My home went into foreclosure. Will I still be responsible for the equity loan?
My home went into foreclosure. My online banking account shows the mortgage balance of $0 yet it still shows my home equity loan balance. Will I still be responsible for the equity loan if I loose my home? I thought a home equity loan uses the home as collateral?
If you lose your home due to foreclosure on your first mortgage, you will likely still be responsible for the home equity loan that you took out against the home. The equity loan will no longer be secured by the property, but it will become a personal liability, and the creditor may be able to continue collection action, possibly even filing a lawsuit against you to recover the debt. In addition, if the auction of the home after the foreclosure does not cover the full balance of the first mortgage, then you may also be liable for a deficiency balance on the first mortgage. Again, this could lead to collection action up to and including a lawsuit being filed to collect the debt. If the auction proceeds are sufficient to cover all of your mortgages and home equity loans, then you may be able to walk away with no further obligation.
Foreclosure is a very difficult process which can, not only force you from your home, but can also leave you owing thousands of dollars in fees and deficiency balances. Unfortunately, with the recent downturn in the housing market, more and more consumers are finding themselves in the same dilemma you are facing. To learn more about foreclosure, I encourage you to visit the Bills.com foreclosure page.
I wish you the best of luck, and hope that the information I have provided helps you Find. Learn. Save.