My condo was foreclosed on, the 1st shows as such but the 2nd, which happens to be a HELOC, is showing as deficient. Am i responsible for the HELOC?

Asked by Sparki_d, Scottsdale, AZ Sat Jan 22, 2011

I used both loans to purchase the home and never took an additional draw on the HELOC other than for the original purchase. I have read that if the loans were used for purchase money then the mortgage holders cant come after me since the foreclosure has satisfied the lien. However, my confusion lies with the fact that the 2nd is actually a HELOC. Does that change things? I cant get anyone at Bank of America to give me a straight answer.

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Robert Quinn’s answer
Robert Quinn, , Scottsdale, AZ
Thu Jul 21, 2011
No, you should not be responsible for the Heloc as long as the entire sum of the loan was purchase money. With that said, there are other conditions such as the home having to be a single family residence on less than 2.5 acres of land. I am a negotiator on one of the top short selling teams in the southwest (90% success rate with hundreds of sales annually), and I can tell you from experience that Bank of America is a very hard institution to deal with. You will need a good agent to successfully negotiate this one for you. In the rare event that they are allowed to pursue you for this Heloc (even though they cannot), a good negotiator might be able to get BofA to accept the loan as "paid in full." If you have any other questions or concerns, please feel free to visit my website or call/email me. If you are interested in short selling your home, I highly encourage you to give me a call. Have a wonderful day!

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Blair Ballin, Agent, Scottsdale, AZ
Wed Feb 23, 2011

While AZ is a non deficiency state, HELOCs can be handled differently by banks. If your HELOC was used strictly for purchase money, that should help you out. B of A is not an easy bank to work with. Your best bet would absolutely be to speak with a real estate attorney. Many offer free consultations. I have clients that have worked with Peter Westby at Platt & Westby and have had good experiences. Best of luck!

Blair Ballin
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Todd Hall, Agent, Gilbert, AZ
Wed Feb 23, 2011

I agree with many of the comments below. It so happens that I am both a licensed real estate agent and a licensed real estate attorney and would be happy to talk to you about the situation. Feel free to call me at your convenience.


Todd W. Hall, Esq.
(602) 492-1565
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Stephanie We…, Agent, Gilbert, AZ
Fri Jan 28, 2011
Sparki D,
If your HELOC was used as purchase money, most attorneys I've talked to say the bank cannot come after you but the banks will attempt to try even when they know they can't legally come after you. That being said, your best option is to spend a couple hondo and find a good real estate attorney in Scottsdale so you can put your mind at rest and know exactly what is the likely outcome of your situation. Good luck to you!
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Brenda & Ron…, Agent, Mesa, AZ
Sat Jan 22, 2011
You will definitely want to talk to a good Real Estate attorney that this is his specialty. Arizona is a non deficiency state for purchase money, but you will need to have an attorney look at your loan documents on the HELOC. I agree though, that generally you are protected against the lenders pursuit of the money since it is purchase money.

Best Regards,

Brenda Cunningham
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Jeffrey Masi…, Agent, Scottsdale, AZ
Sat Jan 22, 2011
Dear Sparki:

Arizona is a non deficiency state. However, without seeing your loan agreements, no one in this public forum will be able to give you an answer. Also, no one is qualified unless they are an attorney to give an opinion. Generally speaking though you are protected from the lender's pursuit of the unpaid balance. I highly encourage you to speak to your attorney in this matter.

May I wish you the best.

Jeff Masich
Arizona Homes and Land
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David Rosen, Agent, New York, NY
Sat Jan 22, 2011
Sparki - Yours is an illustration of how f-ed up these banks are and how no one in the government has shown any leadership in this regard.

The answer is you are totally right and should not have any deficiency as it was all purchase money mortgage. That is the law as I understand it. However the loan originator at the time of your purchase put you into a loan product that was meant for people using a line of credit. And those lines of credit are handled by different departments. For all I can tell - and I do many short sales - the HELOC department has no mechanism to know if the money they lent you was purchase money or not. So they treat it like a credit card and treat you as guilty until proven innocent.
Mind you B of A has paid the government big fines for engaging in this practice as a settlement already. However those fines dont seem to mitigate the lack of service they put the "victims" of their actions through after the fact.
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Connie Clark, Agent, Scottsdale, AZ
Sat Jan 22, 2011
By law, real estate agents cannot give out legal or tax advice.

Here are three excellent attorneys in the area (who do not charge huge consultation fees) that can help answer your questions:

You might especially find the Buck Law AZ site very helpful.

Connie Clark
Desert Platinum Properties - A few minutes ago ..
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Stew Keene, Agent, Scottsdale, AZ
Sat Jan 22, 2011
Because your question is legal in nature we, as realtors, are not licensed to practice law and therefore not qualified to answer without putting ourselves in legal peril.

You need to speak to a real estate attorney (as Laura has already suggested) familiar with deficiency situations in Arizona.

I can refer you to an attorney should you not have one already.

I am sincerely sorry for your situation,

Stew Keene - Home Smart Realty
Web Reference:
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Spirit Messi…, Agent, Tucson, AZ
Sat Jan 22, 2011
Talk with a mortgage broker & attorney who specializes in either Real Estate or bankruptcy. You should never receive this kind of advice from a real estate agent or Realtor. Best of luck.
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Laura Myers…, Agent, Scottsdale, AZ
Sat Jan 22, 2011
Your best bet is to contact a real estate attorney who specializes in foreclosure. Typically purchase money loans in a foreclosure are wiped as well as second liens but not necessarily the right to pursue. I am not an attorney but Google Arizona Anti Deficiency Law and study this and it will give you great guidance.
Laura Myers
Keller Williams AZ Realty

A couple of attorney's to Google - Chris Combs and Neil Thomson
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Ray And Karen…, Agent, Mount Dora, FL
Sat Jan 22, 2011

Sounds like your HELOC is in a second position.

If you find out you are responsible it is possible they will settle for a lesser amount and provide terms.

If the HELOC and first lien is with B of A there may be a bit more flexability. At some point B of A may sell the debt to a collection agency.

Hope that answered your question.
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