If the Heloc is found to be "purchase money" then your analysis would seem to be correct.  I did  quick search for cases describing Helocs as purchase money and found no precedent.  If you have cites to case law I would appreciate them.  

As far as using logic to state Helocs are purchase money, sure I agree the argument would seem to be sound. If otherwise qualifies and the money was used to buy the home, lets deem it purchase money.  But, if I were indymac, I would state -  by definition the loan is a line of credit against the owners equity so how can it be purchase money.  First there had to be homeowner equity, right.  Would the homeowner have any equity if he had not already owned the property?  

Regarding seconds --  

 The sold out junior scenario is noteworthy because it applies to non purchase money juniors.   On the internet and in conversation with people in the industry you typically hear short sell advisers tell borrowers to rest assured the lenders will use a non judicial foreclosure - so the borrower does not have to worry about about deficiency judgments. 

However, a sold out junior (non purchase money) gets to skip the foreclosure and may to seek a deficiency.  The fact that Indymac is even talking about pursuing deficiencies is noteworthy.  

I don't know of any case that specifically states that a HELOC obtained as the junior portion of an 80/20 deal is standard purchase money.  I'm not surprised to not find this specfic ruling as I think it's clear from the cases, beginning with Roseleaf Corp. v. Chierighino (1963) 59 Cal.2d 35 on up, that funds loaned to purchase property and secured by that property are standard purchase money and therefore within the realm of 580b.  HELOC funds in this instance are being applied to the purchase of the property, not a refi, not for a boat, not to pay off credit cards, etc etc.  Call the loan what they will, HELOC or something else, it's still purchase money. 

 Indymac is going to lose this one if they pursue it.  And if there is an attorney's fee provision in the loan docs, Indymac may be exposed for defense costs if they file a deficiency suit.  Indymac, like alot of other 2nds, made the decision to go 100% and now they are going to get burned on alot of these deals.  I'm not surprised that they are looking for way to chase down the borrowers, but they have a loser when it comes to purchase money 2nds.

This is a very interesting discussion.  I've been looking into the issue myself lately.  I haven't found much more than what's outlined here.  Have anyone of you had any luck in finding more information, specifically any case law further illuminating the nature of a HELOC loan effectively issued as a second loan to purchase a home?

I've also been researching this situation because I'm in California and may foreclose in the next 3 months. From my research, I have concluded that as long as you didn't refinance your first or second loan, your first and or second is considered non-recourse because the money was "purchase money." I'm sure lenders will try to challenge this as more foreclosures come in the coming months. Although the law does not currently require lenders to do a loan modification for many owners who face foreclosure, I believe Lenders will soon voluntarily work with owners rather than loose money trying to sell foreclosed homes. Due to the falling dollar, economic depression, and falling house prices, it is making more sense to just walk away, even if your credit takes a hit.

Interesting subject matter.  Question: what about dispute resolution clauses which are typically standard as well?  May a lender (in this case Indy) pursue a HELOC used as purchase money [notwithstanding any ADR provision(s) which were probably incorporated into the loan docs]?  Or would any ADR provisions only apply to the borrower, should the borrower wish to proceed against the lender (for whatever reason)?     

good question.  I decline to answer your hypothetical.  j.k.  I always hate that response.

I would have to bet the adr clause is limited in scope and application.  I would have to read it in context of the entire document.  I doubt it applies to power of sale or post foreclosure/ disposition  remedies. 
But, again, I would have to read it first.

Nathan thanks for joining the conversation.  Nathan at least half my clients have refinanced seconds.  I advise those who can afford it to remain current with the first while we push hard on the second. 

CCP 726a and CCP 580b are the reasons why Realtors must advise their short sales sellers to speak with an attorney.

It can be absolute disaster to let the first and the second go into default at the same time.  We are seeing lenders like BofA sit back and demand the sellers sign notes for the full amount.  All sellers with two loans need to work with someone who can protect their interests.

Nathan what do you think of these billboards and ads by Realtors saying they can stop foreclosure?

Nathan thanks for joining the conversation.  Nathan at least half my clients have refinanced seconds.  I advise those who can afford it to remain current with the first while we push hard on the second. 

CCP 726a and CCP 580b are the reasons why Realtors must advise their short sales sellers to speak with an attorney.

