Dorothy Rhue Allen, 85, had borrowed $40,000 to buy the home in 1976 and had only one payment left to make when she was hospitalized in 2006 and went into default. That's when LaSalle Bank initiated foreclosure proceedings through the law firm, Fein, Such, Kahn and Shepard. Cenlar Federal Savings Bank serviced the loan.
Allen hired an attorney to help save her home, which it did, but the banks say that her $432 due swelled to $5,797 in late fees, penalties and other charges.
Allen's attorney, who purchased the home on her behalf, initiated a class action lawsuit saying that the bank demanded "excessive funds," beyond the scope of what's allowed by federal law, according to Courthouse News Service.
"Be vigilant," is the advice her attorney Roger Mattson gives to others. "You should be vigilant to make sure any bills you have from mortgage companies are warranted and you are responsible for them."
In defending herself, Allen, a widow, has so far paid her own attorneys about as much as her creditors were demanding, but at least the house was rescued from foreclosure while they fight the exorbitant fees.
This is definitely a heartwrenching case that serves as an example of why consumers believe banks have no mercy on homeowners, but at the same time, there were some steps that Allen could have taken to help prevent this time-consuming, expensive scenario, say experts.
1. Electronic reminders.
If you're still hanging on to paper reminders from a "to do" list on the refrigerator door or an oversized desk calendar, backup that list with an electronic reminder. Particular options could be the appointment book on your cell phone, or, the Bill Tracker App for the Blackberry or iPhone Pageonce - Money & Bills app, says Scott Gamm, founder of the personal finance website HelpSaveMyDollars.
2. Auto Bill Pay.
Having your bank issue checks on your behalf, or authorizing a creditor to debit money from your account each
Personal finance expert Lynnette Khalfani-Cox, known as The Money Coach, says, "Personally I like the idea of having as much as possible automated, especially for major bills. You just have to absolutely make sure there will be enough money in your account."
She adds, with auto pay you do run the risk of the bill not being paid on time, or not in the right amount if the amount changes each month or the due date changes. Another problem, says this author of "Perfect Credit: 7 Steps to a Great Credit Rating," says you have little recourse if you dispute a fee or charge but the creditor has already been paid.
An app or auto bill pay might have worked for legendary art critic Anthony Haden-Guest, who learned last January when he returned to New York from an extended stay overseas, that Public Storage had sold everything he owned in one of its storage units to a single buyer after he failed to pay his bill.
"If you went into the storage space it was packed floor to ceiling," Haden-Guest told AOL Real Estate. The value of his papers, books, art, furniture, clothes, was more than $1 million. "I owed them $1,350. I was about three months late," he says.
Haden-Guest, brother-in-law to Jamie Lee Curtis, had simply forgotten to pay his monthly storage fees while he was living in London. It wasn't the first time.
"A couple of times before I was late in paying," he says. "[Public Storage] called me and notified me ,and this time I was never notified. They were very aware of my lawyer and his telephone number in New York and the new owner of my flat. They could have reached me. I am one of the easiest people on the planet to find. [We found him on Facebook.] Sometimes you get behind."
"These are cases where it pays to do some prudent planning from a pure hassle factor to reduce the amount of stress, aggravation and mental worries you have to do endure if you don't plan ahead," says Khalfani-Cox. "The unexpected always happens."
3. Revocable trust and power of attorney.
Everyone age 18 or older should have a Power of Attorney in case they become incapacitated," says Andy Mayoras, an attorney with The Center for Elder Law in Troy, Mich. "Power of attorney documents are not very expensive to have done, and are critically important ... especially for those age 65 and older."
He says also a must is a revocable trust, which allows you to have more control over your estate while you're still living, even though someone else might be handling your affairs when you can't.
4. Inform close friends and relatives.
Even without much complication, one should at least keep a file with account information and a list of bills that are due, all of the experts agreed. This way, you can direct a friend or relative to step up to the plate and take care of business for you when you can't.
Even if you didn't want to pay your bills electronically, each month, for example you can still have the information entered into a bill pay program with your bank, but set it to "manual" rather than automatic. That way you or someone on your behalf would have to go in and actually click "pay" in order to make the authorization.
Khalfani-Cox says it might be wise to delegate this task to a disinterested, but trusted third party who will not be emotionally involved in your illness. If someone is all wrapped up and worried over your hospitalization, it wouldn't be unusual for it to slip their mind to tend to your affairs.
"It would also be nice if social workers at hospitals would routinely mention these issues to families of people in the hospital for more than a week," Mayoras told AOL Real Estate. "Then, in Allen's case someone could have driven to her house and checked her mail, bills, etc., and taken care of it, even without advance planning. If worse came to worst, they could have applied for guardianship [or] conservatorship through the local court and received the ability to manage her money and pay her bills during hospitalization. It never should come to losing a house over this."
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