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Absence of loan history raises red flag

Q: My home loan, with a failed institution, was sold by the FDIC. After two years of servicing my loan, the new lender demanded payment for an alleged late-charge balance transferred with my loan. However, it also stated that there were no history records.

I was never late, and this year the new lender admitted the late charges were not verified and made a partial refund. The FDIC has been in the loop. Who's at fault in this scenario and what are my legal options?

A: If the new lender has no loan history, you are under no obligation to pay late fees. No court will force you to pay what a lender cannot prove. If you already made the payment, and you have proof, insist that the lender either refund the balance or credit your loan balance with that amount.

But this raises a more difficult question: Are you sure that the new lender has the correct loan balance for your account? Ask the lender to send you all the information it has relating to your loan.

If possible, I would try to retrace the history of your loan payments from the very first time you sent in a check. At the end of each year, lenders are required to send you a tax form indicating how much mortgage interest you have paid. Sometime, these forms also show the then-current loan balance.

If you believe the lender's information is incorrect, I would ask the lender to pay for an independent auditor who will review all of the records and come up with the exact amount that you currently owe.

If the lender refuses to cooperate, contact the Federal Trade Commission and the Federal Reserve Board, as well as your state's attorney general.

Tenant protection in lease-option

Q: When executing a lease with an option to purchase, subject to current financing, how do I protect myself if the landlord defaults on his mortgage and the bank forecloses?

A: As I understand your question, you, the prospective tenant, will enter into a lease with an option to purchase the property at some point in the future. The landlord — eventually the seller — has his own mortgage on the property. You are concerned that the landlord might default and the bank might take back the property, eliminating your right to buy the property.

State laws differ on the rights of tenants when their landlord's property is foreclosed upon. Talk with a local attorney about the laws in your state. But there are a couple of ways that you can protect yourself.

First, if state law permits, the lease with an option to buy should be recorded among the land records where the property is located.

Second, the lease should require that the landlord provide you with periodic proof that he is current with his mortgage payments as well as property tax and insurance premiums.

Third, you should send a letter to the lender, advising that you are a tenant and requesting that the bank notify you should the property owner become delinquent. The letter should also state that you have an option to purchase.

Nowadays, banks don't want more foreclosures on their books. If they know that the tenant is interested in buying, I suspect that the bank will want to discuss the situation first with the tenant before foreclosure actions is started.

E-mail Benny Kass at

Absence of loan history raises red flag 03/28/08 [Last modified: Wednesday, November 3, 2010 10:46am]
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