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HELOC after bankruptcy/discharge, new house..

Valued Member

HELOC after bankruptcy/discharge, new house..

Hello everyone!  I have been searching the web and this forum for a while to find an answer to my unique situation.  I am going to begin calling some banks this week, but would love any similar experiences and the outcome..

 

In 2009 I was discharged with BK7 including my home.  Did not reaffirm, moved out, moved on.  I now own a home outright with no mortgage and would like to get a HELOC to do some home improvements.  Here's my issue..

My loan was original with GMAC.  They eventually started foreclosure process, but each month the sherrif sale was postponed.  This year, the loan was sold to Greentree Servicing who will again restart the foreclosure process.  At this point, the deed is still in my name, but on my credit report the mortgages simply show IIB.

 

Will I be able to get a HELOC on my current, owned-in-full home?  Or will the lack of foreclosure on the old property cause issues?

Everything else is fine for approval, as far as FICO and income..just wondering If I'll be wasting my time applying due to the situation.

 

Thanks in advance!

Bouncing back from BK '09
10/2012: 641(EQ) 636(TU) 624(EX)
4/2015: Equifax 694, TU 687, Exp 706
Goal: 700+ all 3 by June 2015
Message 1 of 6
5 REPLIES
Moderator

Re: HELOC after bankruptcy/discharge, new house..


dazacman30 wrote:

Hello everyone!  I have been searching the web and this forum for a while to find an answer to my unique situation.  I am going to begin calling some banks this week, but would love any similar experiences and the outcome..

 

In 2009 I was discharged with BK7 including my home.  Did not reaffirm, moved out, moved on.  I now own a home outright with no mortgage and would like to get a HELOC to do some home improvements.  Here's my issue..

My loan was original with GMAC.  They eventually started foreclosure process, but each month the sherrif sale was postponed.  This year, the loan was sold to Greentree Servicing who will again restart the foreclosure process.  At this point, the deed is still in my name, but on my credit report the mortgages simply show IIB.

 

Will I be able to get a HELOC on my current, owned-in-full home?  Or will the lack of foreclosure on the old property cause issues?

Everything else is fine for approval, as far as FICO and income..just wondering If I'll be wasting my time applying due to the situation.

 

Thanks in advance!


No, you won't be able to qualify for a new mortgage because you still own a home that is in foreclosure. The lack of a completed foreclosure will cause you issues until it is done. Once it is complete, as in the deed going back to the bank or transferred to another party through a short sale or Deed in Lieu, then you can start the clock beginning from that transfer date to the date you can obtain a new mortgage. It doesn't matter that the loan was iib. It still must be foreclosed to remove the lien from the property. Why don't you do a short sale on it? At least then the deed will be removed from your name - either through the short sale process or the lender will offer a DIL to you.

 

Please note:  a HELOC is a mortgage, but with a little tougher underwriting criteria because you can take out the funds, pay them back and take them out again so it is more risky for the lender. No institutional lender is going to touch you until your past issue is cleaned up.

 

Edit:  There are a lot of people in your situation. They thought they took care of the issue by filing BK, but that was only half the problem. Getting a discharge from your BK is helpful in that it removes your personal liability for repayment, but it doesn't remove the mortgage lien from the property. In order to do that the lender must 1) foreclose or 2) you sell the property in a short sale or 3) you provide a Deed in Lieu that is accepted by the lender (the acceptance part is the key).

Message 2 of 6
Valued Member

Re: HELOC after bankruptcy/discharge, new house..

Thank you! I appreciate the reply and helpful info. I never imagined the foreclosure to take this long and now entering year 5 with a new servicer starting the process all over.

They will not do a DIL because there was a 2nd mortgage on it. I will look to do a shortsale to make this happen sooner than later.

Would a credit union generally take any special consideration given the facts? Oh well.. guess I can start the clock over and maybe get a new car for now instead.
Bouncing back from BK '09
10/2012: 641(EQ) 636(TU) 624(EX)
4/2015: Equifax 694, TU 687, Exp 706
Goal: 700+ all 3 by June 2015
Message 3 of 6
Moderator

Re: HELOC after bankruptcy/discharge, new house..

Do the short sale. It is the only way to get the lender/servicer on the stick to f/c or accept a short sale.

 

Just so you know, there is a huge backlog of lenders doing the exact same thing: they sell off the defaulted mortgage from servicer to servicer rather than completing the f/c. Kind of like musical chairs, but with mortgages. The best way to get it stopped is with a short sale - that way the lender has to pay attention to your deal rather than sell it off. (Sometimes they will sell it to another servicer during short sale negotiations, but not as often).

 

Yes, the second puts a quash on doing the DIL so if they offer you one, just respond that you have a second. It means your options are down to two: short sale or f/c. I have seen them offer a DIL when there is a second in place and they knowlingly can't comply with their own offer! Smiley Frustrated

 

No, a credit union won't ignore the outstanding f/c.

Message 4 of 6
Valued Member

Re: HELOC after bankruptcy/discharge, new house..

Thanks again- very helpful info!  I have contacted a realtor to get this process started and finally be free of this mess! Smiley Frustrated

 

My home improvements will have to wait, but it is what it is.  Thanks again for all of the info!

Bouncing back from BK '09
10/2012: 641(EQ) 636(TU) 624(EX)
4/2015: Equifax 694, TU 687, Exp 706
Goal: 700+ all 3 by June 2015
Message 5 of 6
Valued Member

Re: HELOC after bankruptcy/discharge, new house..

Thought I'd post a quick update.. after going through the process of listing the house for short sale, filled out all papers, etc.. 2 days later the realtor was advised that the bank purchased the home back via sherrif's sale.   Finally!!  Now we can move on and be done with it!!   Smiley Very Happy   Smiley Very Happy   Smiley Very Happy

Bouncing back from BK '09
10/2012: 641(EQ) 636(TU) 624(EX)
4/2015: Equifax 694, TU 687, Exp 706
Goal: 700+ all 3 by June 2015
Message 6 of 6