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Home >> Lending >> Business Credit
Bank wants 'Business' only to Foreclose
The bank wanted all my business, and so gave me a loan covering three of my rental properties. I did not notice the cross-collateralization clause for any future loans. Later, the bank approved a $65,000 building loan to add to my home, and said they would turn this into a normal note after the build. After the build, the bank said that they cannot place the loan in a secondary market, and that I should find another bank. This is not an option, as I later found out. First and second loans go over 80% rule. The bank has had me on forebearance for the last two years, paying interest only. They know the loan should not have been approved in the first place, but all they are interested in is foreclosing on my rentals, on which I have never missed a payment. What can I do? This is in Texas.
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 Banks are not in the business of taking liens on property for the intention of foreclosing on it. Rarely is money made on foreclosures, as they first have to pay a market price for the property, which goes against the loan, then maintain and insure the property, repair what is needed and then sell it. All of that has a cost associated with it.
Texas protects homesteads and a cross pledge from personal debt to business may be improper or at least trigger rescission disclosures. This is a matter for your attorney to review.
It may well be that when the loans were made, the bank intended to hold the mortgage or to sell them to an investor. Many of these circumstances changed for borrowers, based on the way it was done when the first loan was made, and the way it is done now, when the loans come due. That is unfortunate. We can't assume what their intentions were. We can only go forward.
Published on BankingQuestions.com 11/03/10
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