800K mortgage vs $200k HELOC title research question.


#1

Question for the experts - Looking at a home that has a revolving line of credit of 200K dated 2/02 and a mortgage of 800K dated 2/07. The 800K mortgage will be sold at auction. Now how do I know how much was taken out of the line of credit (I assume it’s the 1st lein due to date)? Would the line of credit freeze the account after they found out about the NTS or would they leave it alone since the owner is making the monthly payments?


#2

Pretty unusual for a lender to loan $800k in a position junior to a $200k HELOC. I’d look again for a reconveyance. If I new an escrow or title officer at the title co that handled the $800k loan I might also see if they couldn’t lookup whether or not the HELOC was paid off when the $800k loan was made. From there I’d probably knock on the door and see if I couldn’t convince the owner themselves to tell me.


#3

That’s what we were thinking. We pulled a preliminary title report and it showed the HELOC. Not sure if it’s worthwhile to pull a full title report to get additional info. I’ll probably make a trip to the county’s record office to see what I can find out today. We’re willing to do the 800K at auction, but the 200K lien is a deal-killer. Fri Mar 26th 2010 at 9:23am


#4

It is critical to watch for unreconveyed HELOCS. Although the HELOC was undoubtedly paid off in escrow when the new loan was recorded and the title company requested that the account be closed with a recon to follow we have seen several cases over the last few months where the account was not closed or reconveyed and the homeowner continued to use the account. This is not an issue for the foreclosing lender because they have a title policy that insures their lien position and would simply file a claim with the title company if the property becomes bank owned. This lenders policy does not cover an investor. We recently heard from an investor that purchased a property at trustee sale that was a purchase money first trust deed only to find out that the HELOC from the previous owner was not reconveyed and the previous owner continued to use the account. The account is now in collections and the collection company sees a potential payday so they are not being very helpful. We suggested contacting the title company that handled the sale but unfortunately they are no longer in business. We cannot stress enough the importance of checking for recon’s on HELOC’s. Fri Mar 26th 2010 at 10:06am