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Banks refusal to refi equity loan when pmts current and after made pay down large sum violate any regulations?

Orlando, FL |

Our bank gave us a 330g home equity loan based on their appraisal late 07,higher than the actual homes value. They continued advancing money to my ex through 09 knowing we were going through divorce and the market dropped.I received house and both loans at which time they made me guarentee the equity with my business, changed it to a 1 yr from 20 yr balloon or refused to refi the businesses ballooning credit line.Frst mtg behind 4 months when divorce final, served with foreclosure the next month and waiting mediation kept the 2nd current.Next yr refused refi either unless agreed scrivners error on property selling, pay 170g on mtg belonged to ex and 50g on equity.Both current, still waiting mediation 1st but wont refi upcoming balloon. Why turn 2 preforming loans into nonprefoming?

Business credit line is not high compared to equity I have, House has a 1st mtg owned by Amerisave, Countrywide, Bank of America or Melon, Not sure. Melon filed foreclosure. House value slightly over whats owed on 1st. Home equity was made by community bank holding biz line and is for 280,000. Combining home equity and biz line still have fair amount of equity in the biz. Credit ruined in divorce, 1st waiting mediation in foreclosure can't find refinancing for biz when balloons or the home eq even if combined. I cooperated with everythg bank wanted. Payments current though I have had late ones none over 30 days and now pay on time. They took the money I had coming from sale, intended to pay property taxes and generate more income. they intentionally made things difficult every since I took over even posting false 60 day late pmts to all bureaus to ensure I couldnt find other financing. I've paid close to 300g on their loans in 3 years. Now they want to take everything away?

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Attorney answers 3


The answer lies in who is the actual investor/lender, what type of loan is it, if Fannie mae or Freddie mac, whether FHA, etc
So many factors are taken into consideration for modifying or settling loans. I strongly urge you to seek a reputable loan modification attorney to run your loan and financials to see what type of Loan you have and what you qualify for.


The odds are overwhelming that 'your bank' is no longer yours, certainly as to the first mortgage, although possibly not as to the 2nd. What I mean by that is that the typical business model for most first mortgage originations is that the loan is made, and then immediately sold to some form of investor. The 'investor' is not an individual, it is some form of investment trust, either Fannie Mae, Freddie Mac or some other more complex securitization. The originating lender in many cases retains servicing rights, so the borrower never knows what has gone on backstage, but that is usually how it was done. The worst aspects of that business model are that the originator retains little or no "skin in the game", having cashed out at the beginning of the process, and then remaining only as servicer. Servicer is typically very robotic and often indifferent to good business judgment. In your case, they were fairly smart, in that they enmeshed your business well-being in this mess.

This is a complex situation to analyze from a defensive standpoint, and will entail a great deal of know-how. What is the current value of the property relative to these two loans ? Is there any real equity ? What is owed on the first ? The owner of the first mortgage is undoubtedly not the same party as the owner of the second. If the property is worth more than is owed to the first, when the balloon comes due, the first forecloses, and presumably makes itself whole with the resulting sale of the property, so it is then happy and out of the picture. The second lien is wiped out but the debt is not, and that creditor has recourse to the guaranty by your business, which is ugly.

Any refinance by the first is unlikely - even if the creditor was willing, which it apparently is not, in order to accomplish this, the owner of the second would have to agree to subordinate behind the modified and extended first. That likely involves increasing its risk, which would make such an agreement very unlikly.

While I never say 'never', the odds of a modification of a matured loan (which the first is about to become) are slim to none.

Unless you have the resources to pay off the first, it sounds like you also need to seriously look at asset protection measures if you have assets, including some sort of pro-active protection for your business and business assets, since your existing business is now very much at risk when the balloon comes due.

Please note that the above is not intended as legal advice, it is for educational purposes only. No attorney-client relationship is created or is intended to be created hereby. You should contact a local attorney to discuss and to obtain legal advice.


There are many factors here and yours sounds more complicated than most. I can tell you that most lenders will not modify loans that are performing meaning you have to be 3 or more months behind before they will negotiate. Who the loan is with and who the investor is will make a big difference. I suggest you return an experienced foreclosure attorney to review your specific facts and evaluate your options.

Mr. Warrick is licensed to practice law in Florida and Alabama. This response is not legal advice and responing to your question does not create an attorney/client relationship or any future obligation. The response is in the form of legal education and is intended to provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that, if known, could significantly change the reply and make it unsuitable. Mr. Warrick strongly advises the questioner to consult with an local attorney in order to ensure proper advice is received.

Royce Brent Bishop

Royce Brent Bishop


It does sound like you have many defenses with them continuing to loan money and making things difficult, but depending on the court (judge) you still need very thorough sit-down. This is looonnnggg question. Larger banks are sometimes "easier" to defend than small community banks because community banks were not as wrapped up in the buying and selling of mortage loans--they did of course, but chances are larger banks have a more difficult case to prove. Don't wait till it's too late. It's good that you are seeking advice sooner than later. This is really complex and would be really hard to repair later when so many clients approach us when the bank is practically moving in.