Home Buying in Bellevue>Question Details

handymom08, Home Buyer in Clovis, CA

I have a defaulted HELOC but am current with my first mortgage payment and want to stay in the home. Can a collection agency forclose on my house?

Asked by handymom08, Clovis, CA Wed Dec 5, 2012

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Yes they can and depending on their recovery, they may continue to come after you for the difference. Consult an attorney for the best course of action but do not ignore it.
0 votes Thank Flag Link Fri Dec 21, 2012
Meg, good point about lien stripping in Chapter 13. In many cases the lender won't even contest, conditioned on the owner completing their Chapter 13 plan. That can also deal with other debt issues the owner has, which is what IMHO makes it a much better option than the loan modification (assuming there is significant other debt).
0 votes Thank Flag Link Thu Dec 6, 2012
In Washington they have 6 years from default to bring a lawsuit against the maker of a note, assuming that they are NOT impacted by the short sale legislation addressed in this piece:

http://www.trulia.com/blog/kary_l_krismer/2012/03/new_short_…

Once reduced to judgment, the judgment lasts 10 years and can be renewed for another 10 years under existing law. There was talk of changing that to an even longer period. There's also the possibility of the judgment having extended life if the judgment debtor moves out of state and the judgment is transferred to that other state.

Also note there may be tax consequences on the running of the statute of limitations, the expiration of a judgment, or the compromise of a debt for less than the amount owed.

Again, an area to consult an attorney.
0 votes Thank Flag Link Thu Dec 6, 2012
Agreed, the HELOC can file for foreclosure as a lienholder if it chooses to. I would bet that they will choose to if you don't pay or get other assistance. I suggest the following:

What you need is a process called 'lien stripping.' You will need an attorney and typically it will be one experienced in Chapter 13 filings and how to strip away a second. This is best done if the home is underwater. Let's say you have a first mortgage for $500,000 and a second mortgage for $160,000 totaling $660,000 in debt against the house. You pay an experienced and qualified real estate agent for a current market analysis on the property. If your home is now worth $490,000 in this market in it's current condition, you will want to go ahead with the lien stripping and have the 2nd removed completely, thus allowing you to keep the home and only the first mortgage on it. You can contact me privately for more information if you like at MegOharrison@gmail.com
0 votes Thank Flag Link Thu Dec 6, 2012
I don't believe so but they can pusue collection for up to 16 years according to Washington State law. They may also be able to file a lien against your property once they have a judgement against you.

Sincerely,
Kathy Finney
Certified Distressed Property Expert - CDPE
Real Estate Broker and Consultant
Miller Laine Properties, Inc.
206-300-5663
kathy.finney@millerlaine.com
http://www.KathyFinney.com
0 votes Thank Flag Link Wed Dec 5, 2012
A second mortgage (HELOC) can and will foreclose if necessary. If the HELOC does not receive payment in full at foreclosure auction, they will most likely turn over the balance owing to a collection agency as junior liens will follow you for up to 20 years. If you wish to stay in the home you need to call your HELOC to arrange a plan to catch up. Good idea to ask this question to a local attorney as these message boards can give not so good advise.
0 votes Thank Flag Link Wed Dec 5, 2012
I would suggest contacting an attorney to help you. California law is different than Washington law.
0 votes Thank Flag Link Wed Dec 5, 2012
Contact Penfield Legal Services in Bellevue, WA. If the HELOC was securitized prior to 2008, they may be able to cancel it out. Otherwise, they can negotiate with that bank.
0 votes Thank Flag Link Wed Dec 5, 2012
A collection agency may not foreclose, however the 2nd lien holder(HELOC Bank) does have the right to foreclose, but when all is said and done the 1st lien holder would receive the proceeds if there are any in the event of a sale. I suggest you contact your 2nd lien holder about a loan modification if you want to stay in your home.
0 votes Thank Flag Link Wed Dec 5, 2012
I think they can as long as they want to pay off the first. Best thing to do is to do a settlement with them and pay them 10-50 cents on the dollar.
0 votes Thank Flag Link Wed Dec 5, 2012
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