HelocBasics » HELOC foreclosure

List of Non-Recourse States

Jamie — Wed, 21 Apr 2010 08:39:06 +0000

Even if your home is sold in foreclosure, you may still be on the hook for the difference between the amount you owe the bank and the amount the property sold for. Years later, the bank may come after your paycheck to recoup there losses.

Unless, of course, you live in a non-recourse state.

In non-recourse states, homeowners cannot be held personally liable for more than a forclosed property sells for. The debt is completely satisfied at the time of sale and lenders cannot sue to make up for lost funds. To learn more, take a look at this list of non-recourse states.

Keep in mind that laws change from time to time and that state code can be complicated to understand. If you’re facing foreclosure, consult with an attorney before making any decision based on potential recourse.

photo credit: respres

What Happens to a HELOC in Foreclosure?

Jamie — Wed, 14 Apr 2010 08:18:10 +0000

Foreclosures seem to be slowing, but the country still isn’t in the clear. If your home is in danger of facing foreclosure becuase of a HELOC in default, it’s important to have some idea of what the bank will do. Here are the five primary ways HELOC foreclosure situations play out:

The homeowner is given permission to offer a short-sale.
The homeowner is given permission to offer a short-sale because the primary mortgage holder offers a monetary incentive to the HELOC lender.
The primary lender forces a foreclosure.
The HELOC lender forces a foreclosure.
The HELOC lender purchases the primary loan.

Each of these five possibilities offers unique benefits and drawbacks to the homeowner. Take a look at the article HELOC Foreclosure to learn more about how to make the most of your situation in each possibility.

photo credit: stevendepolo

Should I be a HELOC Co-Signer for a Friend or Relative?

Jamie — Wed, 25 Mar 2009 21:06:22 +0000

As it has become more difficult to take out a home equity line of credit (HELOC), many borrowers have turned to friends and family members for help.

If you’ve been asked to co-sign a HELOC loan, think twice before putting a pen to the dotted line. As a co-signer you may be required to pay back the entire amount if the borrower cannot. If the loan goes into default, your credit score will be severely damaged.

To learn more see: Should I be a HELOC Co-Signer for a Friend or Relative?

photo credit: demi-brooke

Using a HELOC to Pay Off Credit Card Debt

Jamie — Thu, 19 Mar 2009 21:49:46 +0000

Low home equity lending rates have prompted many borrowers to pay off higher-interest debt with a HELOC loan.

BankingMyWay reports:

“Those carrying considerable debt may have difficulty using balance transfers to consolidate it all. New credit cards may not have a high enough limit. In these cases, a home equity loan may be a more practical option. Of course, you have to have enough equity in your home to cover the outstanding balances. One added benefit to using a home equity loan instead of a balance transfer is that payments are often tax deductible.”

Paying off credit card debt with a HELOC can be a smart move, but there’s some risk involved. Although the rate is probably going to be lower, HELOC loans are secured by your home.

If you don’t pay back credit card debt, you’ll have to deal with annoying phone calls and ruined credit. If you don’t pay back HELOC debt, not only will your credit be trashed, you may end up facing foreclosure.

See Also:

HELOC Foreclosure

No, a HELOC Debit Card Isn't the Same as a Credit Card

Jamie — Wed, 04 Mar 2009 04:26:16 +0000

In the midst of this economic crisis, a growing number of HELOC borrowers are going to credit counseling agencies to get help with their debt. Unfortunately, some are surprised to find that their HELOC debit card is not the same as a credit card and their outstanding balance cannot be renegotiated or reduced in the same way. (Yikes).

The Miami Herald recently gave advice for a borrower who was surprised the counseling agency couldn’t work with his debt:

“Unfortunately, that ”credit card” balance was not borrowings from a credit card company. It was most likely a ”debit” card attached to an equity line. Your relative was spending down his home equity, and that’s a travesty. It should have never been so easy to access the accumulated value in one’s home. But we know that now.

Most credit counseling services are good at helping the clients assess their situation and prepare a realistic budget. They then work with the credit card companies to consolidate the client’s credit card debts and have a payment plan that will actually pay off the cards in a period of time. This is not the case with home mortgages, and that, my dear, is what this home equity ”credit card” is.”

A HELOC debit card can be handy. But, remember, every purchase reduces the equity in your home. Don’t pay back the balance and you may be forced to sell or face foreclosure.

photo credit: Andres Rueda

See Also:

HELOC Foreclosure

5 Financially Sound Ways to Use Your HELOC

HELOC Lenders Reluctant to Start Foreclosures

Jamie — Tue, 03 Mar 2009 05:10:51 +0000

If you don’t pay your home equity line of credit, your HELOC lender could force foreclosure proceedings. But, many HELOC lenders are reluctant to start the process and would rather work out a solution with borrowers.

