My HELOC Follows Me

Paul,

I reciently short sold my house. I had two mortgages on the house. The first from Coundtywide and the second  (Heloc) from WAMU. Countrywide accepted the short sale and my credit report states settled/ paid. WAMU shows charge off? Why? They accepted the short sale too? (Per my realtor). What questions should I be asking? Do I have to repay the debt? Can they place a judgement againts me, garnish my wages, of file law suit againts me? We did a short sale to avoid forclosure and ruining my credit. I couldn’t afford to pay the mortgage and cannot afford to pay the remaining debt. Please Help

Lisa

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Hi Lisa,

I hate to hear that this question is being posed after the short sale closed.  It sounds like they agreed to the short sale, but they may not have agreed to a full release of liability.  Take a look at the short payoff letter that you signed with WAMU and you’ll have your answer. 

Lenders either offer a (1) full release, (2) partial release, or (3) charge-off the balance which can be subject to future collection.  At times, the short payoff letter is silent and while the shorting lender expects that to result in option #3 (continued collection); nevertheless, this can be defeated by inserting ‘full release of liability’ language in the purchase and sale agreement.

None of this is much consolation at this time I’m sure but what can I type?  It sounds like your real estate agent didn’t know enough to explain the nuances in a short sale transaction and what you’ve cited is one of the most glaring issues.  To be fair, many HELOC lenders elect to charge off the balance and continue collection; however, this should be a conscious decision that the seller makes prior to closing by reading the short payoff letter prior to signing.

And dear Lisa, if you find that the balance is subject to future collection then all is not lost.  All of the tools to battle debt collectors are available on this site and I’d say I wish we would’ve met under different circumstances, but otherwise I don’t think we would’ve met, so I’ll say welcome to the Broken Credit Blog.  It’s you and me (and a few thousand others) against the debt collectors.

Paul

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