It can be absolute disaster to let the first and the second go into default at the same time.  We are seeing lenders like BofA sit back and demand the sellers sign notes for the full amount.  All sellers with two loans need to work with someone who can protect their interests.

Nathan what do you think of these billboards and ads by Realtors saying they can stop foreclosure?

2945  claims -- I know that some District Attorneys offices and I think the A.Gs. office are going after the loan brokers doing loan modifications.  I have been offered 10-20 grand a month to serve as the front man for these groups.  I told them  - in my opinion they are probably breaking the law by taking money up front. 

The reason why people are willing to pay these groups more is because of the sales pitches I have heard.  I have routinely been told by by potential clients that many Realtors say they can stop foreclosure, save credit and they exagerate their success rates.

I get so many calls by stunned people who are surprised to the learn the seconds are holding out of large notes and large amounts of money.  Well I ask them if first has filed an NOD they beging to see the light. I simply can not believe how unprepared these so called short sale experts leave thier clients.  Instead of suggesting it may be time for a deed in lieu, they try and sell the house up until the last moment.

 I have lost a few clients to Realtors making bold false claims about their short sale sucesses.

I know my competitors frequently state that a deed and lieu can't work with two loans (wrong.)

I know others claim they have done 1000s of short sales - but when pressed back off the claim

Others claim they have an in house attorney - to which I tell the clients ask the attorney if they represent you or the brokerage. 

There are bold claims being made by some.  I feel sorry for the scrupulous Realtors trying to compete with some of these guys - witht he we stop foreclosure - save your credit b.s. 

In my opinion C.A.R. needs to step in and save the integrity of the profession.  Do you know how many clueless short sale experts there are now. 

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I like this discussion.

I know you all are speaking about California law, but I have a question about Arizona law. My understanding is that the laws aren’t that much different. Here’s the scenario:

Wife purchases a home sole and separate of the husband, and resides in the home as a primary residence. The home was purchased with an 80/20 split, all funds going to the purchases of the house. (and the seller that made off like a bandit!) But I digress.

The 20% (2^nd) was a 1 year ARM. As the ARM adjusted, the wife refinances with a bank using a HLOC, taking only $4,000 more than the 2^nd.

The questions (Understanding that this is not legal advice and if legal advice is needed, an attorney will need to be retained)

First, can the bank that holds the junior position seek a deficiency balance if the home is foreclosed on? If deficiency is sought, do they have grounds for the whole 20% or just the $4,000 additional that was taken at the time the loan was obtained?

Second, because the wife holds the home sole and separate, and the husband signed a disclosure, can the husbands credit be dinged for it?

Third, and like the one before, if the wife goes delinquent on the home, short sale won’t work, and foreclosure is eminent, will the husband’s credit be affected in any way?

And last, does co-mingled bank accounts and/or community property laws provide any recourse that would include the husband? i.e. wage garnishment on the husband.

I appreciate that you all have been willing to spell this out for some of the non-attorneys out there. I’ve called 10 different attorneys and none of them have been willing to call back.     

Thanks,

Trying-to-stay-afloat       

As Nathan states, it is not uncommon for 2nds with no equity to sit back with a wait-and-see attitude.  Initiating foreclosure makes no sense.  It is only when the 1st begins foreclosure proceedings that the 2nd are forced to face the music.  If they are purchase money, they are looking at a complete loss with no recourse.  These 2nds are ripe for a pennies-on-the-dollar short payoff.  The strategy I have encountered involves 1) stopping payment on the purchase money 2nd once the 2nd has no equity; then 2) advising the 2nd that the 1st is about to go into default and wipe them out; then 3) attempt to negotiate a short pay of the 2nd; then 4) if the 2nd won't play ball, stop paying the 1st and head toward foreclosure; then 5) attempt again to negotiate a short pay of the 2nd with foreclosure looming.  If the 2nd still won't play ball, the borrower decides whether to bring the 1st current and stay or let the place go.  I have yet to hear of a case where the 2nd doesn't accept a short pay - something is better than nothing.  Unfortunately, it may take a looming foreclosure by the 1st to get the 2nd to cave.

