All Forum Posts by: Kent Renshaw

Lender is a chain bank

FYI - Illinois is a Lien Theory state. The lender does not have title, only a lien.

Thanks Jerry. I do feel better. There are so many twists and turns in this scenario in areas that I am not familiar with.

Another note! The reason the initial suit was filed was the demand of buyer to acquire a Deed. When that occurred Seller contacted Buyer through their attorney and sent a Notice to Vacate and the threat was made to file the Quit Claim Deed. It had been prepared as you described and signed along with a Warranty Deed. Buyer came to me and a letter was sent to Buyer's attorney not to file the Deed as there was a dispute as to the satisfaction of the agreement. Even with the notice of dispute, they filed the Quit Claim Deed. But that was after the Mortgage. Several factors had changed within the Contract by oral modification, followed by long term performance. My client had been in a motor vehicle collision and was unable to pay the monthly payments. She and the seller agreed that she would catch up on payments when she received settlement check, which she did to the tune of $6500, which Seller accepted. They later orally modified the amount of payment from $450 per month to $350 per month and Seller accepted those payments for over three years. All in all, Buyer paid more for the property than was originally owed considering the sales price and the interest rate. Regardless, Illinois law requires that an installment contract for greater than five years and an equitable interest in excess of 20% requires the Seller (as the lender) to adhere to the foreclosure laws. I guess my point in this paragraph is twofold. That there were a set of Deeds prepared and that the seller had not followed state law regarding foreclosure that more or less acknowledges the buyer equitable interest.

Jerry, you recognized my argument regarding Notice. With it being of record the lender was on notice and shouldn't have made the loan. The lender cannot say they are "in first position" when they had notice otherwise. No good faith argument. I totally agree that had the Memo not been filed, there is no argument. No title company would have insured over this obvious cloud.

*at a loss

My involvement in this case is after the fact. I still have trouble with the lender having notice of an agreement and going forward without concern of what was out there. IMO they should have questioned the seller and/or contacted the buyer. When they go into this transaction knowing that the May be interfering with a contractual relationship, they do so with unclean hands.

I fear that the seller is judgment proof and there was no title policy issued. The loan was so small that I am surprised that the lender is fighting this. I have taken this on as a contingency. With the buyer obligated to borrow against the house to pay my fees if we are successful. I will fight this to the hilt and have let the lender's attorney I'll go to appeal if need be! The original loan was approx $16k in 2004. They say with attorney fees and interest the balance is still $12k. Does this seem to be a chase down the rabbit hole for a lender? I'm still at a lose why they have chased this for three years through bankruptcy and all. And we're really just getting started!

I represent the buyer (Plaintiff) in this case in Illinois. The Contract was not filed with the Memo and was a unilateral contract drawn by the Seller's attorney. I am not a banking attorney and wondered what would give the lender's Contract/mortgage with the Seller greater strength than a previous contract between Buyer and Seller? A clause in the Contract provides that Seller must be able to deliver clear title, but has little else to protect Buyer. Illinois foreclosure law requires proceedings under those statutes if buyer has at least a 20% ownership of the property. At the time of the Mortgage, Buyer would have held such a percentage. Seller has had a history of selling/defaulting buyers several times.

Scenario: Contract buyer and seller enter into a Contract for Deed. Buyer immediately files Memo of Agreement in the situs county. All goes well for two years and Seller applies for loan. Mortgage Lender realizes the existence of Contract for Deed, but enters into agreement with Seller anyway.

Buyer satisfies payment and demands Deed, Seller refuses. Buyer sues on State Court, Seller files bankruptcy and forfeits house to bankruptcy court. Both Buyer and Lender are named creditors. Realizing that property is encumbered that there is nothing left for other creditors, bankruptcy trustee abandoned the house and surrenders to state court to settle issues.

Seller believes she should still have interest in the house. Buyer has paid in full the contract price and did all she could do by filing Memo of Agreement.

Mortgage Lender feels they are entitled to the house because of their Mortgage with the house as security.

My argument: Buyer has supreme right to property as to both the Seller and the Mortgage Lender. As to the buyer, the contract has been satisfied. As to the Mortgage Lender because Buyer has done all in her power to protect her interest whereas the Mortgage Lender had control of his situation and proceeded on with the loan with what they thought was a "secured interest." As both the Contract for Deed and the Mortgage are Contracts with the Seller, it would seem that neither would have power over the other except for the time of execution and filing. Lender had the chance to "walk away" but instead went on with the deal placing themselves at peril. I would think that equity would put Buyer's Contract first in line and as such, Buyer has a superior interest of total possession of the home and no surplus for Lender to claim.

Your thoughts?