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By Peter G. Miller
Blow the Whistle?
As an individual homeowner, is it of benefit to me to let the government know that my issuer engaged in fraud when they issued me the loan. Or should I not mention it? My issuer allowed me to use a HELOC on a previous house as a down payment on my current house.
While it might seem noble to report lenders for various transgressions, this is unlikely to be such a case.
You had an existing home with a home equity line of credit, or HELOC. The old lender, the new lender and everyone in town knows about this because it's been recorded on the local property records and it shows up on your credit reports. The lender knows there's a debt, knows you're making monthly payments and includes those figures when qualifying you for the new mortgage.
Now it might be that you took money out of the HELOC and stuck it in a savings account or used it to buy stock. You now want to sell the stock to raise down payment money, or you might want to pull money from the savings account. If the money has been there long enough - if it's "seasoned" - then that's fine with lenders.
At every step in the lending process the activities check out. There was a home equity loan taken out on the first property. Fine. Money was taken out of the HELOC. Sure. That's what's supposed to happen. You bought a replacement property with money taken originally from the HELOC. In your loan application you list the HELOC, it shows on credit reports and you disclose your debt and required monthly payment.
Notice that no loans have been hidden. No required payments have been concealed. The lender can easily show the source of your down payment.
If something in the transaction seems discomforting, consult with a real estate attorney. However, from the facts and given the financing this seems entirely reasonable.
(c) CTW Features
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to email@example.com.View Foreclosure Article Archives
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