Foreclosure in 85032>Question Details

Kathleen, Other/Just Looking in 85032

If a heloc lender decides to foreclose on a property don't they have to pay off the first trust if they do so? (The 1st trust loan is current).

Asked by Kathleen, 85032 Tue Mar 2, 2010

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If a lender forecloses on the HELOC they will take title subject of all leins prior to them in the chain of title. You would loose your interest and they would have to payoff the other liens if they liquidate the property. If the heloc is foreclosuing there must be equity in the property to the point they feel they can mitigate their loss.

Keith Manson
First Weber Group
Certified Distressed Property Expert
Metro Milwaukee
0 votes Thank Flag Link Thu Mar 4, 2010
Hi Kathleen,

This is a great question and you have received some good advice here but please keep in mind that you are receiving it from agents who may or may not know AZ real estate law. Your best solution is to consult a real estate attorney. If you need some references for attorneys I would be glad to provide some names. I am sure that most of the agents responding to your question have names they could recommend as well.

I wish you the best of luck and God bless...
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0 votes Thank Flag Link Tue Mar 2, 2010
Hi Kathleen,

It is my understanding that if your the first & second liens are from two separate unrelated companies, then holder of the second lien to cannot start foreclosure proceedings unless they buy the first lien, which is highly unlikely in this market.

If the the first & second liens are from the same company, the second CAN foreclose.

Consult a real estate attorney to be sure of what your options are in regards to the law any your particular situation.

Good luck & all the best,

Roswell Moore, CMPS
Certified Mortgage Planner
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0 votes Thank Flag Link Tue Mar 2, 2010
Some people, who are having financial problems, continue to pay the first mortgage, but stop making the HELOC second mortgage payments. The thinking is that the second mortgage holder will not foreclose. In many circumstances that isn't true. If the HELOC lender believes there is value in the home to cover both tne first & second mortgages, it will foreclose. In some situations, people keep their keep their credit cards current, but don't pay the second mortgage. We are still in the middle of a recessession, with job loses, health issues, etc., so many people do not have the funds to pay for everything. I just want to make it clear that a second mortgage lender can foreclose & may do so.
0 votes Thank Flag Link Tue Mar 2, 2010
I have a slightly different take but i find the question interesting. Here in Hawaii a lot of times the AOAO (homeowners association) foreclose on a unit for delinquent maintenance fees. Then ultimately the first lien holder comes and takes 1st position and forecloses too. In this case the AOAO is looking to rent the unit to recoup some of the losses from the unpaid maintenance fees.

If a second lien holder forecloses, the first lien holder can still take it from them, but the second lien holder has the right to pursue the deiciency judgements in many states and I think that is why the 2nd lien holder would foreclose.
0 votes Thank Flag Link Tue Mar 2, 2010
Kathleen, like Ted said, try to get the 2nd to modify the loan. If they charge it off, they will likely sell it to a collection agency, and you will be bombarded with phone calls. In addition, the AZ Anti-Deficiency Statute does not cover the HELOC, thus allowing the 2nd (or the collection agency) to get a deficiency judgement for the entire amount owed. With a deficiency judgement, they could not only lien your home, but could go as far as garnishing your wages. The other option, if you cannot get a loan modification on the 2nd, would be a short sale. Hope this helps!
0 votes Thank Flag Link Tue Mar 2, 2010
Kathleen in most cases if the second mortgage wants to foreclose they will have to pay off the 1st mortgage company at foreclsoure. This will happen in cases where they think there is enough equity to pay them off and then get some funds from the foreclosure ssale to satisfy their loan. your best bet is to try and work out a loan modification with your second mortgage company.
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0 votes Thank Flag Link Tue Mar 2, 2010
Yes they do. This is there thinking that they can recover their money. However, if you are upside down, they will know this and oftern times put it off as a charge off rather than foreclose since they will lose out.

It only makes sense for them if there is equity in the property to force the sale and pay the 1st and 2nd back the money.
0 votes Thank Flag Link Tue Mar 2, 2010
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