Foreclosure University HELOC

Question:  I just purchased my first home using a VA Loan and will receive the First Home Buyers tax credit some time in the next 12 to 16 weeks. I would like to make some repairs and improvements to the home now. How long must I have my loan in order to obtain a HELOC?

Answer:  -You can take out a HELOC anytime as long as you qualify. Anymore it’s becoming extremely difficult to get a HELOC on your home because of what’s happened to the real estate market. Not only do you need stellar credit and financials to back it up, your home must have a good amount of equity in it. The days of taking out a HELOC up to 100% LTV are long gone.

Question:  I have a house that is currently going through the short-sell process. I have an approval letter for the first and the second. The second is stating “BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above.” I live in CA and the second was an home equity line of credit (HELOC). We have already agreed to pay $2500 to the second and they have agreed, but they are still including this language in the short sale approval letter. What rights do they have to sue us later on?

Answer:  - It depends on what you agree to as part of the payoff. This is where you need to make sure you ADD to the payoff letter that the $2500 is for “full satisfaction” of the loan. See there are 2 types of payoffs. 1 is a “release of lien” which means you pay the mortgage company $2500 and they retain the right to still come after you for the deficient amount. The other payoff is a “satisfaction” which means “paid in full” – they give up their right to come after you for the deficient amount (which is called a deficiency judgment). All they can do is 1099 you for the amount lost of which you can file form 982 and in most cases claim insolvency and negate the 1099. If it was your personal residence, with Obama’s new laws in place, you may not have to pay anyway. So whatever you do, please please please get the satisfaction. Sometimes if they don’t agree to a satisfaction of loan, you’ll just have to pay a little extra more to get that piece of mind.

Question:  I have a home equity line of credit and am delinquent 1200. The credit union has a copy of the mobile home title, but is not listed as security interest holder. I have made arrangements to catch up the past due balance. We have not signed any mortgage papers. Can they foreclose based on a copy of the title. They want us to add them as security interest holders and said that also included our tax lots.

Answer:  - Anyone can foreclose if they have a lien on your property. If you borrowed money from a HELOC that is attached to another property to buy this mobile home, then the credit union will foreclose on the property attached to the lien that was pledged as collateral for the loan.

Question: We have a mortgage with 20% of the amount in a HELOC with both parts of mortgage through Wells Fargo (May 2007). The house value is continuing to decline below the value of the first mortgage. If we walk away, short sale or foreclose…can the bank try to collect on the HELOC? We live in Oregon.

Answer: -Absolutely… you should always try to work something out with the bank. They may not make you pay the full amount but will require you to pay something in most cases.

Question: What should i do?

Answer: -Well, you can try to settle the debt with them and pay them a fraction (5% -10%) of the original loan amount, you can do nothing and hope they issue you a 1099 in which you will have to pay taxes on that money you received, or they will file a deficiency judgment against you in which they can garnish wages and so forth until that amount is paid.  If it goes that far, most people will file bankruptcy and either get it wiped out completely with a Chapter 7 or agree to pay the lender a certain amount (5% – 10%) over a period of time with a Chapter 13.