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Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 114769
Experience:  Licensed attorney practicing landlord-tenant, land use and other real estate law and litigation.
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I opened a HELOC in 2005 & the original lender, Secured

Customer Question

I opened a HELOC in 2005 & the original lender, Secured Funding, sold the loan to HSBC less than a year later. In 2008, I filed Chapter 7 bankruptcy & reaffirmed my loan with the pri***** *****en holder because I wanted to keep my home. I did not reaffirm the HELOC, however, HSBC still maintains a 2nd lien hold on the title of my home. In 2012 I received a reassignment notice from the county recorders office, filed by HSBC. This is 6 years after the reassignment of my loan took place. I'm assuming HSBC failed to file it back then, in 2006, after the transfer of interest in my property was completed & maybe someone in their organization happened to notice it was missing 6 years later...? My question is whether or not there is a time limit for a mortgage company to complete, notorize, & then file the required county recording of a security interest in a real property? I think it is weird that they waited so long to do the legal paperwork & I've been wondering ever since if I have any legal recourse. My house has been underwater ever since my bankruptcy back in 2008, & my lawyer back then should have followed my Chap 7 w/a Chap 13 to strip off the unsecured 2nd, but he failed me there & i didn't know any better back then. It's now 2016 & my house is still underwater. I'm struggling w/a 2nd horrifically unpleasant experience of financial hardship following a company-wide layoff & my home is, once again, facing foreclosure from the 1st. In order to have the best chance to save my home, one more time, i need to get this unsecured 2nd off my title, but I would rather not have to file a Chap 13 in order to do it. Do i have any legal recourse against HSBC for the 6 year delay in recording the reassignment of the 2nd lien interest on my property?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
There is no legal requirement that the loan ever be recorded in CA. However, if a loan is not recorded, then it cannot be enforced against any third parties and other creditor liens recorded prior to the HELOC would prime the HELOC. So if your creditor waited to file the loan with the recorder's office that is not illegal or against any law.
If the HELOC was extinguished in the earlier bankruptcy, then the loan should be invalid and you would be able to file to remove the lien for breach of the bankruptcy order. Since you did not reaffirm the loan, you need to see if it was extinguished in bankruptcy and if it was you would file in court to remove the lien as invalid.
Customer: replied 1 year ago.
Thank you so much for your quick & very knowledgeable response. Not only is it good to finally know the answer, but you gave me more, much needed, information that I wasn't previously aware of. With that said, I have additional questions that I need to request your assistance with to help me move forward with what I need to find out. Can you tell me how to best go about finding out if the HELOC was "extinguished" thru my earlier bankruptcy, & thus currently invalid? I haven't heard of that term before now. The house was severly underwater at that time, I definitely did not reaffirm the 2nd (only the 1st), & eventhough my lawyer half-heartedly mentioned doing a Chap 20 manuver to strip the unsecured 2nd, that unfortunately wasn't done. I remember he did tell me that the debt from the HELOC was indeed discharged as 'unsecured' debt, because the current value in the home amounted to less than the amount I still owed to the 1st lienholder, therefore, the 2nd lienholder was no longer considered to have a secured loan on my property since the diminished collateral in my home was entirely spoken for by the 1st lienholder. He further explained to me that, similar to my accumulated unsecured credit card debt, this 2nd HELOC would be discharged thru the BK 7 &, as a result, HSBC could never seek repayment directly from me because of the BK discharge protection laws applicable to unsecured creditors. However, HSBC would retain their lien hold on the title of my property indefinitely & if in the future the property value was to ever recover & supercede what I owed on the 1st, then HSBC could make a move to foreclose on the property to recover any amount remaining from the auction sale after the 1st had been satisfied. So all this time I have been concerned about the possibility of this happening as home values continue to rise. Like I explained above, I never heard the terminology "extinguished" & "invalid" in regards ***** ***** fate of the 2nd following Chap 7 BK. Only that it had become an unsecured debt thru discharge but would retain a lienhold on my title & I would have to file a Chap 13, including a special/additional stripping process subject to judicial review & approval, in order to strip it off. So what I'm not clear on is, will it say exactly that, "extinguished", which I assume would indicate "invalid" in my BK 7 paperwork, or do I need to request special records from the court to be able to identify if this loan was indeed "extinguished" & is indeed officially invalid?
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
If the bankruptcy court order includes the HELOC, then they cannot collect it from you personally, but if you sell they can collect on the lien if the sale price is more than the primary loan on the property. However, if your property is under water and you barely get enough to cover the first mortgage, they cannot collect on the lien.
You need to read your Ch 7 final order which tells you specifically what loans were discharged.