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We have applied and been approved for a heloc and are about to sign the closing documents. About four and a half years ago we applied and were given mortgage assistance via a loan through the state's hardest hit fund. The terms were 0% interest and no payments for ten years. If we sold the home or refinance in the first 5 years we would have to pay it back, after that it is forgiven at 20% per year and after 10, we owe nothing.  Nothing specifically bans home equity loans/lines of credit. Since we don't pay anything on this and there are no statements or anything, we completely forgot to mention it while applying.  I have no idea how or if it is recorded. I'm assuming the heloc bank pulled the title when approving the loan. Would this have come up if it were an issue? They didn't mention it at all. I don't want to inadvertently commit mortgage fraud. On the other hand, I also don't want to shoot myself in the foot by bringing it up. We desperately need this loan as our house is falling apart and in dangerous condition and we have no way to pay for the repairs otherwise. Should we be worried? Or since we must have cleared the title search, am I being anxious over nothing?
asked Sep 7 in Home Equity Loans by anonymous

1 Answer

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The current "silent" loan should show up when the HELOC lender pulled title. So the new lender might already know about it. They would have to put that loan in 3rd position behind the new HELOC. It's possible that the Hardest Hit Fund loan is okay being in 3rd position, but that would kind of surprise me. If it were me, I would make sure the HELOC lender knows about it. If they missed it, they could come back to you when they see the original application didn't disclose the existing 2nd mortgage. Hopefully, they already know about it and have gotten a subordination from the organization that issued the Hardest Hit loan. It would be disappointing if they denied the loan due to it, but I'm afraid of what they'll do after loan closing if it comes up. I wouldn't want them to come back and say you need to pay off the Hardest Hit loan, or the new one.
answered Sep 7 by TimLucas (8,040 points)

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