Title In re: Kim, 18-26438
David E. Rice
Case Number

The debtors moved for an order that strips off a second mortgage on their principal residence. At trial, the stipulated value of the residence was less than the amount of the first mortgage claim. The evidence showed, however, that the debtors and the holder of the first mortgage entered into a loan modification agreement that increased the principal balance of the first mortgage debt after the second mortgage loan was made. Based upon the loan modification agreement, the holder of the second mortgage asserted at trial that its mortgage lien was not wholly unsecured because the first mortgage lien was subject to partial subordination under Md. Code Ann., Real Prop. § 7-111. The Bankruptcy Court, David E. Rice, Judge, held that the second mortgage lien should be stripped off unless the holder of the second mortgage promptly commenced, and ultimately prevailed, in a proceeding under § 7-111 to establish the extent of its priority over the first mortgage lien.