What Happens to Your Home Equity Line of Credit When You Default?
by Phil M. Fowler
Default could cause the lender to sell your home.
When you apply for and receive a home equity line of credit, the lender will require you to sign a mortgage or trust deed, both of which are legal documents that give the lender a lien on your home. The lien is the lender's remedy if you default in your repayment on the line of credit. The lender exercises that remedy by carrying out foreclosure after you default.
The first thing that happens when you default on your home equity line of credit is that the lender will send you a Notice of Default and Election to Sell. This Notice of Default is a formal letter that initiates the foreclosure process. The Notice of
Default points out that you have breached your repayment obligation and that the lender intends to sell your home in foreclosure.
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