Federal District Court Affirms Decision that Residential Loan Modification Does Not Alter Lien Priority in Pennsylvania

By Scott Waterman, Standing Chapter 13 Trustee Eastern District of Pennsylvania (Reading)

Citing Pennsylvania law, a Federal District Court in In re Hamilton (Hamilton v. Pennsylvania Housing Finance Agency), ___ B.R. ____ (E.D. Pa. 2020) refused to apply the equitable subordination doctrine to reorder the priority of mortgages after the first mortgage lender granted the debtors a loan modification prior to the bankruptcy filing.

Modifying a first mortgage is one of the most common loss mitigation tools available to bring a loan current to prevent foreclosure. The Pennsylvania Housing Finance Agency (“PHFA”), a second . . .

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