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Hot Topics in Claims Avoidance: Avoiding HELOC Claims in Florida


Often, sale and refinance transactions necessitate the payoff and satisfaction of revolving lines of credit, also known as home equity lines of credit (“HELOC”).

These mortgages are loans secured by the debtor’s real property which generally allow the borrower to access the equity in their property utilizing credit devices including checks, ATM cards and credit cards.

The ease by which these accounts may be accessed, drawing up the outstanding principal balance right before, or after, the closing, may leave the agent and underwriter vulnerable to claims.

The recommended practice concerning satisfying HELOCs, and insuring without exception, are as follows:

-Prior to closing, the agent should provide lenders with adequate notice of the intended conveyance or refinance, review the mortgage for, and comply with, any specific requirements pertaining to payoff information and satisfactions which may differ from traditional mortgages.

-The agent must request an estoppel letter from the lender for all outstanding amounts due, with language in the estoppel request:

  • (a) instructing the lender to immediately freeze the account upon issuance of the estoppel;
  • (b) advising the lender that any amounts advanced subsequent to the payoff made pursuant to the estoppel will not be secured by the property; and,
  • (c) that upon payment the lender must execute and record a satisfaction of the mortgage and written authorization by the borrower for (a) through (c) must be provided to the lender.

-The agent should verify with the lender, on the day of closing, the amount outstanding and document the same; and if the amount outstanding is different from the lender’s original estoppel letter, a new, revised estoppel letter must be obtained prior to closing and disbursing.

-The agent should obtain an affidavit referencing the loan number, address of the property, borrower’s name, and the current amount due under the loan (as evidenced by the attached estoppel letter). The affidavit should include affirmations by the borrower that:

  • (a) the account is closed;
  • (b) no advances or withdrawals of funds have been made within the 30 days prior to the closing which would change the current amount due;
  • (c) all lender’s documents pertaining to paying off and closing the account have been executed; and,
  • (d) all credit and/or ATM cards, checks, or other credit devices attached to the account have been destroyed or surrendered to the agent.

-All checks, credit and/or ATM cards or other credit devices for obtaining additional equity advances or withdrawals from this credit line that have not been previously destroyed should be surrendered to the agent, and if the payoff is not being wired to the lender, the agent should forward the payoff via overnight mail together with the aforementioned affidavit, and a letter, executed by the borrower:

  • (a) instructing the lender to immediately close the account and provide confirmation thereof;
  • (b) advising the lender that any amounts advanced subsequent to the payoff made pursuant to the estoppel will not be secured by the property; and,
  • (c) advising the lender that, upon payment, the lender must execute and record a satisfaction of the mortgage.

Any other requirements that the lender imposes should also be attached.

If an agent is unable to comply with all of the guidelines set forth herein, he or she should not insure without exception for the HELOC and should contact underwriting counsel. Naturally, should a superior mortgage lien be refinanced and the borrowers do not wish to close the HELOC, it will be necessary to obtain a subordination of the HELOC to the superior mortgage lien.


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This blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on this blog.

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