Legal Question in Real Estate Law in Illinois

Seven years ago, my husband and I built a new home. The house we were living in did not sell. We rented the house and now have a contract-for-deed on the property. We have a second mortgage on this property from the bank that has our primary residence loan. This loan covered some overages in building costs and served as a down payment. We have paid both the primary loan and the secondary loan faithfully for the seven years.

Due to my early retirement, our payments have been late for about six months. We make a payment every month. The bank loan manager called us in and told us the secondary loan was up in May and they may not renew it because of the late payments.

What are my rights? What should I know? What advice can you offer?


Asked on 4/09/14, 4:18 pm

2 Answers from Attorneys

Henry Repay Law Offices of Henry Repay

Did you politely discuss any options or recommendations with the bank manager? Have you consulted another lender to explore options? Perhaps between the two properties, something can be structured. It is hard to provide advice within the scope of a site like this. Are you age-eligible for a reverse mortgage and could that be a tool (tread carefully as this can be costly)? Have you ever sought a loan modification on the other loan(s) to reduce your monthly payments? Is the loan balance low enough to use a Chapter 13 bankruptcy as a last resort? If absolutely necessary, can you draw on a 401(k), life insurance policy or other asset? Is the buyer in any position to get the financing now to complete the purchase? Would your bank possibly be more willing to work with the buyer to get this structured? Although the buyers may have time under the contract, they may not have any choice in working with you if the alternative is a loss of the property. At a minimum, are the buyers in a position to pay down the contract so that you can use any extra money to pay down the second mortgage as an incentive to the bank to renew?

I suggest you start by inquiring about ways to restructure any or all your loans, but also sit down with a reputable attorney who has a broad practice including real estate and bankruptcy. I am not suggesting bankruptcy is the answer, but understand that there are ways to use bankruptcy protection as a way to pay creditors and save property. So, at least be armed with the information and have the input of an attorney concerning any of the above solutions.

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Answered on 4/10/14, 5:34 am

I agree with Mr. Repay. About the only other additional thought I have is that depending on facts you might be able to refi the first mortgage as an investment (this typically will result in a higher interest rate) that takes into account the current balance on the 1st as well as the 2nd and roll it into one. Since you day you can handle the payments on both and the aggregate balance between the 2 should be less than when you first took them out, you might be able to handle 1 new loan. Again, just an additional thought and you should still sit down with a lender and attorney.

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Answered on 4/11/14, 10:25 am


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