Monday, May 18, 2015

Mortgagee Rights when Balloon Payment is not Disclosed in Loan Modification Agreement

Question: I am a mortgagee, who entered into a loan modification agreement and believed in all matters pertinent to it. After I made a couple of scheduled loan modification payments, the mortgagor disclosed to me an astronomical deferred interest amount I owe that was not disclosed in the loan modification agreement. The same mortgagor was also working with me on a cash for deed transaction and then all of a sudden I found out that the mortgagor sold the note to another company. What are my rights in this case?

Response: I would check the loan modification agreement to make sure that the deferred or balloon payment was truly not disclosed in the loan modification agreement. Balloon payment is a very common tool when modifying the loan because it helps decrease the monthly payment significantly and because most people are less concerned about 30-40 years from now (which in truth is the point of the balloon payment—to help people with the payment now). I have seen loan modifications where the specific balloon amount is not disclosed but I have not seen one where it would be omitted altogether. Most loan modification agreements have a balloon disclosure even if it’s not applicable so I would double check first. It is a very normal practice amongst servicers to sell the note so that it’s not shocking whatsoever. You can still negotiate the cash for deed if the new servicer provides such option.
 
In the legal blog, Attorney Svetlana Kaplun addresses typical questions our firm has received from our clients, or come across from homeowners related to foreclosure, foreclosure defense, loan modification and bankruptcy topics.

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