HELOC Question & Ch. 7

[Freddy03]

I keep going back and forth about my HELOC.

Mortgage and HELOC is with Wells Fargo.

Currently I am 30 days late on mortgage but current with HELOC.

Mortgage is $226K - zillow has house worth $108K (ouch)
HELOC is $12K - current payment is about $220.

This month I was a few days late paying the HELOC and they called me 3-4 times a day. So when I was setting up my payment I asked the rep - what if I can't make this payment anymore? What would happen. The rep told me that they would start the FC process after 90 days late. I said really for $12K on a house that's more than $100K underwater? Of course then the story changed. He said that it would just be written off and sent to a collection agency.

So my question is what happens if I stop paying this HELOC (after discharge and not reaffirmed)? If it gets written off - do I need to do anything?

I would hate to keep paying $220 for the next 6-7 years if I don't have to.

[newbie2]

If you stop paying they will most likely just sell it off to a collection agency. You can have it discharged in bankruptcy (your responsibility to pay) but the lien will still be there. If I were in your shoes with a house that much underwater I would get rid of the house. If you still want to keep the house even knowing how far underwater you are, you can try to negotiate a settlement with whomever ends up owning the 2nd mortgage lien/debt to release the lien. Search the forums for this type of thing, there are many instances of it.

[Freddy03]

Thanks - I don't plan on keeping this house. I want to "stay and pay" for about 5 years or so.

[newbie2]

Then I wouldn't even worry about it. Pay the first, discharge them both, and it is doubtful the 2nd will do anything with that non-equity position.

[Pandora]

pay the 1st (since you're riding through for now...) and save the $ from the 2nd That way you'll have $ to settle should you decide to down the line.

[bcohen]

If your house is really underwater by as much as you say it is, I'd quit paying on all mortgates, save my money, and when the foreclosure happens move out and rent. Paying a HELOC while the first mortgage goes unpaid is worse than flushing money down the toilet. In today's market, a HELOC is not going to foreclose unless there is no first mortage, or the home clearly has significant equity--even by the most pessimistic valuation.

I understand that you don't want to keep the house in the long term, but is your first mortgage payment--on a $226k loan--really less than what you'd pay to rent a comparable home in a decent neighborhood? Could you possibly "downsize" to an apartment to save even more money? With all due respect, if you are worried about being able to afford your $220 HELOC payment, you simply can't afford to live in this house, even to essentially "rent" it from the mortgage company for 4-5 years.

[Freddy03]

If your house is really underwater by as much as you say it is, I'd quit paying on all mortgates, save my money, and when the foreclosure happens move out and rent. Paying a HELOC while the first mortgage goes unpaid is worse than flushing money down the toilet. In today's market, a HELOC is not going to foreclose unless there is no first mortage, or the home clearly has significant equity--even by the most pessimistic valuation.

I understand that you don't want to keep the house in the long term, but is your first mortgage payment--on a $226k loan--really less than what you'd pay to rent a comparable home in a decent neighborhood? Could you possibly "downsize" to an apartment to save even more money? With all due respect, if you are worried about being able to afford your $220 HELOC payment, you simply can't afford to live in this house, even to essentially "rent" it from the mortgage company for 4-5 years.

Thanks for your response - It's not that I can't afford the HELOC payment - I was asking if it was smart to pay it while being so underwater.

I have checked out rents in my area and it's close to my mortgage payment now. So I have decided not to uproot the children and just pay and stay until they are both in or our of HS.