents, like crops, are incidents to real property that may become personal property.” Id. The court further noted that rents are no longer incidents to real property when they become tangible property as do crops, which become personal property when severed from the land. Id. See also Hernandez v. Union Int’l Bank (In re Hernandez), 149 B.R. 441, 445 (1993) (“[i]t is clearly established in Texas that until a severance is effected ‘the mineral estate remains with the surface estate; the original fee carries both estates.’”); Citizens Bank and Trust Co. v. Wy-Tex Livestock, Inc., 611 S.W.2d 168, 171 (Tex. Civ. App. 1981) (stating “[i]n Texas, a lease is an interest in real estate.”). Interests in oil, gas and other minerals, which lie under property is real property and royalties to which the debtor would be entitled for leasing minerals is also real property under Texas law for purposes of a debtor’s claim of homestead exemption. In re Poer, 76 B.R. 98 (Bankr. N.D. Tex. 1987). In a case where the plaintiff sought to recover damages to a house and where venue was in issue, the Texas Court of Civil Appeals stated that “a house located upon land is regarded as a part of the land.” Calvert v. Welch, 369 S.W.2d 840, 842 (Tex. Civ. App. 1963). Real property was also deemed to include fixtures in a Texas criminal appeal. Franks v. State, 688 S.W.2d 502, 504 (Tex. Crim. App. 1985) (Teague, J., dissenting). The court therein noted: “When most, but, of course, not all, of us attended law school and studied the law of real estate or real property, we were taught that the term “real estate” is usually defined to mean the following: “land and anything permanently affixed to the land, such as buildings, fences and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items which would be personal property if not attached.” Id.
91 In Caster v. United States (In re Caster), 77 B.R. 8 (Bankr. E.D. Pa. 1987), Judge Scholl modified a home mortgage for “an indigent single parent of four children, aged from ten years to a new born baby…” Id. In Oglesby v. Assocs. Nat’l Mortgage (In re Oglesby), 150 B.R. 620 (Bankr. E.D. Pa. 1993), Judge Scholl modified a home mortgage for a woman with “eleven dependent children, and two dependent grandchildren.” Id. at 622.
92 See supra notes 26-31 and accompanying text.
93 See, e.g., Scott Carlisle, Single Asset Real Estate in Chapter 11: Secured Creditors’ Perspective and the Need for Reform, 1 AM. BANKR. INST. L. REV. 133, 147 (1993) (“Interpretation by state courts of the provisions ostensibly giving lenders the right to rents has resulted in considerable confusion to the detriment of lenders.”).
94 Butner v. United States, 440 U.S. 48, 55 (1979) (quoting Lewis v. Manufacturers Nat’l Bank, 364 U.S. 603, 609 (1961)).