Legal Question in Credit and Debt Law in Maryland

I have a legal question regarding my grandmother. She has made an uncle of mine as power of attorney. A few years ago he asked her to apply for a home equity loan on her condo that is paid in full in the amount of $100,000. She got the loan understanding that he was going to pay the loan off. He has been falling behind in payments every once in a while and telling her that it's all taken care of. Now that he is behind in payments again, the bank is taking my grandmother to court. It has ruined my grandmothers credit. She believed him when he told her he was keeping up with the payments. He was even using her credit cards to make those payments. He says that she will not have to go to court when the time comes. Since the loan is in her name wouldn't she have to be there?

Thanks,

Tiffany

Asked on 10/20/10, 9:11 pm

2 Answers from Attorneys

Phillip M. Cook Cook Legal Services, LLC
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Based on the facts above Tiffany, unless your grandmother is physically or mentally incapable, she will absolutely have to be in Court if she's sued. Your uncle is playing a VERY dangerous game with his mother.

Please note that it's not very common for a bank to take someone to Court when they fall behind on a home equity loan. The reason is simple -- if someone has fallen behind on payments, they likely have no money, so there's no reason to get a judgment in court against them. Instead of going to Court and suing you for breach of contract, banks often FORECLOSE THE HOME when a home equity loan has defaulted, since the home is collateral for that loan. It is difficult for me to say why the bank is taking your grandmother to court instead of just foreclosing the home without seeing the court documents that the bank filed and were presumably served on your grandmother. However, I will tell you that if the uncle continues on this path of non-payment, at some point, your grandmother may lose her home.

At the end of the day, this can be resolved by making up the overdue payments, as well as any penalties and late fees the bank has charged. Does your grandmother have the ability to pay off the outstanding amount?

As always, I STRONGLY recommend that you hire a Maryland attorney to review the loan and court documents and advise you on your rights. Please let me know if you would like my assistance.

Best of luck.*******The above is for informational purposes only and does not create an attorney-client privilege.*******

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10/26/10, 6:44 am
Cedulie Laumann Arden Law Firm
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Your post raises several different legal issues, each of which should be timely addressed. While people are free to take out loans for other relatives (whether or not it is wise to do so), sometimes if the signer is elderly or disabled this might be a case of undue influence and/or a constructive trust. It may be helpful to have an attorney review the details of the loan.

As far as the mortgage payments go, if they have not been paid the owner would be in default and the condo could be sold in foreclosure. Alternatively the bank could be suing on a breach of contract basis. Either way, this is nothing to ignore. Depending on the circumstances, the loan could possibly benefit from a loan modification and/or some type of forbearance.

You may wan to contact the free Maryland Hope Hotline (for homeowners facing foreclosure) and seek legal advice on the pending lawsuit without delay.

***Note that this general information is not a substitute for specific legal advice and does not create an attorney-client relationship. An attorney-client relationship is not formed unless and until we meet and both agree. The specifics of your situation or changes in the law may affect how this general information applies to you.***

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10/26/10, 6:46 am

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