Regarding Indymac's assertions of pursuit of deficiency judgments - this is the wave of the future.  The most typical scenario is going to involve the sale of sold-out junior loans to investors/collectors, who will obtain deficiency judgments and begin collection.  There is going to be a lot and I mean a lot of money made doing this. 

This is a great discussion, but I don't know if this will help my situation.  I live in N Cal and will probably going short sell or even foreclosure soon.  Here's the tricky part, I do have 1st and HELOC, they both belong to the same lender, Wam... in this case.  I refi with Wam. one year after I purchased my house.  So if I am going into foreclosure, will the lender be able to recourse the HELOC?

Here are some more interesting parts, I used the HELOC as the down payment for an investment house that was sold a year ago and took the lost.  On my statment, the HELOC was seperated into two part, one is Fixed rate loan and the second one if called Home Equity Line of Credit.  So can they come after me for the whole amount of the HELOC?  What are my choices??

Thanks in advance!!!

You bring up some issues that take some investigation. 

among other potental  "defenses" you need to consider:

1.  The doctrine ofmerger

2. Whether you have facts to claim your refinace could still be consider purhase money.  -- Same lender?  Just a better rate?

my home was appraised at 1.7 million 1 year ago. we have a fico score of 800. have no debt. we used our HELOC in the last year on home renovations because we had over 800k in equity. foreclosures are just starting to hit my area. two homes comparable to mine have been put on the market asking pric 640K... if this trend continues what kind of business sense does it make to keep paying my 1st and heloc.... the banks themselves are undercutting there other assets. my home is in AZ. any insight would be wonderful. thank you.

I have a house in San Diego I bought 3 years ago. I got 80/20 100% financing to buy the house. All my payments are current and my wife and I have a credit score of about 805. The bank is Countrywide. We're expecting some money to come our way very soon and would like to talk our bank into completely re negotiating our loan package into a 20 year fixed with 20% down on the currently appraised value of the house. But our only leverage against the bank would be that if they don't do that, we might stop paying on both loans and just move out.

I know this would mess up our credit score, but I think we can deal with that. My concern is if they can take us to court, harrass us and garnish our wages.

I'm not a lwayer and don't know all the fine details in the loan contracts. I'd appreciate it if someone here could answer my question about whether the bank can take action and collect money from us.

Can anyone please give advice on our situation, we live in California.

We have a Cal HFA loan as a 1st mortgage (original purchase money).

Cal HFA is foreclosing on the house because we rented it, even though we are current on our payments. We were unaware that our note had an 'owner occupied only' clause. Since we rented the home we defaulted on that part of our agreement.

We are not going to fight the foreclosure since we are upside down on the house anyway.

The part of this forecloser that concerns me is that there is a home equity loan also (through Wells Fargo). Half of the home equity loan consists of 3 'defered-payment loan' (or silent loans) that we used as down payment asssistant program for 1st time home buyers through Cal HFA. The other half of the loan was used to make upgrades on the home. The total home equity loan is $80,000. So, would the $40,000 that was used to consolidate the 3 defered-payment loans still be considered original purchase money and therefore be non-recourse? Would we need to hire a Real Estate Lawyer to fight this?

How and when will Wells Fargo come after us? Or will they at all?

Thanks in advance!

Here is the scenario I am currently dealing with...Junior lender (Wells Fargo) was wiped out in foreclosure sale by senior lender (Countrywide).  The junior loan was a HELOC that was refinanced for the exact same amount as the orignial loan in order to ock in a variable rate.  Is that refi going to be considered purchase money and nonrecourse?  Or is the refi not considered purchase money even though it was just a lock in of the purchase loan?  Is Wells Fargo likely to pursue a deficiency judgment in CA?  What is the threshold for pursuing a deficiency judgment...$100k...$200k?

I have a first mortgage on our house in Northern California and a HELOC with a different lender, National City.  National City froze the HELOC last year due to "not lending in that geographical area any longer".  Our house is now worth less than what is owed to the first mortgage holder.  We are underwater by about $150,000 at this time. 

My husband lost his job and was out of work for 5 months last year.  I worked for the school system and lost my position due to budget cuts from the state of California.  I'd like to ask National City to accept a settlement of .30 to .40 on the dollar for the HELOC, rather than do a short sale where they receive only what the first mortgage holder would give them. 

