Legal Question in Real Estate Law in California

First, a mystery-- you say the HELOC has never been drawn down, yet you say both loans were used for the purchase of the property, and that payments were being made on the HELOC. Perhaps instead of "has never been drawn down" you mean "has never fully been drawn down." Otherwise, there seem to be inconsistent statements of fact.

Now, to answer your question. Nonpayment of payments due results in a default. There is nothing wrong with the collection agency's choice of words, at least in that regard. Also, under the terms of the HELOC, a default (failure to make payments for an extended period of time being an example thereof) may trigger an acceleration clause, and indeed the total may now be due. You'll have to read your loan agreement to be sure, but an acceleration is likely upon a default.

Finally, we come to the question of the lender's remedies. Miller & Starr's treatise on California real estate law says (in section 9.31) "If multiple notes are secured by one deed of trust, the creditor is compelled by CCP (Code of Civil Procedure) 726(a) to foreclose on all of them together and, if the property lacks sufficient value to cover all the notes, the creditor's remedy is to seek a deficiency judgment by way of judicial foreclosure and a timely application for a fair value hearing (if one is otherwise permitted). Walker v. Community Bank (1974) 10 Cal.3d 729."

If Miller & Starr are correct and your lender understands the law, I predict that sooner or later the lender will foreclose both notes at the same time. Referring the HELOC to a bill collector might have been a deliberate attempt to get you to pay, or a mistake, but it is probably a side issue and should not encourage you to be off guard for the notice of default and notice of trustee sale that will, with 99.8% certainty, be forthcoming.

I can't even disagree or agree with Mr. Whipple. Your post makes no sense.

A HELOC is not a purchase money mortgage, but rather a Home Equity Line of Credit. A HELOC differs from a conventional home equity loan in that the borrower is not advanced the entire sum up front, but uses a line of credit to borrow sums that total no more than the credit limit.

Second, how in the world do you have a second deed of trust if you only have one deed of trust? If only one runner competes in a race, how in the world could he come in second?