Should a new mortgage company notify you of a balloon payment?

While unemployed my previous mortgage company deferred interest on my mortgage loan so that I could catch up on my payments I was unexpectedly widowed in Dec 2016. That same month my mortgage was sold. I recently

received the NJ Homesaver grant. While checking to see if it was applied to my mortgage. I found out that the new mortgage company imposed a ballon payment in the amount of the deferred interest. I was never informed of this. It was never on any of my statements and I have never received correspondence about it.

Asked on September 25, 2018 under Real Estate Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

IF there was a formal written agreement between you and the old mortgage company deferring your interest for some set period of time or stating you could repay the deferred interest over time, the new company would be bound by that agreement when they took over the mortgage: when they took over the mortgage, they only took over the rights that the previous mortgagee had, and if that previously mortgagee contractually limited its rights vis-a-vis the interest, the new mortgage is also so limited.
BUT if there was no written agreement or contract limiting what could be done about the deferred interest, but they were only voluntarily choosing to help you out, their successor in interest (the one who took the mortgage over from them) is not bound by their choice but could require that all the interest be paid promptly, and do not need to provide you advance notice of that. To analogize: say that the person you bought your house from let your neighbor and their children use the backyard. You now buy the house: you have the right to control access to you own property and could, without advance warning, tell your neighbor that if they come onto your land, they will be trespassing--and enforce your rights (e.g. call the police) if they do. You can ignore what your predecessor did. Similarly, the mortgagee has the right to the interest unless that right is limited by contract; the new mortgagee can choose to enforce that right (require payment) regardless of what the old mortgage did and without notice.


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