I am asking if you have any suggestions as to what to do, or how to go about getting them to accept the offer.    

Hello there,

I live in Northern CA and have an underwater mortgage. I bought my house in 2005 with an 80/20 mortgage for $520,000.

1st Loan $415,000             2nd Loan HELOC $115,000

The house is worth $350K now ($170K less than what I owe). I never refinanced any of my loans.

I'm thinking on walking away from my home but I'm afraind the bank will sue me for the 2nd Loan since it's a HELOC. I read some of the previous postings but I'm still a bit confused if the bank would sue me trying to collect their money.

Would the 2nd loan (HELOC) in this scenario be considered "nonrecourse"? Please advise. Thanks!

Thanks for the information. I will read about CCP 580b. One more question though, what do you mean by "... you may want to tie the lender down as best you can..."? Sorry, English is not my first language and I didn't get that part. Thanks!

We are in a very similar boat to many people above.

We live in CA.  My salary has been cut and my husband's company looks like it may not be around for much longer.  We are looking into options with our house, though we are currently still making payments on our mortgages.

We currently have a first w/ Chase and a 2nd (home equity line) with Wells Fargo.  We re-financed our second a couple of years ago to get a better rate and took out and extra 20K of equity at that time.  Does the fact that we re-financed mean that if we foreclosed/did a short sale, Wells Fargo could come after us for deficiency?  Only for the extra 20k or for the whole thing?  Is the best option that route of stopping payments on 2nd, staying current on first and trying to negotiate the 2nd down?

Also, I am not on the loan docs, though i believe we did record my name on the deed.  Does that mean that my credit will not be affected if we foreclose/do a short sale?

Thank you.

Foreclosure

The refi probably knocked you of CCP 580b protections.  To be sure you would have to read the case law and go over you facts. 

If you are not protected by ccp 580b then you could be on the hook for the whole second if you are a sold out junior of a recourse second. 

Short Sale

It all depends on the type of release you negotiate with your lender.  I like to see released from deficiency in writing.

If you are concerned about protect assets or future salaries, I would consider attempting to work out a short payoff with the second before commencing a short sale strategy with the first.

'

Thanks for the response.  Actually, we aren't so far underwater that the first would be a short sale-the first would get all their money.  It is only the second that we would need to forgive some of the principle owed.

I think we are going to put it on the market and go for it.  After speaking with my realtor, it sounds like it could get a lot worse over the next year or two before getting better...

If there is a significant amount of money left over for the second, you should be able to use that fact to your advantage.

Money now vs less or no money later.

refu loan.bank aproved but w/implications,2nd approve but promissory note,if they dont agree to take out language and foreclose could they sue me later because itis a non judicial.should i offer to pay closing cost and pay them monthly instead so they will agree,what are the chances

I have read all of the above comments and had a quick question.

i purchased a home in california for 250,000.  the first is for 200,000 and the second for 50,000.  i later refi it for 165,000.  i used part of that money for upgrades to the home.  of the 165,000, 50,000 was used to purchase the property and another 65,000 was used for upgrades.  Would i be able to fight that $115,000 of the 165,000 was for the home and should be non-recourse? 

Also, I didn't understand the logic behind not paying on the second because they will not start the foreclosure process.  if I start to pay on the 1st but not the second, i assume the second can eventually start the foreclosure process.  if they file first, would they get paid first?  what if i never default on the 1st, would the second be paid in full and then the first get's whatever is left over?  Can the second foreclose on the property if we are current with the first?

thank you in advance for your time!

