Q: I have just reviewed the estimated closing statement on the purchase of a home, and I see numerous fees which don’t make sense and which the realtor cannot explain, other than to say that there are all kinds of “garbage fees” paid at closing. I see that his own company, which will be getting a hefty commission, is charging me $150 for an “Administrative Broker’s Charge” which the realtor quaintly refers to as ‘the ABC’. Can they do that?

A: Well, in Alabama they can’t. HareWynn, Newell & Newton, a law firm in Birmingham, Alabama, has just won a class-action case against the largest realty firm in that state for doing exactly that. You can read more about it here.

Q: I went through a mortgage broker when I purchased my house. I just closed on July 30. A week after I closed, I received a letter stating that the company that they sold my loan to went out of business. My mortgage broker asked me to send my first payment to them while they looked for a new company to service my loan.

Yesterday (August 24), I received a call from my mortgage broker. They said that they just needed me to sign one more document, which they sent as an attachment to my e-mail address. The body of the e-mail didn’t explain the document, just asked me to sign it and return it to them asap. The document is called a “Mortgage Broker Fee Agreement”. The document lists all of the fees that I paid directly to the broker at the closing. However, it also lists a new 2% YSP that has not been on any of my paperwork until now.

When I chose to work with this broker, I asked questions about the YSP right away and was assured that there would not be one on my loan. I checked my paperwork again last night and could not find any mention of this 2% YSP.

My mortgage broker already dated the document that they are asking me to sign for July 27, 2009. My feeling is that they are trying to get this extra 2% commission from whatever new company they sell my loan to. While this is unethical, it doesn’t effect me directly. However, I’m wondering if it can somehow effect me directly if I sign it. Is there any way that this can change what I owe and require me to pay more?

I’m really confused. What is your take on this? Thanks for your help!

A: You shouldn’t send payments to anyone other than the lender or the new servicer. What your mortgage broker has asked you to do – send the payment to him – is as close to a felony as you can get.

The same thing applies to the mortgage broker fee agreement, which you should have received when you first applied for the loan. The 2% YSP is an underhanded attempt by the broker to make an additional commission on your loan.

This mortgage broker spells t-r-o-u-b-l-e, and I’d stay away from him.

Q: My closing date was set for 8/26. On the morning of 8/21 I get a call from my Mtg broker stating that the mortgage company has “decided that they are no longer going to finance manufactured housing” & that she’s “found someone else to finance me but doesn’t know when we’ll be able to close”. The lender that she “found” was the one that was originally was supposed to do my mortgage but the broker said that she was leaving them and would make sure that my paperwork went through with the new company (the one that now won’t finance mfg homes anymore). This all seems very suspicious to me.

I intend to contact the original Mtg company that is playing with my life (according to the broker)but want to have as much info as is possible prior to doing so. Is this legal? Is the broker the one that’s feeding me the line? Any info or advice that you can provide me would be appreciated.

A: Making loans on manufactured housing is a very touchy issue. Most lenders stay away from manufactured housing, and the ones who do make those loans are liable to pull out of it at a moment’s notice. What happens is this: the mortgage company does not use its own funds to fund your loan; instead, they have to obtain a commitment from an investor – usually another bank – to step in and fund the loan. That investor decided apparently not to go through with their commitment.

And that is why I tend to believe your broker – looks like she got caught in something that was not of her own doing. At this point in time keep your fingers crossed and hope that the other lender will come through.

Q: My grandmother has expressed her desire to transfer her property to myself. I was thinking the easiest route would be a quitclaim deed. Not to sure. Please advise as to what we should file so that this is done correctly. Thanks.

A: To transfer a property the correct way, the transfer must be insured by a title insurance policy. Call your local title company and ask them to handle this intra-family transfer. The one-time premium for the policy is based on the value of the property.

Aside from that, there could be some income-tax issues here, due to the size of the gift. You may want to discuss the tax ramifications with an accountant or a tax attorney.

Q: I am being denied automatic termination of my PMI, with the reason being that, “i made additional payments to reduce my balance ahead of time, thus i am not qualified for automatic termination of my PMI.” My loan information shows my LTV at 76%, and a Scheduled 78% LTV date of 07/01/09. Is that right? Please advise. Thank You.

A: It sounds silly, but the lender may have a point. The 1998 The Homeowner’s Protection Act that governs PMI termination offers two scenarios for termination:

1. AUTOMATIC TERMINATION once the mortgage balance is down to either 78% LTV (Prime loans) or 77% LTV (Subprime loans). The LTV is calculated by the lender/servicer by assuming you are making the payments called for – not more and not less.

2. REQUESTED CANCELLATION of the PMI once the LTV is down to 80%. In this scenario, it is up to you (and not the lender) to provide proof that your loan is down to 80% or less LTV. This method is quite useless during periods of real estate slump, when values drop.

Now, let’s go back to the first scenario. If I understand you correctly, you’d be at 78% LTV even if you hadn’t made additional payments. If your loan is not a high-risk loan, the lender should terminate your PMI now. On the other hand, if your loan IS a high-risk loan, they may prevail in an argument and force you to wait a few more months before they remove the PMI. In that case, I would file a complaint with the regulating agency, with the hope that such a complaint would get the lender to move faster.

Q: I had a 80/20 loan combo with the same company; the 80 loan went into default and the house was auctioned off. The 80 loan was originally 64,000 and the 20 loan was 22,000. With the high interest rate we were not paying much on principal so when the house was auctioned off it was sold for $86,000 (the original price when we bought it). But with all the fees and court costs the 20% loan was not paid by the proceeds of the auction and so now we are being harassed by a collection company to pay this loan. My question is, do we have to pay this loan back? I don’t understand why, because what would we be paying for? Please help, we are so confused. Thanks

A: The laws differ from one state to the next. In many states you’d find yourself responsible for any losses suffered by the holder of the 2nd mortgage, and this could very well be the case in your state. You may want to consult a real estate attorney in your area (many offer free consultations).