The San Francisco Chronicle explains:

“…Most second trust holders are reluctant to institute foreclosure proceedings. There is an expense involved (such as advertising, auction and legal fees) that the HELOC bank may not want to spend if they believe the foreclosure sale will not generate any money for them.

You or your attorney may want to discuss the situation with the HELOC holder and see if you can work out some kind of amicable resolution.”

Because the HELOC is a second lien, it is second in position to collect any money from a foreclosure sale. HELOC lenders know that they will be paid after the lender for your original home loan recovers lost costs. In some states a HELOC loan becomes an unsecured lien against the recipient. However, even in these areas HELOC lenders are often willing to work with delinquent borrowers.

The bottom line: If you refuse to pay back your HELOC, the lender will eventually start foreclosure proceedings. But, many lenders are willing to help borrowers get back in good standing, particularly in today’s market. If your HELOC bills are past due, call your lender and see what can be done.

photo credit: TheTruthAbout…

See Also:

The HELCO Foreclosure Process

Answers to Common HELOC Questions

How Obama's Foreclosure Prevention Plan Helps HELOC Borrowers

Jamie — Thu, 19 Feb 2009 10:07:55 +0000

If you’re a HELOC borrower facing foreclosure, Obama’s new Homeowner Affordability and Sustainability Plan has something for you.

The housing plan has a provision that allows “mortgage cram-downs,” a highly controversial practice that allows bankruptcy judges to alter the terms of a mortgage at their discretion. Basically, when the plan becomes law, you could file for bankruptcy and have your mortgage modified and your HELOC payments reduced or even eliminated all together.

Currently, bankruptcy courts can not change the terms of a mortgage for a primary residence. Additionally, many states have recourse laws that allows lenders to go after a delinquent HELOC borrower, even after a property has been sold. In such cases the borrower is personally responsible to pay back the balance of a home equity line of credit and can even have his wages garnished until the debt is satisfied.

USA Today reports on the announcement of the new foreclosure prevention plan and how these changes will work:

“That’s the rule for investors who own two, three and four homes,” Obama said Wednesday. “It should be the rule for ordinary homeowners, too, as an alternative to foreclosure.”

The change in the law would empower judges to lower interest rates, extend the repayment period, and change the principal amount owed on the mortgage to what is determined as the home’s fair market value…

Many homeowners have two mortgages because they have taken out a home-equity loan to pay off their credit card debt.

Under the plan, the bankruptcy filing could wipe out the home-equity loan, enabling the family to keep their home, Lee says.”

Critics of the housing bill worry that too many borrowers will have their mortgage and home equity debt wiped out, even if they are capable of making their monthly payments. However, the announcement of the program comes as a relief for many HELOC borrowers in recourse states. In some cases, these borrowers owe tens of thousands and are “upside-down” on their mortgages due to declining home values. Even if they sold their properties, such borrowers would still owe their home equity lenders. In the coming months, they hope to have their HELOC debt discharged and avoid the burden of paying it back from their own pockets.

photo credit: respres

See Also:

How HELOC Foreclosure Works

List of Non-Recourse Mortgage States & Anti-Deficiency Statutes

Foreclosures Rise, Cause HELOC Borrowers Headaches

Jamie — Thu, 22 Jan 2009 05:31:16 +0000

There was a record number of foreclosures last year, concentrated in several metro areas.

The Real Estate Bloggers report:

“There is no surprise that the foreclosure activity has been focused in the states where real estate speculation was rampant. 26 percent of the foreclosures in the United States in 2008 were just in California.

The top 5 states

HELOC Delinquencies at Highest Levels Ever

Jamie — Sat, 17 Jan 2009 23:44:47 +0000

Recent numbers show that HELOC delinquencies are at their highest level ever recorded.

A US News and World Report blog shares this from the American Bankers Association:

“In the latest sign that consumers are under financial stress, indirect auto loan and home equity lines of credit (HELOC) delinquencies reached their highest levels ever during the third quarter of 2008, according to the American Bankers Association

No Fannie / Freddie HELOC Foreclosures During Holidays

Jamie — Thu, 27 Nov 2008 06:13:26 +0000

Fannie Mae and Freddie Mac won’t be perusing foreclosures during the holidays. Even those facing HELOC foreclosure are off the hook – at least for a few weeks.

MarketWatch reports:

“Fannie and Freddie will not foreclose on occupied homes from Nov. 26 to Jan. 9. Fannie said it will reach out to 10,000 affected borrowers and Freddie will reach out to 6,000 affected borrowers.”

For more information about the foreclosure process see: HELOC Foreclosures.