Great info.  Thanks,

I have a situation whereby I have an active HELOC on  1st mortgage that already foreclosed because the bank didn't charge it off as per an executive letter BBB response they stated.   I wasn't even on the 1st mortgage or did I live at the property either.   Long story short, the 1st mortgage foreclosed (Nothing to do with me) the HELOC was never late.  The bank informed me it would be charged off after 3 months of hell trying to find out.   They didn't charge it off and the account remained open without any written agreement.   I hence, had no choice but to request a hardship and reduce the interest rate stating "The property forclosed already"  again on deaf ears.   I didn't want to be deliqent on the HELOC and have the CHarge off occur based on the Non Judicial Foreclosure.  Both the HELOC and 1st are WAMU loans.   I informed their charge off department at the time that I was going to try and open a lawsuit against the 1st mortgage holder because -  the HELOC was originated  (Mind you, with improper Address in the TITLE section with the 1st mortgage holder also signed as a trustor) and the money was disbursed from the HELOC funding to her to prevent a foreclosure in 2006 of the property.  (Basically, an advance of child support, to keep my children near me) -  Hence in April 2008 the foreclosure transpired anyway putting me in a court battle with CHild Support services and custody battles while trying to request a hardship from WAMU since they failed to charge it off and would not listen to me whatsoever, in the notion that the charge off manager made a determination to keep it open in lieu of a lawsuit I was to file against the X wife.  No Contract was signed at foreclosure time to keep it open and I have audio tape of WAMU foreclosure department telling me the HELOC was zeroed out and Closed already.   Since that was a lie, the BBB was involved and an executive letter signed by wamu stated the charge off was to occur the date of the foreclosure.   I had no say so in the allocation procedings of the 1st mortgage because they would not speak with me since I wasn't on the 1st mortgage at all.   

Now: I have spent 2 months speaking with now Involved Chase Executives that the charge off was not performed -  their response or reply has been very tediously slow and they have trouble reaching WAMU charge off department like everyone else for weeks.   Chase basically asked me if my xwife is still living there after all of the proof i provided.  More stall tactics.   WAMU sold this property to another person on July 15, 2008 and never ever informed me of any change in the Heloc Conditions of moving it to a secured debt  etc....   With extreme luck,  I found an alternate teleophone number and located the person in WAMU that actually makes the HELOC happen and was also the same person who is responsible for not doing what he was supposed to do on Foreclosure day April 18,. 2008.  He heard my story of severe mental anguish and the fact that I reported their lack of respons and run around to the BBB  FTC and the OCC as well as Chase Executives and then indicated he would now charge off the account by Friday July 17, 2009.   He would not note the file in their system that the charge off is to be based on the Foreclosure because it has been on time since day 1.   So now I fear that collections will now come after me for this and pursue legal suit.   If I hear things correctly, 

HELOC Lender Forces Foreclosure - Some borrowers stop paying their HELOC bills while continuing to pay their primary mortgage. In this case, the HELOC lender may decide to force foreclosure. In trust deed states, such as California, HELOC lenders who force foreclosure can seek no additional recourse in addition to any money the foreclosure brings. Basically, once a HELOC lender forecloses, he can't get a deficiency judgment to recoup additional money from the borrower. Because the primary mortgage lender will receive the lion's share of the foreclosure money, HELOC lenders often choose to wait it out rather than forcing foreclosure themselves. A foreclosure forced by the HELOC lender will have the same effect on your credit as one forced by your primary lender.

How do I now protect myself since in my case the foreclosure was done prior and the HELOC was erroneously handled by the charge off folks there.   I have Audio Tapes of their acknowledgement the accoutns were closed on April 18, 2008 and the executive letter stating the charge off to be based on the foreclosure.   It was a Non-Judicial Foreclosure.   I asume I will need an attorney

Thanks,

Bruno Ricc

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I have a CALHFA loan. One loan, 30 year fixed that has not been refinanced. Is this recourse of non-recourse? I live in California, which I have read, are non-recourse loans. I have meet with a lawyer and a accountant that have said I will not be responsible for the difference if I should short sale or foreclose. But I have read clauses in my promissory note that make me uncertain. I cannot get a straight answer. I called CALHFA and asked them if it were recourse or non-recourse. They said it would be responsible for the difference. The said the loan may not use the term recourse but it may be worded differently…

Does anyone know of a lawyer that is familiar with CALHFA loans so that I can get a straight answer? Thank you.

I too, had a CaLHFA loan - 30 yr fixed, never been refinanced. CalHFA foreclosed on our home last year and we were NOT responsible for the difference that we were short on the sale of the property. I did a lot of research because I was scared pf what CalHFA would do. But, most "origianl purchase money" in CA is non-recourse. CalHFA should just do a "non-judicial" foreclosure and you will not be responsible for the money. Of course, they are going to say you are responsible (they want their money). In my experience, consisting of many phone calls to CalHFA I got different answers depending on whom I spoke with. Have you asked to speak with their legal team? I would use the term "non-judicial" foreclosure and ask them if that is the type of foreclosure they would use.

