Thursday, June 26, 2008

query via e-mail: unsatisfied HELOC

For instance I have a crazy situation where a borrower had a second and when the settlement happened the second was paid off and a new HELOC opened, but the old one was never closed, and even after calling the bank, Chase they did not close it. So the borrower used it and has been paying on it for over a year. Of course he is now in trouble financially. The problem is the new HELOC went into third position, the existing Chase one stayed in second. Isn't that all the title agents fault, Chase and Countrywide for not caring enough to get it all straight.
My guy is worried if he defaults on all of this they will come after him. He simply used a credit line they did not close after pay off. This client would be happy to pay someone for some good advice. Where is the liability? I need to try and negotiate a solution, but don't want to even call the lenders until I have a good handle if they can hold him responsible for this mess.


If the new HELOC lender has a title insurance policy insuring their position, they could make a claim to the title company if they suffer a loss. If they did not put title insurance in place they have no guarantee of lien position. The title agent has the responsibility of paying off the line of credit and if requested, sending a request for satisfaction and closure. They would only step in and have liability moving forward, in my opinion, if there was an insurance policy, owner or loan, that guaranteed an interest coming behind the satisfaction.
The lender who accepted the payoff has an obligation to satisfy - usually there is a state statute that rules - if the borrower or their agent followed the instructions in the payoff letter.
The borrower has an obligation to watch their own finances and control themselves.
That's pretty much it in my book. ;)

Any other thoughts?

9 comments:

Anonymous said...

Out west here we are having HUGE problems with getting Line of Credit loans reconveyed. WAMU is one of the big culprits and we have anecdotal reports that after they receive the Settlement Agent check....they re-solicit the borrower to stay a customer and leave the Line of Credit.

They do NOT inform the Settlement Agent if a pay off is short and in several instances they have not closed out the loan and reconveyed it because there is a Credit Balance!

But to answer the borrower....you spent the money and the bottom line is you need to repay it!

Diane Cipa said...

Wow...that sounds like HELOC Hell. ;)

Anonymous said...

Of course the lender can come after him for not paying the new balance on the old HELOC. Whether or not there is a title claim, I don't know, but this borrower signed a note and promised to pay and if he knowingly took an advance from the line, he's responsible for all principal and interest. Shame on the lender for not following through with the closure and reconveyance, but "He simply used a credit line they did not close after pay off" means HE BORROWED MONEY AND HAS TO REPAY IT.

Just my opinion. :-) Love this site, Diane!!

Diane Cipa said...

Thank you so much and you are RIGHT! A promise to repay is a promise to repay. That's what it's all about, folks.

Ability and WILLINGNESS to repay.....good old-fashioned values and underwriting.

Anonymous said...

I have a question... does the original Heloc (that should have reconveyed) stay in their orginal position or do they get bumped.

I have a situation where WAMU did not reconvey and left the line open. I used the line. I accecpt repsonsibility, however, another HELOC, recorded after the orginal WAMU Heloc, is foreclosing on us. I need to figure out lien positions. Title company is say telling us that WAMU (one that did not reconvey) is 1st position and the foreclosing heloc is in 3rd position. Why anyone would want to foreclose when in 3rd position is beyond me?

Diane Cipa said...

Hi, Anon. Unless the WAMU HELOC was postponed as part of the later HELOC financing, they are in their original position. The bigger question is why would anyone buy this property at Sheriff Sale if there is a prior lien that will survive the sale. Perhaps the foreclosing lender thinks there is sufficient equity to recoup something or maybe they just have a crappy attorney! ;)

Anonymous said...

Diane,

Thanks for your reply. Since the refinance took place in 2004, I'm assuming that there is no way to find out if there was reconveyance for WAMU Heloc that was not filed? Or some other related paperwork perhaps?

I talked with the Title company involved in the transaction and at first they were helpful until they realized they had insured the loan(s). Then they started to talk about their Claims Dept. I only want to find out the liens and their relative positions.

3rd is foreclosing on March 22. I have an appraisal on the house at $440K (2/1/2010). The first and second amount to $440K. I wonder if there's a way to point this out to the lender/trustee company?

Diane Cipa said...

Remember, I am not an attorney and if you are facing foreclosure, it would be a good idea to consult with your attorney. I recommend using certified mail anytime you communicate with a title company or a lender for any reason concerning a serious matter. Certified mail is an attention getter.

Good luck.

Diane Cipa said...

Remember, I am not an attorney and if you are facing foreclosure, it would be a good idea to consult with your attorney. I recommend using certified mail anytime you communicate with a title company or a lender for any reason concerning a serious matter. Certified mail is an attention getter.

Good luck.