When the housing bubble popped, most homes went down in value. Some went way down!
As a result, your home's value may be equal to (or even less than) the amount of your first mortgage. This means, for practical purposes, that your home equity loan - which is usually a second mortgage - is no longer secured because your home has fallen so much in value.
For example: Let's say that your home is now worth $300,000 - the amount you owe on your first mortgage is $300,000 - and the amount owed on your second mortgage is $50,000. Since your home's value equals the amount of your first mortgage, there is no equity left to secure the second mortgage.
Here's how this works in bankruptcy...
Please see full article below for more information.
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