HELOC & Second Mortgage Debt Attorney in Phoenix, Arizona
A HELOC, or Home Equity Line of Credit, is essentially a second or sometimes third mortgage on a property. During the boom times in Arizona, when people actually had equity in their property, many took out HELOC’s or second mortgages to tap into that equity and use the money for other purposes, paying off credit cards, etc.
The Difference Between Second Mortgages & HELOC’s
Typically, there is a first position mortgage in place that was used to purchase the property. The HELOC or second mortgage may have come later. Second mortgages are, by definition, inferior to the first mortgage. This means that if the first mortgage forecloses, and there is insufficient equity in the property, then the second mortgage lender will get nothing from the foreclosure and become essentially unsecured.
Similarly, HELOC’s are usually inferior to a first mortgage. Though, in some rare cases there may only be a HELOC and no first mortgage, i.e. if the first had already been paid off. Additionally, HELOC’s often came with a debit/credit card to access the funds and the borrower could charge up to the limit of the secured HELOC, or even pay it down like a credit card.
For more on how mortgages work in Arizona, see our page on Arizona mortgage law.
HELOC & Second Mortgage Debt Liability in Arizona
Some HELOC’s and second mortgages will meet most of the tests necessary for anti-deficiency, or non-recourse protection in Arizona:
- The property must be 2.5 acres or less
- Single or Dual Family Residence
- Utilized as a Dwelling
But the last piece of the test, that the loan be for “purchase money” is where borrowers can run into trouble. If you took out a HELOC or second mortgage that wasn’t purchase money or refinanced purchase money, and you spent the loan proceeds on things other than the property in question, like paying off credit cards, buying a boat, going on vacation, etc., you may have some liability.
Have you Been Sued for HELOC or Second Mortgage Debt in Arizona?
If you’ve been sued or had collection action taken against you for HELOC or second mortgage debt in Arizona, we can help. Our firm is focused on helping negotiate for large reductions in HELOC & second mortgage debt, without bankruptcy. We help clients settle their debt for a fractional amount. And we can defend you in court if you’ve been sued.
Call our office today for a free consultation with an Arizona HELOC & Second Mortgage Attorney.