HELOC Settlement Question

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Rc3

LoanSafe Member
Nov 19, 2015
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Evening all, it has been a while since I have been here and that's a good thing. Going on 8 yrs since our BK and a modification with no issues since. Anyway my question, after our BK my HELOC with USAA was discharged. I made small payments for the year after BK to keep the balance from getting higher. I called them at year 1 end and was told I can keep paying whatever but as the debt was written off there was no long charges accruing and I stopped. I have never heard anything from them since outside when I tried to refi about 4 years ago and they refused to allow it. Nothing was ever reaffirmed.

So I am trying to look at this again as I would really like to refi this mod at 6%+ but I would need to deal with the HELOC. Home is valued about 230k and between 1st and 2nd we likely have about 30-40k equity. My HELOC was 30k, any chance I could get them to settle after this long given the equity? No way I could do 15k+ but I could maybe make 5-10k.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
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www.loansreduced.com
Hi Rc3,
I apologize about the late response but this is something that has been coming up quite often within the forum. I can tell you my experience and what I've been able to accomplish for our members so far.

First and foremost you still won't be able to refinance unless that lien is taken care of one way or another. You will also have to meet the charge off requirements (4 years) for a conventional loan, different requirements for FHA. When you meet the charge off requirements you have 2 options. First option would be to pay off the 1st mortgage and the 2nd lien in full (whatever the payoff demand states). The other option would be to work with the 2nd lien holder for a settlement option. IF you get the 2nd lien holder to agree for a lower settlement - we can accept that as a payoff (I can't speak for other lenders on this).

The most recent scenario I funded for one of our members was where a client had an agreed upon settlement amount which was roughly 40% of the balance. It had to be paid off in a certain period of time and we were able to refinance and pay them off.

I've also done a few scenarios where the 2nd lien holder is not willing to budge and requires to be paid off in full, that isn't a problem either.

Thankfully we don't look at the payment history in this scenario because like you mentioned, the loan is charged off. The reason we have to take care of the 2nd lien is because when paying off the 1st, the 2nd will automatically take 1st position and the last thing a charge off lien will do is subordinate (allow the new lender to be first, and them stay second). They want their money and this is the way they get it.

Feel free to reach out to me if you have any additional questions, I am licensed in almost every state in the country. [email protected]
 

Rc3

LoanSafe Member
Nov 19, 2015
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8
47
Thanks, yeah 40% would be pushing all our savings right now. Might just let it sit longer till we can afford like 50% which would leave us some cushion. Its been 8.5 years since so no issue there. We dont plan to move but would like to refinance. Maybe we wait longer or look into a settlement that is paid by refinancing.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,113
182
63
San Diego, California
www.loansreduced.com
That's what I would do, if you qualify for a refi (we can always check that at anytime) - you can go in with the stance of you have the money just need a period of time to satisfy them. I wouldn't necessarily let them know where the money is coming from.
 

Rc3

LoanSafe Member
Nov 19, 2015
36
3
8
47
Just wanted to respond on this old post. I had asked questions several times on a charged off HELOC. Bottom line I really wanted to refinance and in the process clear up the HELOC lien that was on my property which I knew had to be done to refi anyway. I had forgotten about this post so I went to Quicken for a refi. I explained my situation and the entire time it was not an issue, after constant extensions to closing (about 2 1/2 months) I finally got someone high up to take a look at the issue and I was basically told Quicken didn't know how to work this type of situation.

After 2 1/2 months I was done and remembered this thread. I reached out to Erik, he said this is common for him and could get it done for me. Not only did he get it done, it was done in about a month as stated and best of all he crushed anything Quicken could do. I ended up with a better rate and saved about $5k in costs. Bigger is not better, get someone who will get the job done. Thanks Erik.
 
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Jzone

LoanSafe Member
Jun 20, 2017
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Just wanted to respond on this old post. I had asked questions several times on a charged off HELOC. Bottom line I really wanted to refinance and in the process clear up the HELOC lien that was on my property which I knew had to be done to refi anyway. I had forgotten about this post so I went to Quicken for a refi. I explained my situation and the entire time it was not an issue, after constant extensions to closing (about 2 1/2 months) I finally got someone high up to take a look at the issue and I was basically told Quicken didn't know how to work this type of situation.

After 2 1/2 months I was done and remembered this thread. I reached out to Erik, he said this is common for him and could get it done for me. Not only did he get it done, it was done in about a month as stated and best of all he crushed anything Quicken could do. I ended up with a better rate and saved about $5k in costs. Bigger is not better, get someone who will get the job done. Thanks Erik.
Were you able to get any kind of settlement from the HELOC when you refinanced?

I'm in a similar situation after chapter 7. Im current on the 1st, but havent paid the 2nd. Debt was discharged but 2nd still has the lien. Im in no hurry to sell or refi, but the lien holder seems in no hurry to settle either.