Can the home equity lender foreclosure on my home if there is no equity?
The answer is “yes”
Here is a question I am asked at least 2 to 3 times a week. “I have both a mortgage and a line of credit on my home. If I default on the line of credit, can they foreclose on my home? I am trying to refinance the first mortgage but no one will do it because the value of my house is about equal to the value of my mortgage and credit line debt. “
Answer: a loan secured against your home can always foreclose if they are not paid or some other default under the contract (deed of trust). Many people seem to think that a home equity line of credit “HELOC” or line of credit, or second mortgage, cannot foreclose if they are not paid. I am not sure where they get this idea, but it is pervasive, even among some realtors. So, let’s set the record straight. If you sign a Deed of Trust, Agreement for Sale or Mortgage the lender has a lien on your home. If you do not pay the lien then the lender has a right to foreclose on the property. The lender may also have a right to sue you for any losses. I say “may” because the law of the state where the property is located will control.
A lender will not refinance unless the house is worth significantly more than you owe. Since you owe on both the first and second loans, then the house must be worth at least 20% more. That percentage could change depending on the type of loan.
We have several videos on our web site. Below are a few that might be of interest:
“Lender’s Foreclosure Rights in Arizona”
“Should I keep my home or let it go into foreclosure?”
“Meet Ms. Drain and Suggestions on How to Hire an Attorney”
MUSINGS BY DIANE: “So, please talk to a good real estate attorney who is familiar with the foreclosure process in the state where the real property is located. Do not just assume that you know the law. Do not take advice from your realtor or best friend. This is a situation that could haunt you for many, many years.”
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*
WHAT HAPPENS AT THE END OF A COVID-19 FORECLOSURE FORBEARANCE? Can servicers demand a large balance? Generally, the servicers should not be demanding full payment following a COVID forbearance. There [...]
CFPB Releases Online Tool Helps Renters and Landlords Access Federal Assistance New resource helps renters and landlords find state and local programs distributing federal rental assistance funds WASHINGTON, D.C. — July 28, 2021: The [...]
Arizona Residential Eviction Actions Procedures – effective July 15, 2021 IT IS ORDERED that the following procedures are applicable to eviction actions governed by Arizona Revised Statutes, Title 33, filed [...]
Forbearance of Home Mortgages During COVID-19 Know your options before making a decision not to pay your mortgage 11/18/21 UPDATE – see summary of foreclosure alternatives This chart provides a summary of relief [...]
We are a debt relief agency; we help individuals and small businesses through the bankruptcy process. Attorney Advertising. This website is designed for general information only. Any information you obtain from this website should not be construed as legal advice, nor as grounds for forming an attorney-client relationship. You should consult an attorney for information on obtaining formal legal advice.