Houston TX – After yesterday’s blog post, I am sure that some people were wondering why a HELOC gets zero from a foreclosure. Let me explain why.
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When a property is foreclosed upon, it is auctioned on the courthouse steps. Let me give you a scenario where a homeowner owes the following on the property.
First Mortgage is owed $200,000.
Second Mortgage is owed $40,000.
There is a HELOC (Home Equity Line of Credit) that is owed $100,000. (The home increased in value to $400,000 and a lender agreed to grant the loan.)
So a total of $340,000 is owed on the property. Now, what if it only sells for $150,000 on the courthouse steps. Who gets that $150,000?
The first mortgage does. The second mortgage wouldn’t get a dime unless the property sold on the courthouse steps for more than $200,000. The HELOC wouldn’t get any money unless it sold for more than $240,000.
This is why a second mortgage gets so little money from a foreclosure. Historically, second mortgages were loaned for the top 20% of the property value. The lower 80% was the first mortgage.
In most cases, the attorney fees, foreclosure costs, delinquent property taxes, and other fees would bring the first mortgage’s total up to around 100% of the property value.
This is why in most cases a second mortgage rarely gets any money from a foreclosure. Of course there are other variables that can change things, but this is how it usually works.
Thinking about a loan modification?Our Houston loan modification kit will show you how to reduce your mortgage payment, keep your home, and get back on your feet. Send me an e-mail at soldbymichelle@gmail.com to request a Free Copy. Or, click here to request a copy.
Thinking about a short sale? I can help you short sale your property so you can move on with your life. Send me an e-mail at soldbymichelle@gmail.com. I will contact you for a free consultation.
When we talk, I will explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can call me at 832-274-5007
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Thanks for reading this, Michelle Gonzales.
Michelle is a Real Estate Agent at RE/MAX 360.
Phone: 832-274-5007. soldbymichelle@gmail.com.
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Michelle Gonzales specializes in loan modification assistance and short sales in Houston Texas. Houston Loan Modification Help, Houston Short Sales. Houston Short Sale Realtor Houston TX Short Sales. Houston Realtor.
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