Summary:
In February of 2006, the Coopers granted a Deed of Trust for a home equity line to First Bank. Later, in December of 2006, the Coopers refinanced their home with a Deed of Trust, currently held by Homeward, paying of the equity line to First Bank. The closing attorney at that time requested that First Bank terminate the home equity line, but First Bank instead allowed the Coopers to draw an additional $87,598 before they ultimately filed Chapter 13. Homeward brought an adversary proceeding to have its lien determined to hold seniority over First Bank.
Pursuant to N.C.G.S. § 45-82.2, upon the request of an authorized party to terminate an equity line of credit, the lender shall terminate the borrower’s ability to obtain further advances and, after payment of the account in full, record a satisfaction. A violation of this section, however, expressly, at N.C.G.S. § 45-84, does not provide the remedy of reducing the seniority of an equity line, but rather, pursuant to N.C.G.S. § 45-36.9, allows the landowner to bring suit for damages. Further, Homeward is not the landowner, so it has no authority to even seek damages under this statute.
Commentary:
It appears, not surprisingly, that the Coopers are attempting to strip-off the mortgage held by Homeward, contending that the property is worth less than is owed to First Bank. This is being done by motion rather than adversary proceeding, which seems particularly dangerous given the contentiousness of this case. Further, since an Adversary Proceeding would allow the attorney for the Coopers to be compensated for all of his services of benefit to the Coopers, rather than the far more modest flat fee for a Motion to Value.
For a copy of the opinion, please see:
Homeward Residential v. First Bank- Failure to Cancel Equity Line
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