Foreclosure with HEL? (loan, recourse, credit report, second mortgage)

[Mel1214]

Need some help with a foreclosure question please. My home was foreclosed in 2010 and has since been sold at auction and sold again. When my, now ex, husband and I were living there we had a mortgage and home equity loan. He is now telling me that I owe him half of the HEL as he has been paying on it, but I'm not sure that's accurage. When a home sells after foreclosure, what happens with the HEL? I thought I read somewhere that because the HEL is paid off before the mortgage and, therefore, the HEL no longer exists. I'm in Ohio if that helps. Thanks in advance.

[thomasdavie]

Hi.

Let me piece together what I believe you are telling us.

You and your husband had a home together. Unfortunately, the home was foreclosed upon. The first lender then sold the home.
and put the proceeds to the first mortgage. Whether or not it satisfied the first mortgage or not is not known.

There was a home equity line of credit on the home too. So there was 2 lenders. The second lender never received any proceeds from the sale, probably because the first lien wasnt even paid off with the sale.

The home equity bank now wants to come after your husband for the second mortgage , Your husband now says you owe half that.

I would advise you check with an attorney. Each state is specific on what they consider 'deficiency balances' on foreclosed properties. If its a state that allows a lender to sue for a deficiency balance, which this may be the case, then again I would ask the attorney what your options are.

A tip would be to you and your husband is that the foreclosure has caused you both to take a hit to your credit that is substantial and will take a while to fix.

So there would be no harm in approaching the second mortgage company and ask for a settlement on the amount owed. Again, make sure you check with legal council before you do anything further.

If you are in dire financial hardship, then ask the attorney about chapter 13 and specifically chapter 7 bankruptcy.

[Mel1214]

I truly don't know if the second lender received any proceeds from the sale. I was not on the mortgage or the title, nor was I on the HEL. My husband and I are now divorced, so getting any clear and truthful answers isn't likely. This all happened nearly 3 years ago and he says he's been making the HEL payments since then. I just don't know that this is true. I recall reading somewhere something about the fact that we no longer have the collateral that was used for the loan and that the HEL would be paid before the mortgage in the case of foreclosure. My ex husband won't talk to an attorney about a settlement, nor will he ever file bankruptcy. He'd live on the street before doing that for some reason.

[2bindenver]

If you were not on title, or the note then why would you be responsible for the deficiency?

[Modification Specialist]

Originally Posted by Mel1214

Need some help with a foreclosure question please. My home was foreclosed in 2010 and has since been sold at auction and sold again. When my, now ex, husband and I were living there we had a mortgage and home equity loan. He is now telling me that I owe him half of the HEL as he has been paying on it, but I'm not sure that's accurate. When a home sells after foreclosure, what happens with the HEL? I thought I read somewhere that because the HEL is paid off before the mortgage and, therefore, the HEL no longer exists. I'm in Ohio if that helps. Thanks in advance.

My $00.02

Your (ex)husband is now asking for help paying the second mortgage? Three years after the foreclosure?
Since you were not on the loan, why are you being nice to him? Other than your divorce degree specifically stating you are responsible the mortgage payments, my opinion is it's up to you if you want to help him.

Your state is a recourse state - meaning the 1st mortgage can do one of two things to collect on the amount owed to what the property was sold for after a foreclosure. They can take him to court and be awarded a deficiency judgement. This is very expensive to presue, it is an option if the lender thinks they can collect. The other option is for them to send your ex-husband a 1099c, which is them cancelling the debt through the IRS. Then your ex has to file that with his tax return.

Mentioning lien holders position in you case, the 1st mortgage is ahead of the second mortgage. You say the property was sold. This tells me the first mortgage actual paid the second mortgage so there was a free and clear title they could sell the property.

If your ex husband doesn't pay them, the 2nd mortgage company can take him to court for a civil judgment (again this is an expensive option for a lender to go to court).

Regarding Bankruptcy - if he has an income, chances are he'll get a chapter 13 to make payments to a trustee. If he has no income, possible be awarded a chapter 7 and total wash the debt away. Filing bankruptcy will not be a good move because it would set him back even further. (A chapter 7 is listed for up to ten years, where a chapter 13 seven years on his credit report.)

He could ask for a settlement himself, mentioning he doesn't have any money and has an appointment to talk to an attorney about a chapter 7 (not doing). If they think he's possibly going to do a chapter 7, this could scare them into a lower settlement.

Good Luck...


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