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A Home Equity Line of Credit ( HELOC) is equivalent to a 2nd mortgage. As the name implies there can only be 1 2nd mortgage. A lender can decide to create a 3rd mortgage although these are rare. Typically the later HELOC provider pays off the first HELOC lender and only one HELOC remain on the property.
A lender is not prohibited from adding a 2nd HELOC, but the lender must agree to be 3rd in line behind the mortgage, and the 1st HELOC.
As far as the illegality, I think State Farm was indicating your action in obtaining another HELOC may be considered Mortgage Fraud. In other words BOA may have an action against you. Given the time differential and unless you purposely withheld disclosing the 1st HELOC to BOA this is an unlikely scenario.
If BOA was fully aware of the first HELOC, and BOA decided to proceed with the HELOC there is nothing illegal as long as the home supported the amount of the line of credit..
BotXXXXX XXXXXne you cannot force BOA to forgive the loan.
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