Hope that helps....

The post above manifests two reasons why some loans in CA can be deemed non recourse.

CCP 580B protected loans (original loans on your dwelling) 

CCP 726 - one action rule - non judicial foreclosure - senior lender waives right to seek deficiency

But, what I would need as a lawyer to give you an opinion is to know whether the agency claims and exemption to those laws and whether the courts concur. 

Thank you H.P. and John for your help. 

H.P. you're the first case I've heard that is similar to what we're going through. I consulted a lawyer which I'm hoping will help me dig a little deeper otherwise I will look for additional advice. I will call CALHFA back using the terminology you mentioned. Did anyone seem like they knew what they were talking about? Were there any sites that were helpful with this subject? What final bit of information seemed to ease you during such a stressful time?

It's so frustrating. CALHFA was the middle man that bought out our loan. I never thought it made a difference until now...

Thanks again. I will continue to do my research.

JD HELP

JD ~ I like the site: www.learnaboutlaw.com and this one of course!

Here's a link I liked.     http://www.learnaboutlaw.com/deficiency-judgement-anti-deficiency-laws-california-and-elsewhere

What exactly does it say in your promisory note that make you think CalHFA will go after a judicial foreclosure?

Only the legal dept. knew what they were talking about and they were not very nice. No one else at CalHFA was well verse in Real Estate Law or even what the terms of my loan consisted of. What eased my stress was many helpful lawyers that agreed to take my case if needed and my unending researched that assured me that CalHFA would not come after me after my house was sold. Once they begin a non-judicial foreclosure, they waive their right to come after you for any money based on the "one action rule"

Hope that helps :)

H.P.

Did they out right say yes to a non judicial foreclosure? Did you get it in writing? Has it been difficult moving on with bad credit?

Thanks!

JD HELP

Great post!!  I have a few questions of my own:

1) I read one person's interpretation of CCP 726 as:

"if the Senior and Junior lender are one in the same... and the Senior forecloses under the deed of trust thus "selling out" the junior, they are not able to then seek deficiency judgement on the junior because it is only due to their own action on the senior that caused the junior to lose their security."

I can't find this anywhere in the CCP or case law.  Did I misinterpreted come laguage?  The reason why I ask is because I had a 1st and Heloc money purchase loan with Counrywide.  Neither loans were refinanced.  The 1st mortgage foreclosed December, 2008.

2) Regarding the purchase money helow, the loan amount was $121k.  The seller rec'd $118k.  The additional $3k was given to me in the form or a check.  I don't recall what I did with the $3k.  Based on this sscenario, would the whole heloc be considered non-recourse or only the purchase money $118k amount?

3) How sound is this plan: 

If the bank failed to file suit within the 4 years statute of limitation to collect on the heloc, I am off the hook?  I figure that this would be the best case scenario since a) SOL runs out, 2) no settlement, thus no ordinary incomed owed b/c there was nothing settled or forgiven.  I would just have to wait 7 years for the heloc to be erased from my credit history.

Thank you for all the great commentaries....

i have a question of my own.

a friend of mine bought his home in 2006 in california.  two loans were made, with no down payment, an 80/20 loan if you will.  both loans were transferred to different banks.

2 months after the purchase date the mortgage broker (3rd party) who did the loans on his home came back to him and told him that he can refinance the 2nd to lower it from an aggressive 11% rate to a 8% rate.

happily my friend accepted, in order to save some money every month on interest payments.

now my friend is walking away from the property and he is being sued by the second note holder, WF, and asked to pay the balance of the loan in full.

my question is this:  since the second was not used to pull any equity out of the property (really it had none), and since it was done within 2 months of the original purchase, can he go to court and ask the judge to consider the refinance a purchase money loan and therefore non-recourse?

is there any literature on this?  is there any hope?

court date is coming up soon, so i definitely hope you can point me in the right direction.

thanks a million for taking the time and the effort, in advance.

quick follow up to the last question....

does the case that you mentioned earlier have to do with your friend refinancing a loan with 2 months of purchase on an 80/20, solely to bring down the interest rate?

is there any stipulation anywhere that says if u refinance within X months and u pull no cash out, your non-recourse status will remain?

any ideas where I might be able to find such literature?

thanks again for the help.