The California Commission on Judicial Performance describes its mandate thusly:
“The Commission on Judicial Performance, established in 1960, is the independent state agency responsible for investigating complaints of judicial misconduct and judicial incapacity and for disciplining judges, pursuant to article VI, section 18 of the California Constitution.

The Commission’s mandate is to protect the public, enforce rigorous standards of judicial conduct and maintain public confidence in the integrity and independence of the judicial system. While the majority of California’s judges are committed to maintaining the high standards expected of the judiciary, an effective method of disciplining judges who engage in misconduct is essential to the functioning of our judicial system. Commission proceedings provide a fair and appropriate mechanism to preserve the integrity of the judicial process.”

To that end, the CJP’s website lists – alphabetically – all disgraced judges admonished, censured or removed in the past 20 years.

However, the California State Bar (www.calbar.org) is blissfully unaware of that list. Even though the attorney records on its site are supposed to disclose all administrative and public actions taken against the licensees, I have cross-referenced the CJP list with the California Bar records, and – surprise! – no adverse actions are shown on any of their records. Moral lapse on the part of the ethics-enforcers?

Q: I am buying a bank owned foreclosed home in Michigan. The asking price was $$40,000, but wee finally agreed on $37,500 with concessions of $2,500. Closing is to take place no later than the end of this month. Two weeks ago, I was faxed an addendum that states the sellers concessions will be 2,250, and not $2,500, and that if I don’t sign the addendum, the contract is void. I have already given the bank a deposit of $1,000. My Good Faith Estimate states that I will need to bring approximately $3,500 with me to the closing. I have already paid the Mortgage Appraisers $400, and I have already signed the addendum that states I will not get a “warranty deed” but instead I will receive a “quit claim” deed. In addition to the money needed at closing, I also have to pay my real estate agent a fee of $195 and a “reo compliance fee of $395.

Does this all sound right? thank you for any help you can offer.

A: You have raised a number of different issues, which I will try to address:

1. A quit claim deed is not as good as a warranty deed and it does not give you a perfect title to the property; however, most deeds given in foreclosure sales provide a less than perfect title, as this is the nature of the beast. Having said that, it seems to me that since you are not buying the property in a foreclosure sale but directly from the bank, you should insist on getting a warranty deed.

2. Only a review of your contract can determine whether the seller can change the concession from $2,500 to $2,250. Normally, I would not get too uptight over a minor change of $250, but the question remains: does the contract allow the seller to change the seller’s concessions?

3. The closing fees could have been negotiated by you when you first made the offer to purchase. As they stand now, they are certainly not out of line.

Since the purchase of a bank-owned property introduces some elements of risk to the transaction, it would make sense to spend a couple of hundred dollars and have an attorney review the documents.

 LEV L. DASSIN, the Acting United States Attorney for the Southern District of New York, announced that DOMINICK DEVITO was sentenced to 51 months in prison on May 19, 2009, by United States District Judge BARBARA S. JONES in Manhattan federal court for mortgage fraud, insurance fraud and obstruction of justice.

According to Counts One, Thirteen and Fourteen of the Indictment, the charges to which DEVITO pleaded guilty; other documents filed in the case; and statements made during the guilty plea and sentencing proceedings: From January 2002 through November 2004, DEVITO was the leader of a fraudulent real estate investment scheme that purchased multimillion-dollar residential properties in various communities in Westchester County — including Purchase, New York — with loans obtained through the submission of false and misleading information to banks and other lenders. DEVITO identified properties for sale, orchestrated the purchase of the properties, and performed construction work at the properties.

In addition, from January 2003 through February 2005, DEVITO engaged in a scheme to defraud insurance companies by submitting false and misleading insurance claims and supporting documents for water damage caused by broken pipes at several of the homes he and his co-conspirators had purchased as part of the mortgage fraud scheme. DEVITO obstructed justice in connection with his sentencing in 2003 in Manhattan federal court for racketeering and mortgage fraud in an earlier case. Specifically, DEVITO submitted false and misleading information regarding the value of his assets and his personal net worth following his sale of a property located in Purchase, New York.

DEVITO, 45, pleaded guilty before Judge JONES on July 22, 2008. In addition to his 51-month prison term, Judge JONES ordered a supervised release of 3 years and ordered DEVITO to forfeit a total of $1.4 million.

Q:

Like many of our neighbors in Las Vegas we refinanced our home mortgage 3 years ago and paid off credit cards.  We accepted a less than interest only payment plan where the balance of our loan increased each month and now the total is well above the estimated value of the home. As the reset date approaches we have attempted to refinance into a fixed rate, we can afford a higher payment, just not the higher rate current mortgage.  We would have to come up with about 35,000 as the appraisal is 250,000. Our credit is very good, all are bills are current, and we own our cars.  Do you have any advice?  I don’t feel we were deceived; just victims of circumstances.  Any help would be greatly appreciated,

A:

Although negative-amortization loans have received a bad rap in the aftermath of the mortgage meltdown, in reality they are an excellent cash management tool in the hands of a borrower who understands how the loan works.

I assume that your monthly payment statement gives you 3 payment options:

1. A minimum payment (e.g. 1.0%)

2. Interest-only payment

3. A fully-amortized payment.

Option 3 is based on the full interest rate, and in any month that you choose that option, your mortgage balance will be reduced. Now, if you were successful in refinancing your loan, I doubt that your new interest rate or payments would be that much different than what option 3 is already giving you.

Unless your lender is willing to allow a loan modification, your best bet might be to stay with the current mortgage.