QUESTION
When first forecloses, does HELOC (non-purchase money loan) with the same bank gets wiped out?
Asked on Oct 17th, 2012 on Foreclosures - Florida
More details to this question:
I have been hearing conflicting answers. I have 1st and HELOC (non-purchase money loan) with the same bank (Wells Fargo). I was told that if the same bank owns both loans at the time of foreclosure, HELOC would be wiped out. If Wells Fargo sells the HELOC loan to collection agency pennies on a dollar before the foreclosure, debt collector can come after me. Are these all true? According to the California Court of Appeals (Simon V. Superior Court {4 Cal.App.4th 63,5 Cal.Rptr.2d 428Cal.App. 1Dist., 1992}, when the same lender has both loans against the same property and attempts to enforce the junior loan, the California Court of Appeals has said the Bank is not a sold-out junior and cannot pursue the borrower under the Note.
3 ANSWERS
Bankruptcy Attorney serving Phoenix, AZ
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Law Office of D. L. Drain, P.A.
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The foreclosure/trustee's sale will wipe out all junior liens on the house. BUT, you are still responsible for the debt. Whether or not the lender can sue you depends on the type of debt.
Answered on Oct 19th, 2012 at 5:27 PM
Civil Litigation Attorney serving Federal Way, WA
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Stasch Law LLC
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I am aware of the California case, however to my knowledge it has not been litigated in Washington. I brought a summary judgment on that issue but the case settled before it was heard by a court. Its an open question in WA.
Answered on Oct 19th, 2012 at 12:57 PM
Insurance Litigation Attorney serving St. Petersburg, FL
Partner at
Gallagher & Associates Law Firm, P.A.
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California case law will have no value in a Florida court. While the language of your first and second mortgage will control, generally a second position mortgagee will loose its collateral when the first position mortgagee forecloses. Your obligation on the Note is not absolved by virtue of this foreclosure.
Answered on Oct 19th, 2012 at 12:42 PM