When is a mortgage not a mortgage? 

When it's a Home Equity Line of Credit. On the street we call it a HELOC (hee-lock) and it's actually similar to a credit card in the way it's processed and collected.  The rub is.... a HELOC will not be forgiven in the case of foreclosure or short sale.

The fact that your home and the equity you have were used as collateral to secure the HELOC make the difference.   The HELOC does, in fact, show as a lien on your home and that's where the second mortgage nick-name comes in.  As with any lien, the home cannot be sold, transferred or taken without paying off or re- the loan.  All of this combines to make the situation very confusing and can leave homeowners feeling desperate.

In the case of a short sale, the bank that holds your mortgage can, and most times will, approve a short sale and a small sum will be offered to the bank that holds the HELOC (sometimes the very same bank) but it is seldom enough to satisfy the loan.  In this case you may be required to agree to continue paying part of the HELOC.  If you can't or won't agree to continue payments the short sale will not be approved and the home will most likely go to foreclosure and you will STILL have to pay the HELOC.

There is nothing pretty about this scenario but educating yourself about the process and having an experienced team of professionals behind will make a BIG difference.  Your Real Estate team will be invaluable as will the advice of a tax professional and attorney.