Are you referring to a Short Sale or using the HELOC for a home purchase?
I'm in the middle of a transaction where the buyer is using a HELOC credit line to purchase another residence through B of A. (the HELOC is from a rental property). It's been the standard loan package required for a conventional loan. The only difference is that they take into consideration the amount of the HELOC loan and the "approved" amount they qualify for and figure it to be a grand total loan of xxxxx for the purchase. The payment amount from the HELOC is considered debt. Still have another 2 weeks to close but so far so good.
We also had a S/S with a HELOC through Chase. In this case, they required proof of what the equity line was used for. We had to prove the monies were used to upgrade the residence and not for expenditures for gain. This money was used for landscaping and hardscape. Provided receipts and a letter of explanation. The negotiator accepted this, and it did close.
Hope this helps! I