Information on consequences of home equity loan default

UpdatedNov 6, 2007

What is the process and consequences of default on a home equity loan?

With either a home equity loan or credit line, when the debt is in default, the lender can foreclose on your house and property. The foreclosure process varies from state to state, but generally takes from two to 18 months. It all depends on the terms of your loan. However, normally if mortgage payments are not received within 150 days, the bank can proceed with the foreclosure process. The home equity products would be repaid after the first mortgage is paid in full. Please consult your lender for details. I will provide you more information in just a moment.

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in case you are having problems with keeping up with your payment you should try and contact your lender to work out a payment arrangement. it is always better that you are active rather than reactive in matters such as this.

foreclosure can be one of the most horrible financial experiences. you end up defaulting on too many mortgage payments and your home is taken away from you. not only do you lose your home in foreclosure, but it can have a long-lasting impact on your credit rating.

foreclosure is a serious situation that has serious repercussions. if you can, you want to avoid a foreclosure as much as possible. bills.com is here to help. if you are in over head in debt, which is causing you to miss mortgage payments, we can help you get a debt consolidation loan (debt consolidation options) to handle your debt and avoid a foreclosure. we also offer helpful guides, foreclosure faqs, glossary terms and other helpful tools to help you keep your home and avoid a bank repossession. you are in good hands with bills.com.

you can find more in depth information about foreclosures on our bills.com foreclosure page.

i hope this information helps you find. learn & save.

best,

bill

bills.com

10 Comments

RRoseskirtster, Jul, 2023

My husband and I took out a HELOC 3 years ago. Immediately after doing so, my husband remodeled our home turning it into a multi-family residence none of this work was done by a licensed contractor nor were permits taken out. We later learn that we went against zoning. Someone reported us and I don't know what's going to become of it. Can our house be taken away from us?

jjeff, Jun, 2012

i was a builder in georgia and was devastated in the housing crash, my home had a first and second mortgage and a heloc in the amount of 124k. the home was foreclosed in 2009 and i am now being sued for the 124k. all 3 loans were with the same institution. i needed to use the heloc to keep the business afloat till it ran out. I have since relocated to florida and have a home here with about 100k in equity in it. we have lived here for three years and the home in georgia was forclosed in 2009. if i file bankruptcy will they take my house away in florida?

BBill, Jun, 2012

It is not possible to answer your question in detail without knowing more about your financial circumstances. Consult with a bankruptcy lawyer in Florida who will discuss Florida Collection Laws. He or she will also outline the bankruptcy exemptions available for Florida homeowners.

AAngelia, Oct, 2011

My husband was out of work for two years, during which time we accumulated some credit card debt and attempted 4 different times to get a loan modification with no success. We also have a home equity that just matured and the new loan the bank is willing to give us will double our payment (which we cannot afford of course). Our home is @ 100K underwater as is. Understanding that the second mortgage company will likely not pay off our first mortgage in order to foreclose...they will more likely seek legal action...is there anyway to get the second loan included in a chapter 7 or will it always be considered a "mortgage" loan and only be dismissed under 13?

BBill, Oct, 2011

I know of no restriction on the number of home loans that can be included in a chapter 7. Consult with a bankruptcy lawyer to receive advice tailored to your situation.

DDon, Aug, 2011

We refinanced our home in 2006 80/20 HELOC. Of course it was a stated (no doc) loan, so they didn't bother verifying income. We tried to do a loan modification in 2008 but unless we were behind they wouldn't talk to us. So we fell behind on the first but maintained the HELOC. The first was solely in my wife's name and the 2nd was in both. Well, three months after we were served foreclosure papers. So we panicked and since my credit was still good we bought another home and moved there. We tried two short sales and the HELOC denied both. Also I tried to get them to move the loan to a promissory note but they denied that as well. The home finally foreclosed early 2011. In June the 2nd started calling me asking for payment. I haven't made a payment for over two years. Unfortunately, now I can't afford to make that payment in my current financial state. My question is what would be the best and easiest way to try and settle this? If I could come up with a lump sum what % do most settle for? Thanks.

BBill, Aug, 2011

It is not clear to my how you can come up with a lump sum payment, if you are unable to make a monthly payment, given your current finances.

There is no set percentage that lenders accept, in these situations, as it is based on their attitude and what you reasonably can afford. I recommend that you start low, if you are offering a lump sum, say 10%, especially if you can demonstrate a financial hardship with a full financial disclosure. You can always up your offer, if the negotiations require it. Never make an offer that you can't see through.