Question: I had the loan with my heloc opened on March 23, 2006 but, when I refinanced the house on September 7, 2006 the lender paid off my balance on my heloc to assume the 1st and 2nd position. My heloc is telling me that they are in 1st position and my Primary Wells Fargo claims they are not. E-trade, which is my heloc, first told me that if I gave them $2,047.00 they will postpone the auction and do payment arrangements since they know I have a hardship and I just received a forbearance from my Primary lender Wells Fargo. So when I called to make the payment on Monday the guy then said, oh you have to pay us $25,000 or the $190,000 balance. I said you quoted me $2,047.00. He said, well you have to pay the interest fee’s, late fee’s and the months the account went unpaid. I told him I don’t have that. Then he said, well we will foreclose on your house despite your forbearance because we are the Primary so the negotiation didn’t work with them at all. Now Thursday this week they are trying to sale it, so I don’t know what to do but just stick with my Primary and hope they figure this out, but it’s scary since they just took my first payment for my forbearance and they act like I shouldn’t worry, but I am. Plus my house is only worth $440,000 and my Loans on the 1st mortgage is $592,000, the 2nd is $146,000 and the home equity line is $190,000 so there’s no equity at all and if I do the Chapter 13, my Primary won’t modify me and I wont be able to get the low mortgage payment they put me on with the forbearance so it’s a risky situation. Oh well, I will see what happens. Is there anything else I can do?
Answer: – Wow, you’ve got a lot of stuff going on… From what it sounds like here, you’ve got a first and second mortgage with Wells Fargo and a 3rd or HELOC with E-trade. Wells Fargo agreed to do a forbearance where they lowered your monthly payment. Your HELOC though is threatening to foreclose because you haven’t worked out anything with them and they are claiming they are in 1st position so they would like to foreclose so they get paid. If I was to bet, I would bet that Wells Fargo is indeed in first position still. Banks don’t just “give up” their positions, especially in this market. Lien priority is based on when things get recorded, except for federal and municipal liens, like IRS and tax liens.
If you want to know, just have your local title company pull a title report and it will tell you. The bank that you have your HELOC sounds like they are trying to settle with you which is usually what banks do in 2nd or in this case 3rd position. They know they are going to lose everything so they might as well get something. It looks like they are offering you a $25K payoff for your $190K debt. That’s not a bad home equity line of credit payoff, although because there is no equity even in the first, I would negotiate that down even more. You need to determine first of all if this house is worth saving based on your personal circumstances. If you settle with the 3rd, but end up losing the home anyway, in my opinion, it would have been better for you to start over in the first place.
We settle notes and we’ve helped a lot of homeowners like you, settle these 2nd and 3rd mortgages for literally pennies… however, even if we were to settle these notes, you’re still upside down on your first mortgage, which doesn’t give you a lot of options. Usually when we settle notes for people it gives them equity again so they can either sell their home if they get in a bind or because we’ve lowered the payments, they can stay in their home. If you do decide to settle with the 3rd or get a home equity line of credit payoff, make sure you get a satisfaction and not a release of lien because that could make your life even more hectic. Let us know if there is anything we can do to help.