Replies to This Discussion

Permalink Reply by Jennifer McNitt on November 3, 2010 at 10:42am

At least in the experience I've had with my HELOC, even if we forclosed the bank could still come after that loan. Forclosure only wipes away the first mortgage but not the HELOC. You would have to have a combination forclosure/bankruptcy to get out of both. Sometimes bankruptcy doesn't even let you do that though (if you have to go the Chap 13 instead of Chap 7 route).

Permalink Reply by Kimberley Kelly on November 14, 2010 at 4:28am

HELOC's are personal loans-think of them as credit cards. They do not get wiped out. SB931 will wipe out the Lenders right to pursue for Primary Lienholder in a Short Sale starting Jan. 1 in CA. However, the HELOC's and seconds need to be negotiated out. I feel it is better for a Seller to negotiate their HELOC in a Short Sale because they have some control and find out what the Servicer will settle for. The collection companies that come after you after a Foreclosure sale will normally seek approx 10% of the note amount if you hold tight to that amount. So..try to get it negotiated down and Mr. Seller must accept that it's a personal debt, and they should face it, come to an agreement and move on.

Permalink Reply by Shari P on November 14, 2010 at 4:58am

Kimberley Kelly said:

HELOC's are personal loans-think of them as credit cards. They do not get wiped out. SB931 will wipe out the Lenders right to pursue for Primary Lienholder in a Short Sale starting Jan. 1 in CA. However, the HELOC's and seconds need to be negotiated out. I feel it is better for a Seller to negotiate their HELOC in a Short Sale because they have some control and find out what the Servicer will settle for. The collection companies that come after you after a Foreclosure sale will normally seek approx 10% of the note amount if you hold tight to that amount. So..try to get it negotiated down and Mr. Seller must accept that it's a personal debt, and they should face it, come to an agreement and move on.

I ended up calling a real estate attorney (and paying the attorney) to get the answer. Regarding the HELOC in a short sale, if the letter has a deficiency judgement threat to pursue, then the seller would be signing her protection away by signing the letter. However, if she decided to let the property go back to the bank through foreclosure, they would not be able to pursue because it was a purchase money loan. This situation with a HELOC second will not be changed with the new law.

As for our actually situation, of course the day after I called the attorney, we were able to workout a non-deficiency letter with the second.

Incidentially, I this real estate attorney (referred to me by my accountant) will consult via the phone and email at the rate of $250 per hour billed in 6-minute increments. So, I emailed him the approval letters, which he reviewed and we spoke on the phone for a few minutes for approx. $80. In this case, I paid for it because I was very curious but it's an affordable way for sellers to get counsel.

Permalink Reply by Kimberley Kelly on November 15, 2010 at 2:36am

So the difference here is that the HELOC was really a PML..I didn't catch that looking at it and should have 80-10-10 to purchase a primary Res. is still all PML's. Good on your for talking to the Attorney..

Permalink Reply by JS on January 5, 2011 at 11:24am

Shari,

I would like the information to your lawyer.  We need to settle a HELOC deficiency.

Thanks,

JS 

[email protected]

Shari Posey said:

Kimberley Kelly said:

HELOC's are personal loans-think of them as credit cards. They do not get wiped out. SB931 will wipe out the Lenders right to pursue for Primary Lienholder in a Short Sale starting Jan. 1 in CA. However, the HELOC's and seconds need to be negotiated out. I feel it is better for a Seller to negotiate their HELOC in a Short Sale because they have some control and find out what the Servicer will settle for. The collection companies that come after you after a Foreclosure sale will normally seek approx 10% of the note amount if you hold tight to that amount. So..try to get it negotiated down and Mr. Seller must accept that it's a personal debt, and they should face it, come to an agreement and move on.

I ended up calling a real estate attorney (and paying the attorney) to get the answer. Regarding the HELOC in a short sale, if the letter has a deficiency judgement threat to pursue, then the seller would be signing her protection away by signing the letter. However, if she decided to let the property go back to the bank through foreclosure, they would not be able to pursue because it was a purchase money loan. This situation with a HELOC second will not be changed with the new law.

As for our actually situation, of course the day after I called the attorney, we were able to workout a non-deficiency letter with the second.

Incidentially, I this real estate attorney (referred to me by my accountant) will consult via the phone and email at the rate of $250 per hour billed in 6-minute increments. So, I emailed him the approval letters, which he reviewed and we spoke on the phone for a few minutes for approx. $80. In this case, I paid for it because I was very curious but it's an affordable way for sellers to get counsel.