Supreme Court to Consider When Second Mortgage Can Be Void

The Supreme Court will decide whether homeowners who declare bankruptcy can void a second mortgage if the home's market value has dropped below the amount they owe on their first mortgage.

The justices said Monday they will consider two appeals from Bank of America Corp., which asserts that bankrupt homeowners should not be able to "strip off" a second loan even if they are underwater on primary loans.

In both appeals, bankruptcy courts allowed Florida homeowners to nullify second loans held by Bank of America. The Atlanta-based 11th U.S. Circuit Court of Appeals affirmed, but Bank of America says the rulings conflict with other appeals courts and Supreme Court precedent.

Hundreds of homeowners have moved to void underwater second mortgages since the 11th Circuit endorsed the practice two years ago.