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True and interesting tales of HELOCs and MEWs.


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2012 Jun 19, 1:11am   4,941 views  11 comments

by American in Japan   ➕follow (1)   💰tip   ignore  

So what has happened to those who took out these HELOCs and MEWs years later? These are not purchase money loans so there is some recourse I assume (but my knowledge is limited here)... I'd like to hear your stories or of people you know. What did they do with the money (over $100k in some cases)?

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1   bubblesitter   2012 Jun 19, 1:22am  

All that money is smoked and did not help economy when it needed most of it.

2   American in Japan   2012 Jun 19, 3:35pm  

@E-man.

Thanks for the info (as always). ..too busy in Asia to have much time keep up, but glad to get the facts.

3   tdeloco   2012 Jun 19, 4:41pm  

I think the original intent was for Homeowners to use that money to renovate their homes. I bet most people did that.

E-man says

Cash-out refinance is the best.

Can you still do that even if your first mortgage is underwater? Also, what about loan modifications? If it's really that easy to get out of it, most people would get out, no problem.

Most of them are interest only for the first 10 years. So even if enough people are unable to get out of their HELOCs (and I don't know if they are and how many), we won't see much HELOC-caused defaults in the next 2 years. People continued to refinance until 2008.

4   pkowen   2012 Jun 20, 2:54am  

tdeloco says

I think the original intent was for Homeowners to use that money to renovate their homes. I bet most people did that.

You'd think that, wouldn't you? That's the way it was back east, when I took out a small HELOC to renovate/restore a fine old craftsman/folk victorian I had. Seemed there was a lot of scrutiny by the bank as to what I was doing with the money.

Then I moved to CA and what did I see at every turn? Regular folks with luxury cars, RVs, vacations, you name it bought with HELOC money. I actually thought it was illegal but no, you can spend your magical equity on anything, and there is no recourse if you default.

Just anecdotal but suffice to say, a lot of people got free money and didn't ever pay it back - and it's a travesty.

5   freak80   2012 Jun 20, 2:57am  

E-man says

It is golden to live in CA. No wonder why they call it the Golden State. :>)

And it's no wonder the state is bankrupt.

6   tdeloco   2012 Jun 20, 4:14am  

Thanks E-man.

So yeah, bankruptcies and loan mods can take care of the problem. Refis work if the mortgage is not underwater.

Are CA mortgages still non-recourse after refinancing? I thought they become recourse loans.

7   FortWayne   2012 Jun 20, 5:52am  

E-man says

He moved to Montana to retire & bought a nice property for cash in late 2006. Who cares about credit when you can pay cash.

I know someone like that too, he moved to Pennsylvania last year. Left his old property here for a short sale / foreclosure.

8   American in Japan   2012 Jul 28, 5:24pm  

Bankruptcy seems like the #1 way to get away from these...

9   Eman   2012 Jul 28, 5:36pm  

tdeloco says

Are CA mortgages still non-recourse after refinancing? I thought they become recourse loans.

Nope. It becomes recourse after refinancing, but it doesn't really matter unless you're a high networth person. Why? Because the bank can sue you for the deficiency if you walk away from an underwatered mortgage. Also, there might be some tax implications too.

10   Eman   2012 Jul 28, 5:37pm  

American in Japan says

Bankruptcy seems like the #1 way to get away from these...

Actually, it depends. It's a case by case basis. One size can fit a lot of people, but it doesn't fit all.

11   American in Japan   2012 Aug 26, 6:51pm  

Interesting and helpful comments...thanks for the info, especially E-man!

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