Ask Nick – HELOC Not Discharged


At the time of my client’s loan, they paid off a Sovereign Bank (n/k/a Santander) HELOC loan. However, the loan remained open of record and unfortunately the Debtors ran the line back up. We are now going to sale at the end of the month and Santander has stated that their mortgage is in FIRST lien mortgage position on this property so they will NOT need to bid to protect their lien, and that our client will be taking title to the property subject to Santander`s Mortgage unless a payoff is requested.

We have the HUD and Policy stating that my client is in first lien position. I have filed a claim with the underwriter. If the HELOC was paid off –but later because of whatever reason it was not closed out, the borrower drew down on it again AFTER my client’s mortgage was given/recorded, which lender is in first lien position?


Unfortunately, you definitely have an issue. The HELOC loan, since it was not cancelled when paid, holds a priority position over your client’s Mortgage. You were correct to file a title claim, and the underwriter should be handling the loss that your client will incur. The loan policy insures your client as a first lien, and they are clearly not. Please make sure you were given a claim number and proceed with the claim.

Do YOU have a title query? Please submit your question to Check back regularly and sign up for our e-newsletter for Nick’s answers to client questions and his thoughts on topics related to all aspects of the title industry.

Under no circumstances is Fortune Title Agency, Inc. or any of its employees giving any legal advice.  The Ask Nick Q’s and A’s are based on situations that the company has experienced and is sharing with the public for informational purposes only.  Always contact your attorney for any legal advice.

Share this post with your colleagues or clients!
Email this to someone
Share on LinkedIn
Share on Google+
Tweet about this on Twitter
Share on Facebook
Buffer this page

1 Comment

  1. Nick:
    Right as usual. The closer should have had the seller sign the close out of the Heloc at closing and the form sent along with the payoff. It’s possible that the title co. has a subrogation claim against the Heloc bank.


Submit a Comment

Your email address will not be published. Required fields are marked *