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HOTLANCER · 01-31-2008, 01:26 AM

HELOC's vs. Second Mortgages or Second Trust Deeds - As someone who has experience in short sales, I would like to note that a common misconception is that HELOC's will dissolve in a non-judicial foreclosure in California. THIS DOESN'T HAPPEN. A HELOC can decollateralize (essentially disconnect from the lien on the house) and follow the debtor around like a credit card balance. The worst thing is that default rates on these can be outrageous. Who needs a $150,000 HELOC going from 9% to 19% or higher? The answer is nobody. Especially after suffering through the drama of a foreclosure. It will be hard enough to rebuild your financial life and the last thing you need is a HELOC raising its ugly head a few years after you start over. There are some cases where people file BK doesn't few years after the foreclosure just to get rid of the HELOC. That doesnt have to happen.

My advice to someone who has tried to save their home through a modification but was unsuccessful is PLEASE, PLEASE, PLEASE do something to settle the HELOC BEFORE its too late. THEY WILL WORK WITH YOU but you are much better off trying to work something out BEFORE the HELOC is released from the deed. Once it is released, they are more likely to want substantially more money. I know of cases where they have been settle for 1-3% of the outstanding balance (or $1,000 - $5,000 etc.).

Obviously, each situation is different and I am not giving blanket legal or financial advice.

01-31-2008, 01:26 AM	#2 (permalink)
HOTLANCER Member Join Date: Jan 2008 Posts: 9 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Heloc HELOC's vs. Second Mortgages or Second Trust Deeds - As someone who has experience in short sales, I would like to note that a common misconception is that HELOC's will dissolve in a non-judicial foreclosure in California. THIS DOESN'T HAPPEN. A HELOC can decollateralize (essentially disconnect from the lien on the house) and follow the debtor around like a credit card balance. The worst thing is that default rates on these can be outrageous. Who needs a $150,000 HELOC going from 9% to 19% or higher? The answer is nobody. Especially after suffering through the drama of a foreclosure. It will be hard enough to rebuild your financial life and the last thing you need is a HELOC raising its ugly head a few years after you start over. There are some cases where people file BK doesn't few years after the foreclosure just to get rid of the HELOC. That doesnt have to happen. My advice to someone who has tried to save their home through a modification but was unsuccessful is PLEASE, PLEASE, PLEASE do something to settle the HELOC BEFORE its too late. THEY WILL WORK WITH YOU but you are much better off trying to work something out BEFORE the HELOC is released from the deed. Once it is released, they are more likely to want substantially more money. I know of cases where they have been settle for 1-3% of the outstanding balance (or $1,000 - $5,000 etc.). Obviously, each situation is different and I am not giving blanket legal or financial advice.