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» Take Charge America Employs MKDesktop to Assist Customers MortgageKeeper Referral Services announced Take Charge America, Inc. counselors are now using the company's database to access important resources for customers. Through MortgageKeeper's MKDesktop product, Take Charge America's credit and housing counselors can connect customers to a database of more than 7,000 well-vetted nonprofits and government services to assist them with financial hardships. Counselors can look up available services and organizations based on the customer's ZIP code and 20 different categories, such as job training and utility payment assistance. From there, counselors can help customers connect with local agencies and programs that address their specific needs. Current database subscribers connect their customers to more than 3,500 resources on a daily basis, according to Illinois-based MortgageKeeper. "Take Charge America has a clear commitment to helping its customers through rough times," said Rochelle Nawrocki Gorey, president of MortgageKeeper. "MKDesktop will help their counselors to access local solutions for virtually any customer, giving each customer a unique, personalized approach to counseling." Chicago's New Foreclosures Drop to Lowest Level Since Start of Crisis New foreclosure filings in the Chicago six-county region dropped by more than a third from the first half of 2012 to the first half of 2013, according to new data from the Woodstock Institute. Completed foreclosure auctions continue at a persistently high rate, however, contributing to the region's vacant property inventory. "Improvements in the Chicago real estate market, such as increases in home prices in some areas, may have encouraged servicers to pursue short sales or other alternatives to foreclosure," said Spencer Cowan, VP of research at Woodstock Institute. Cowan also attributed the decline in filings to compliance reviews and noted an Illinois state law requiring increased fees on foreclosure filings that took effect in June is likely to keep the number of new filings down in the coming months. "The continued high levels of completed foreclosure auctions, however, suggest that the Chicago housing market still has a long way to go towards recovery," Cowan added. Foreclosure filings in the Chicago six-county region—which includes Cook, DuPage, Kane, Lake, McHenry, and Will counties—fell by 36.1 percent from 34,978 filings in the first half of 2012 to 22,342 filings in the first half of 2013. Sub-regions with particularly large declines included West Cook County (-44.9 percent), Cook County (-40 percent), and Kane County (-37 percent). Will County experienced the smallest decline in filings, dropping just 5.1 percent. Completed foreclosure auctions fell by only 6.3 percent in the Chicago area, from 17,432 in the first half of 2012 to 16,332 in the first half of 2013. Foreclosure auctions are often concentrated in areas with high levels of long-term vacant homes, according to the Woodstock Institute. In the Washington Park neighborhood of Chicago, for example, 9.8 percent of residential addresses have been vacant for two years or more as of the end of 2012. Washington Park also has the highest rate of foreclosure auctions in the city. The Woodstock Institute reports the share of completed auctions that became real-estate-owned, or REO, dropped by 3.7 percentage points from the first half of 2012 (when 91.3 percent became REO) to the first half of 2013 (when 87.6 percent ended up as REO). The Institute says this decline may be a result of recovering markets in parts of the region that make some foreclosed properties a better investment for third-party buyers. FROM THE BENCH A Review of Mortgage Lien Avoidance in Chapter 7 and 13 Under state law, mortgages are considered "secured" because they constitute a lien against the property intended to ensure payment of a debt, regardless of whether there is sufficient value in the property to cover the full amount owed on the debt. Under bankruptcy law, mortgages are only considered "secured" to the extent that there is value in the property to support the amount owed on the debt. This is because §506(a) provides that "[a]n allowed claim of a creditor secured by VISIT US ONLINE @ DSNEWS.COM a lien on property . . . is a secured claim to the extent of the value of . . . such property . . . and is an unsecured claim to the extent that value . . . is less than the amount of such allowed claim." Moreover, §506(d) provides that "[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void." In Dewsnup v. Timm, 502 U.S. 410 (1992), a Chapter 7 debtor owned property valued by the court at $39,000 and encumbered by a mortgage of $120,000. The debtor argued that the plain meaning of §506(a) limited the lender's allowed secured claim to the $39,000 value of the property, and therefore the plain meaning of §506(d) voided all but $39,000 of the mortgage. The Supreme Court disagreed, holding that an "allowed secured claim" means different things under §506(a) and (d). Under §506(a), an "allowed secured claim" means the amount of a claim that is supported by value in the property. Under §506(d), an "allowed secured claim" means a claim that is "allowed" and "secured" under §502 because the debt and the mortgage are valid under state law. In other words, the court held that when a valid debt is secured by a valid mortgage under state law, the mortgage cannot be avoided under §506(d) regardless of whether it is supported by value under §506(a). The court relied heavily on the history of bankruptcy law and concluded that Congress did not intend to depart from the long-standing principle that liens pass through bankruptcy unaffected. Dewsnup has been criticized for running afoul of traditional statutory construction. Nevertheless, it remains the law. Furthermore, three out of four circuit courts that have considered the related issue of whether a junior mortgage lien can be stripped off in bankruptcy cases have extended Dewsnup to prohibit junior mortgage lien stripping in Chapter 7. In Ryan v. Homecomings Fin. Network, 253 F.3d 778 (4th Cir. 2001); re Talbert, 344 F.3d 555 (6th Cir. 2003); and Palomar v. First American Bank, 2013 U.S. App. LEXIS 13997 (7th Cir. July 11, 2013), the courts reasoned that stripping off a junior mortgage lien is identical to stripping down a senior mortgage lien, except that the debtor seeks to reduce the value of the lien to zero. However, in re McNeal, 477 F. Appx. 562 (11th Cir. 2012), Dewsnup holding is confined to the facts presented in that case, so it does not bar the stripping off of junior mortgage liens. Accordingly, in Chapter 7 cases, mortgages cannot be stripped down and the majority rule is that they cannot be stripped off either, except in the 11th Circuit. 121

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