GREAT thread.

My situation - 80/20 2007 home purchases in California.  Owner occupied since purchase, both TDs with same bank (wells fargo), the 20 is a HELOC as best I can tell, neither loans have been refinanced. etc. and no monies drawn on the HELOC.  In this case - can I feel confident that the 2nd HELOC is also non-recourse as it is 100% purchase money?

Thx

Great thread, there seems to be a variety of responses on the web concerning California law and purchase money HELOC's with no case law. I'm in the same situation as above 80/20 with a purchase money HELOC, it is even checked purchase money on the loan doc for the HELOC. Is there any definative answer regarding this question? I called the state AG office and one of the staff said it should still fall under 580b, but they were interested to know of others in the same situation. I've seen several post with people in the same situation being pursued by the banks, but very little concerning the resolution to what happens when a lender or collector comes after them. Does anyone know? It seems that lenders purposely created such loans during the boom to circumvent 580b, which seems rather weak ground to stand on if brought to court. If however the second becomes unsecured after a foreclosure does this change the nature of the loan? Sorry I have several questions, but I'm not finding any definative answers.

Good question I will make a new thread for your question. 

I took a heloc out a few years back.  BofA had my husband sign the Deed of Trust.  he was never on title and did NOT sign a note.  Now we are in foreclosure...will my husband be responsible for the heloc.  It has never appeared on his credit reports and never on any BofA docs or tax statements.  Spoke with a RE attorney who stated that he WOULD be responsible...I just don't see how. 

I had a 80/10/10 where the 1st was 80% , the 2nd was 10% heloc, and 10% cash down payment.  The house was purchased for 225K.  This home went into foreclosure in Bakersfield, ca and I have a judgement eventhough the 2nd was a purchase money heloc only used to purchase the property.  Can I try to clear the judgement based on the fact that the 2nd heloc was purchase money.  ???

• I appreciate the concern which is been rose. The things need to be sorted out because it is about the individual but it can be with everyone.

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ryantyler111

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We purchased our home in 2006 in N. California.  We had a 80/20 loan with Countrywide and the 2nd was a HELOC with Indymac.  We never withdrew money from the HELOC.  It was only used in the purchase of the home.  We tried to short sale the property for 18 months without success.  We allowed the home to go into foreclosure and was finalized in March 2010.  The HELOC thru Indymac shows up as a missed payment 120+ day every month.  The first mortgage is listed as closed/settled.  Indymac is not sending us any harrassing letters requesting payment or calling us for payment but as stated above, negatively hits our credit every month.  Is this a common occurrence and do we have any legal right to have it stopped?  We are trying to improve our credit score but we cannot make any progress when the "late payments" continue.

nice information.

Husban wanted a Divorce so had to refinace our home loan in my name to give soon to be X husband $100,000 for the divorce settlement. He had expensive attorney and he earned twice what I did. Day he walked out with his $100,000 the well went dry. Got a HELOC to drill a new well and then the housing market dived. Never could afford the now inflated home payment. Moved out of home but bank (Freddie Mac) still has not foreclosed after 1 year but HELOC bank turned me into collections. What are the chances the Collection Agency who bought the defaulted HELOC loan will garnish my wages? HELP! (Live in California)

My daughter's condo is being forclosed on by B of A.  It was originally financed by Countrywide with a 1st and 2nd, all for the purchase.  She refied with Countrywide 2 years after purchase, with a new 1st and 2nd/Heloc, both with a fixed rate, all to pay off the original 1st and 2nd.  Are the new 1st and 2nd/Heloc non-recourse?  Thank you.

Thank you for the feedback.  My daughter does have some assets and doesn't qualify for a short sale.  Also she is close to the foreclosure date.  At this point I'm not sure what she can do.  She is very concerned about B of A coming after her after her condo is sold in foreclosure.

Thanks again for the constructive feedback. 

If a property is currently worth $500K and the first lien on the property is $600K and the non-purchase money HELOC is $100K.  Can a consumer just pay on the first and ignore the second idefinitely?  It seems unlikely the property will ever have value enough to cover any part of the HELOC.  What rights does the second have agains the borrower?  Can they release the lien and file suit for breach of contract?