Ask Me Help Desk - Foreclosure

Almost two years ago our bank foreclosed on our farm. It all started when my parents signed for a loan, believing it was five years. At the signing, my mother noticed it stated one year instead of five. She asked the loan officer, who they have known for years, why that was on there. She said that it was a formality and it could be changed at any time. So my parents signed it and made their monthly payments of $2,000+. A few months later the bank sent a letter stating that we had only a few weeks to pay the remaining $275,000 owed on our farm or they would have to foreclose. Well we had no way of getting the money for this so we lost everything and my parents filed bankruptcy.
My question is, Was this legal? Do we have any rights?

Quote:

Originally Posted by LeeBee

Almost two years ago our bank foreclosed on our farm. It all started when my parents signed for a loan, believing it was five years. At the signing, my mother noticed it stated one year instead of five. She asked the loan officer, who they have known for years, why that was on there. she said that it was a formality and it could be changed at any time. So my parents signed it and made their monthly payments of $2,000+. A few months later the bank sent a letter stating that we had only a few weeks to pay the remaining $275,000 owed on our farm or they would have to foreclose. Well we had no way of getting the money for this so we lost everything and my parents filed bankruptcy.
My question is, Was this legal? Do we have any rights?

You stated that the monthly payment was $2,000+. Whether it was for one year or for five years the total of payments does not equal $275,000.

one years worth of payments equals about ($2,000 x 12 months) $24,000.

five years worth of payments equals about ($2,000 x 60 months) $ 120,000.

Where does the bank come up with you owing over $275,000??

What was the initial loan amount for?

Sounds like the bank wanted to get your property.

Do you have the original loan paper?

Obviously this was a balloon mortgage. The monthly payments may have been based on a 30-year loan but the term of the loan was only 1 year, with a balloon payment being due at the end of that year. If this was a bank that your family had dealt with for years then the typical activity would be for the bank to "roll over" the loan into a new 1-year loan with the same monthly payments. The part of your question that I don't understand is why the bank called the loan due before the 1-year period was up. Did they give a reason for the total amount being due early? Did your family retain an attorney at any point? If not then you should consider speaking with one now. The bank may have acted in a way that is not permitted by the applicable banking laws in your area. Most attorneys offer a free consultation. Try speaking with one or two in your area and see if your family has a case for setting aside the foreclosure or, if it's too late, then to sue the bank for damages.

My parents do have the original loan papers. I'm not sure how much the loan was for, I'll have to ask my mom. They owed $275,000 on the farm. My parents worked so hard for that place and always made their payments. My mom made the house plans and my dad, mom, brothers and myself built that house. How much do you think they could get if they were to sue?

First even to sue ( or at least to win) there has to be some proof of fraud or some idea that was unrealistic.

First it appears you are not sure about how many loans, what type of loan or loans there was, interest rates and even the amount now due and what makes up

This is the first real issue to sit down with your folks and honestly talk about everything. It is very possible there is more to this than they have mentioned.

If the loan manager misrepresented the loan you may have a case of fraud, which may also have criminal charges.

But of course most of this should have been brought up by your parents attorney at the foreclosure hearing.

The real issue is proving that they did not know what the amount of the loan was, what the payments was and what the ballon amount was and when it would be due, Since all of this should be clear and visible on the loan paperwork that was signed.