Central District Consumer Bankruptcy Attorney's Association

As it has been correctly pointed out, debtor's actions could be seen as
intentional, or at least negligent, misrepresentation.
However, some debtors are unsophisticated and were not told by loan brokers
that they were receiving a loan unsuitable for there situation. It is also
far from clear that the debtors in this situation benefited from receiving
an owner-occupied loan.
It frequently happened in subprime lending that loan brokers received a
commission based on the spread between the best, lowest rate for which the
borrower would qualify and the higher rate actually sold to borrower. The
more expensive the loan, the higher the commission. If the broker can sell
to the borrower a 6% loan, but the borrower qualified for an income
property loan at 5%, then the broker gets a commission based on the
difference of 1%. If the broker "qualifies" the borrower for an
owner-occupied loan which generally has lower interest rate (for example
4%) but still sells a 6% loan, the broker can double the spread (6-4=2 v.
6-5=1) and double his commission. The bank sells the "owner occupied" loan
(secured by an investment property) to an investor, who receives a riskier
product than he bargained for.
This situation comes up very often. My question is how often this ends
badly for the debtor who is trying to strip a junior lien or cram down on a
senior lien.
On Fri, Jun 15, 2012 at 11:58 PM, Alik Segal wrote:
> I realize that s 552 provides:
>
> if the debtor and an entity entered into a security agreement before the
> commencement of the case and if the security interest created by such
> security agreement extends to property of the debtor acquired before the
> commencement of the case and to proceeds, products, offspring, or profits
> of such property, then such security interest extends to such proceeds,
> products, offspring, or profits acquired by the estate after the
> commencement of the case to the extent provided by such security agreement
> and by applicable nonbankruptcy law
>
> My question is whether 552 is strictly followed.
>
>
> On Fri, Jun 15, 2012 at 11:39 PM, Alik Segal wrote:
>
>> Mates,
>>
>> Here's a situation that comes up frequently.
>>
>> During the boom Debtor obtained a second house with a loan for
>> owner-occupied properties. Debtor never moved in and immediately rented
>> the house out. Now Debtor is about to file c11 bankruptcy. The house is
>> rented. Examination of the loan docs reveals that this owner-occupied deed
>> of trust has no cash collateral provisions. The clause concerning TRANSFER
>> OF RIGHTS IN THE PROPERTY makes no reference to rents or proceeds.
>>
>> 1. It appears that the lien does not extend to rents. Should I look for
>> cash collateral language in another clause of the DOT?
>>
>> 2. Assuming the DOT has no cash collateral provisions, does Debtor still
>> have cash collateral obligations with respect to this property? If so, on
>> what basis?
>>
>>
>> [image: Inline image 1]
>> [image: Inline image 2]
>>
>>
>> --
>> Alik Segal
>> Alik.Segal@gmail.com
>> 310-362-6157
>> California Central District
>>
>
>
>
> --
> Alik Segal
> Alik.Segal@gmail.com
> 310-362-6157
> California Central District
>
Alik Segal
Alik.Segal@gmail.com
310-362-6157
California Central District
As it has been correctly pointed out, debtor's actions could be seen as intentional, or at least negligent, misrepresentation. However, some debtors are unsophisticated and were not told by loan brokers that they were receiving a loan unsuitable for there situation. It is also far from clear that the debtors in this situation benefited from receiving an owner-occupied loan.
It frequently happened in subprime lending that loan brokers received a commission based on the spread between the best, lowest rate for which the borrower would qualify and the higher rate actually sold to borrower. The more expensive the loan, the higher the commission. If the broker can sell to the borrower a 6% loan, but the borrower qualified for an income property loan at 5%, then the broker gets a commission based on the difference of 1%. If the broker "qualifies" the borrower for an owner-occupied loan which generally has lower interest rate (for example 4%) but still sells a 6% loan, the broker can double the spread (6-42 v. 6-51) and double his commission. The bank sells the "owner occupied" loan (secured by an investment property) to an investor, who receives a riskier product than he bargained for.
This situation comes up very often. My question is how often this ends badly for the debtor who is trying to strip a junior lien or cram down on a senior lien.
On Fri, Jun 15, 2012 at 11:58 PM, Alik Segal <
The post was migrated from Yahoo.

I realize that s 552 provides:
if the debtor and an entity entered into a security agreement before the
commencement of the case and if the security interest created by such
security agreement extends to property of the debtor acquired before the
commencement of the case and to proceeds, products, offspring, or profits
of such property, then such security interest extends to such proceeds,
products, offspring, or profits acquired by the estate after the
commencement of the case to the extent provided by such security agreement
and by applicable nonbankruptcy law
My question is whether 552 is strictly followed.
On Fri, Jun 15, 2012 at 11:39 PM, Alik Segal wrote:
> Mates,
>
> Here's a situation that comes up frequently.
>
> During the boom Debtor obtained a second house with a loan for
> owner-occupied properties. Debtor never moved in and immediately rented
> the house out. Now Debtor is about to file c11 bankruptcy. The house is
> rented. Examination of the loan docs reveals that this owner-occupied deed
> of trust has no cash collateral provisions. The clause concerning TRANSFER
> OF RIGHTS IN THE PROPERTY makes no reference to rents or proceeds.
>
> 1. It appears that the lien does not extend to rents. Should I look for
> cash collateral language in another clause of the DOT?
>
> 2. Assuming the DOT has no cash collateral provisions, does Debtor still
> have cash collateral obligations with respect to this property? If so, on
> what basis?
>
>
> [image: Inline image 1]
> [image: Inline image 2]
>
>
> --
> Alik Segal
> Alik.Segal@gmail.com
> 310-362-6157
> California Central District
>
Alik Segal
Alik.Segal@gmail.com
310-362-6157
California Central District
I realize that s 552 provides:if the debtor and an entity entered into a security
agreement before the commencement of the case and if the security
interest created by such security agreement extends to property of the
debtor acquired before the commencement of the case and to proceeds,
products, offspring, or profits of such property, then such security
interest extends to such proceeds, products, offspring, or profits
acquired by the estate after the commencement of the case to the extent
provided by such security agreement and by applicable nonbankruptcy lawMy question is whether 552 is strictly followed.
On Fri, Jun 15, 2012 at 11:39 PM, Alik Segal <
Mates,Here's a situation that comes up frequently. with a loan for owner-occupied properties. Debtor never moved in and immediately rented the house out. Now Debtor is about to file c11 bankruptcy. The house is rented. Examination of the loan docs reveals that this owner-occupied deed of trust has no cash collateral provisions. The clause concerning TRANSFER OF RIGHTS IN THE PROPERTY makes no reference to rents or proceeds.
1. It appears that the lien does not extend to rents. Should I look for cash collateral language in another clause of the DOT?2. Assuming the DOT has no cash collateral provisions, does Debtor still have cash collateral obligations with respect to this property? If so, on what basis?
--Alik Segal
Alik.Segal@gmail.com310-362-6157California Central District
-- Alik SegalAlik.Segal@gmail.com310-362-6157California Central District
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The post was migrated from Yahoo.