Collection AFTER Foreclosure

Hello Paul,

Several months ago, my Arizona home, which is also my primary residence, was foreclosed upon.  As it happens, the property was sold back to the lender via a Sheriff Sale.  From what I can see Chase Bank basically used the foreclosure as a means to take the property from their left hand and put it in their right hand.   

I had two loans on my house, a first mortgage with Chase and a second mortgage (HELOC) also with Chase.  I did not ask for the second mortgage, but when I refinanced my first mortgage several years ago, Chase insisted on including a HELOC. 

As has been true with many other homeowners, bad things happened to me, both on a personal and professional level.  So I ended up owing about $450K on my first mortgage and about $150K on my HELOC.   When my home value crashed, I had no means to extricate myself from the situation, even via a short sale and so ended up losing the house in foreclosure. 

All of this was bad enough.  But yesterday it just got worse.  I received notice from Chase that they are now attempting to collect on the second/HELOC. 

I’ve been on several websites trying to figure out exactly what my exposure is in this situation.  There are lots of opinions that run the gamut from “no risk whatsoever”, to “you’re screwed”.   It would be nice to have some clarity about what Chase can do — as well as what Chase is likely to try to do in this situation. 

Any insight you may offer would be sincerely appreciated!

yours truly,

Bill

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Hello Bill,

You’ll have to talk to an attorney licensed to practice law in Arizona for any legal advice. 

My opinion is that a HELOC of which funds were not used to purchase the property and instead was drawn upon after homeownership would essentially have the same status as a credit card debt after foreclosure.  The lien is extinguished at the foreclosure sale but the money is still owed and the lender can attempt to collect – even through the court to obtain a judgment.

Read: Arizona Deficiency Judgment 

Chase is subject to Section 6 of the RESPA’s Qualified Written Request for another year and if the loan is passed on to another entity for collection then that entity will be required to follow the FDCPA.  Who knows, if a collection call log and all correspondence is accurately kept then it might be that you are owed money at the end of all of this.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.