Can I do Short Sale with a Home Equity Line of Credit (HELOC) as a 2nd Mortgage?
Yes, you can still do a short sale if you have a 2ndHELOC, however it can be more difficult depending on your lender. It is important to understand that HELOCS are a completely different type of loan, and the lender can allow you to do the short sale and release the lien on the property, but still leave the entire account open and thus you still owing the entire balance due. HELOC’s are like credit cards with a lien on a property. If the lien is released from the property, it doesn’t always mean the line of credit is closed. MANY inexperienced short agents do not understand this. A new trend that is happening as well is that the bank can sell the bad HELOC loan on the secondary “debt collection” market for a higher price (10%-20% of note value) than what the lender in first position is willing to pay (1%-3% of loan value). Because of this many HELOC lenders have become extremely more aggressive in requiring a 10%-30% payout from borrowers to allow a borrower full release from these loa
