About The Real Estate Group

The Real Estate Group (TREG) "Partners in Excellence"

The mission of The Real Estate Group, LLC is to be Hampton Roads finest provider of real estate services. Our goal is to create a company that provides absolutely the best service for our customers by fostering an environment of teamwork and a common vision. The Real Estate Group, LLC consists of an accomplished team of skilled professionals who take pride in their work and their company. We work hard to go beyond the expectations of our customers, agents, and employees.

Those Pesky HELOC’s!

(Home Equity Lines of Credit)  SO…What’s the deal?

The fact is, unreleased Home Equity Lines of Credit (HELOC) make up a significant amount of claims in the title insurance industry.  An equity line is essentially a revolving line of credit secured by a mortgage Deed of Trust against a piece of property. Two major issues often arise during closing process:

  • One of the most frequent surprises to borrowers, sellers, agents, and lenders alike is an unexpected equity line Deed of Trust showing up on title after the title search is complete.  Often times the seller doesn’t realize a HELOC attaches to the property and is a lien that has to be paid off in order to sell the property.
  • Another example is when a homeowner takes out an equity line, pays it down to a zero balance…often never even using it…and then finds out that the equity line that was supposedly “closed” is still recorded against a property. How is this even possible?  The equity line was paid and closed so it should no longer affect the home, right?”  Unfortunately, borrowers are often unaware that there is a difference between “paying a loan off” and “paying a loan down”.  Since many home equity loans allow funds to be borrowed, repaid in whole or in part, and then borrowed again, the banks will not automatically close an equity line simply because it was paid down to a zero balance.  In order for the bank to prepare the appropriate release document(s), referred to as a Certification of Satisfaction here in Virginia), the BORROWER must request in writing to “close the account”. The circuit court recording fee of $41 will typically be collected by the bank.
    • The seller MUST NOT close this HELOC account prior to closing , but allow the settlement company to order the payoff which will show a zero balance, and collect the $41 fee which will show on the HUD. If the HELOC account is closed by the seller in advance of closing, this will delay closing as the buyers closing agent will need a release recorded prior to settlement. Lenders take anywhere from 60-120 days to have this release prepared; executed and recorded.

When insuring a transaction in which a HELOC Deed of Trust is recorded against a property (refinance or sale), a title company will require that the line of credit be irrevocably terminated and released.  Title companies have a sizeable responsibility when it comes to equity lines, specifically in the event of a sale because an equity line that is not closed and/or released could potentially be borrowed against (while secured against) a piece of property that the borrower no longer owns.

The best protection for a title company against an advance being made after the closing is receipt of a payoff statement received prior to settlement showing a balance owed, or in many cases a zero balance. Either of which usually includes collection of the $41 recording fee for the release (as this indicates the lien will be released after settlement).This payoff request causes the lender to freeze the account and at closing a seller will sign a document affirming their wish to permanently close this account.

SO, if an unexpected equity line comes up during the course of your next closing:

  • Obtain applicable account information and/or loan numbers and be in close communication with your title company.
  • Consult your title company and allow them to contact the bank on behalf of you or your client to ensure the account is not closed ahead of settlement, but addressed through settlement on the HUD.

Just remember, Most of the time, unreleased equity lines can usually be easily handled, but only if the Deed of Trust recorded against a property is addressed prior to closing!

More info on issues that could affect your closing or looking for a highly qualified title company to handle the purchase or sale of your next property?  Contact Landmark Title at 410-8077 (press 1 to reach any of the Landmark staff)

This content written and contributed by Tara Muniz of Landmark Title

About The Real Estate Group

The Real Estate Group (TREG) "Partners in Excellence"

The mission of The Real Estate Group, LLC is to be Hampton Roads finest provider of real estate services. Our goal is to create a company that provides absolutely the best service for our customers by fostering an environment of teamwork and a common vision. The Real Estate Group, LLC consists of an accomplished team of skilled professionals who take pride in their work and their company. We work hard to go beyond the expectations of our customers, agents, and employees.