That’s silly. Lender and borrower can agree to anything that they want to mutually negotiate, so long as they mutally have powers and capacity to do so, and any junior lien creditors consent.
Now when you say “her Daughter” do you mean the private lender’s Daughter? Why isn’t lender taking care of the matter directly?
Also, you DID get your loan mod agreement in writing, didn’t you? If it was informal, you may do well to speak to your own atty. There may be something there because you where acting in good faith and relying on the word of who you thought was now the lender’s rep.
As for “illegal” to charge 0% interest, attorney may be upset because the lender may be stuck with the IRS implied interest rate and doesn’t want his client to be stuck paying taxes on interest money not received.
Lastly, here in CA, lender must notice borrower of pending balloon payment due no more that 150 days prior nor less than 90 days prior. No default can be recorded prior to satisfying said notice. Check with your attorney for law in your state.
When my balloon payment became due and I couldn’t pay it, the private mortgage holder verbally agreed to continue accepting payments and would charge 0% interest to help me to get the balance down. That was 3 years ago. Now, her daughter has her lawyer talk to her and the lawyer says it was illegal for her to accept zero interest and he’s wanting to add all the unpaid interest to the balance owed on the loan. So, to pay it off now, I’ll have to include 3 years of unpaid interest at 10%. Can they do that? And where do we stand legally since the balloon has expired and she verbally extended an opportunity for me to continue paying?
Posted by John Merchant on January 29, 2009 at 19:11:27:
I totally agree with Rick and the daughter’s lawyer is fulla hot air.
But if I were you I’d deal with nobody but the woman you originally dealt with. If she tells you to deal with HER lawyer then you’ll know to do that but until then, just deal with that woman.
And do you have ANY written notes or receipts or anything else saying it was OK for you to just continue making those payments as you did? If so, then that’s pretty good evidence of your extension agreement with the note payee.
And there’s NO requirement about your paying interest…now the IRS may “impute” interest at 12% to note payee, and make the note payee pay income tax on that “phantom” income, but no law saying YOU have to pay 10%.
Of course you realize when the note payee says it’s time to pay off the note you’ll have to go refi and do so, so you better get ready for that.