86 DL sedan brake problems

Months and months ago my 86 DL sedan was loosing brake fluid for some reason. I never could find the leak. It stopped losing fluid all of the sudden after filling the reservoir a few times with maybe 8 oz. total of fluid.

Now, several months later the brake pedal went way down suddenly as my wife was driving the car and coming to a stop. It pushes very easily and the brake failure light is now on. The car still stops but only by pushing the brake pedal down a lot further.

Could this sudden occurrence have been from the loss of a brake pad? I mention that because when I tap on the pedal quickly, I hear kind of a knocking. Should I look for something else?

There does seem to be a little leakage at the bottom of the power brake booster but not any kind of steady leak. I don't see (yet) any dampness around any of the wheels or lines.

Before I get started checking each wheel, one by one, does anyone have a suggestion on what I should check first?

Thanks,

Jay