Acceleration of a mortgage does not turn it into a short term mortgage: Maiorino

In re: Maiorino 08-21335 (Decision March 11, 2009; Judge Ninfo) In this case a Chapter 13 debtor attempted to modify a long-term mortgage by paying it off in full within the plan at below-contract rate of interest (See the case note in Laimer, in the 2008 cases.) The debtor argued that as a judgment of foreclosure has accelerated the mortgage, it was all now due-in-full and, as the last payment was now due within the period of a Chapter 13 plan, it could be modified. Judge Ninfo disagreed and held that the Sect. 1322(c)(2) provision, which states that residential mortgages cannot be modified if the last payment is due after the term of the Chapter 13 plan, applies to the original payment schedule of the mortgage, not the shorter tern caused by the acceleration of the mortgage in foreclosure. Note this phrase (which may return if new legislation allows modification of home mortgages in Chapter 13): “Although all of the circumstances under which a debtor might be better off by intentionally going into default on a mortgage, so that it could be modified in a Chapter 13 proceeding may be numerous and unclear, if a mortgage that has been accelerated by a debtor’s default is held to be eligible for modification under Section 1322(c)(2), such a holding could open up the possibility of abuse”