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.
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