Posted by Lisa/WI on 8/14/05 10:44am
Msg #59002

HELOC Freeze Letter

Pretty self explanatory, but just to clarify if asked by a borrower I would say: This letter is to freeze an already existing Home Eguity Account you have.
Or is this saying too much? Any input is appreciated, Thanx

Reply by Kimberly-IN on 8/14/05 1:33pm
Msg #59015

I just make sure they understand that they aren't allowed to make any more draws on the account. Being in title insurance, let me explain to you what has happened many times in the past.

A title company orders a payoff from say ABC Bank on a line of credit. With the payoff statement comes a paper that needs signed by the borrower telling ABC Bank to close out that account, rather than just pay it down to $0. After the closing, the paper is signed and returned to the bank, but the bank for some reason doesn't close the account. A few weeks later, borrower sees an open line of credit with a $0 balance and not knowing any better (or maybe they do) think that maybe, since the account isn't closed, it didn't have to be closed so they go and rack it back up again.

Title company discovers the damage after it's too late. The line of credit now either has to be paid off again or subordinated before the final policy can be issued insuring clear title. Subordinations have to be approved, so if they aren't, big trouble.

Reply by J. on 8/14/05 1:56pm
Msg #59016

Great formation.

Reply by Lisa/WI on 8/14/05 4:20pm
Msg #59028

Kimberly, Great explanation! Is it safe to say, this letter is a precautionary measure to make sure the situation you just explained doesnt happen. And in this particular case, they are doing a 2nd mortgage to consolidate, and this account needs to FREEZE in order for them to pay it off?? How am I doing?

Reply by Kimberly-IN on 8/14/05 11:20pm
Msg #59077

They may be doing a 2nd, or just a 1st. If the equity is there, they could consolidate with a 1st & payoff the 2nd. Regardless, the freeze letter is pretty standard, at least here it is. (You're doing great!)

Reply by christiSocal on 8/15/05 9:52pm
Msg #59257

I know I'm bad, but

Ever time I flip thru these posts and see this title, I'm thinking someone's asking about hell freezing over!

Reply by CarolynCO on 8/15/05 9:56pm
Msg #59260

Re: I'm thinking someone's asking about hell freezing over!

LOL. The image will now stick in my mind.

Reply by TitleGalCA on 8/15/05 10:12pm
Msg #59267

Re: I know I'm bad, but

I do the same thing! and think...oh great, now the lenders think they can tell Hell what to do with a letter...

Reply by christisocal on 8/16/05 2:13am
Msg #59320

I'm glad I'm not the only one! n/m