Don't Get Duped by Hidden Mortgage Fees

Q: DEAR BOB: Which home mortgage fees are proper for a lender to charge borrowers? -- Stephen O.

A: DEAR STEPHEN: Some mortgage lenders are constantly working to create new names for unnecessary fees to impose on naive borrowers. Start shopping among at least a half-dozen mortgage lenders for a "no-cost, no-fee" home loan. In today's market, I recommend obtaining a fixed-rate mortgage.

However, if you are certain you won't keep your home more than five years, then an adjustable-rate mortgage fixed for five years can save you a few interest dollars. Be certain that it does not contain a prepayment penalty or negative amortization, whereby the interest rate adjusts monthly or semiannually and unpaid interest is added to your loan balance.

If you are dealing with a direct lender, such as Wells Fargo, Bank of America or Countrywide, the lender's good-faith estimate must reveal all loan charges. But you might be asked to pay legitimate fees to third parties, such as for the appraisal, credit report and lender's title insurance. That's fine. Those are not junk fees.

However, if you are dealing with a mortgage broker, his or her written good-faith estimate might be less reliable.

Watch out for previously undisclosed fees with such creative names as underwriting fee, document preparation fee, loan review fee, warehousing fee and loan origination fee.

If the lender asks you to pay a loan fee of 1 or 2 percent of the amount borrowed, usually called points, ask how much reduction you will receive in the interest rate. For each point paid, you should receive at least a one-eighth percentage-point reduction in your loan's interest rate for the life of the mortgage. Pay a loan fee only if you expect to stay in the house at least 10 years. Otherwise, take the no-cost, no-fee loan with all lender charges included in the interest rate.

DEAR BOB: Our condo homeowners association was assessed $6,000 each for replacement of roofs, which we have to pay even if we sell the condo. My roof was replaced last year, but they still want me to pay $6,000. What can I do? -- Rita S.

DEAR RITA: Your homeowners association was not assessed. Instead, the association has assessed condominium owners $6,000 each to replace the roofs. That's the way a homeowners association works. Even when your individual condo unit won't directly benefit, you are subject to special assessments, approved by the board of directors, that benefit the entire condo complex.

DEAR BOB: My widowed mother died recently, and the lawyer who prepared her trust wants to charge an outlandish fee to fill out the court papers for her small estate. Is it possible that I could file the papers myself with the court? Where do I obtain them? -- Eugene B.

DEAR EUGENE: If your mother left her major assets in a revocable living trust, no probate court proceedings are required. However, if she left a will with a testamentary or irrevocable trust, probate court proceedings are probably required. This is not a do-it-yourself project.

Shop around among probate lawyers. Although state law sets a maximum for probate legal fees based on the gross value of the estate, most probate lawyers will adjust their fees downward if you ask unless there are complications or a will contest involving the heirs.

DEAR BOB: Several days after we phoned our neighbor to ask him to quiet his barking dog, and to stop running his tractor and spewing carbon monoxide near my disabled daughter's room, he built a "spite fence." I live on a lake and had a nice view from my kitchen window for 28 years. What chance do I have to either remove part of the fence that blocks my lake view or cut it down by two feet? What recourse do I have? -- Elly W.

Use Local Explorer to learn about Washington, D.C., Maryland and Virginia communities.

DEAR ELLY: Unless your city or county has a view-protection ordinance, you have no legal right to a view. However, if the neighbor's tall fence is defined by local ordinance as a spite fence, usually 6 feet or taller and built without a required building permit, you may have a legal right to have the fence removed. Consult a lawyer for details.

DEAR BOB: In 1988, my husband and I bought a house together. In 1994, we got divorced, and I removed his name from the title. We remarried in May 2006. I added his name back to the title. If we sell our home within a year and file our income tax returns jointly for 2006, can we claim the $500,000 home-sale tax deduction? -- Rita R.

DEAR RITA: Not yet. For your husband to qualify for an additional $250,000 principal-residence-sale tax exemption, Internal Revenue Code 121 says he must occupy the principal residence at least 24 of the 60 months before its sale.

However, he does not have to be on the title if he meets the 24-month principal-residence-occupancy test and you file a joint income tax return in the year of principal residence sale. Consult a tax adviser for details.

DEAR BOB: I am interested in finding out who is buying the house next door to mine. The sale is pending. Is there any way to learn other than asking the buyers or realty agents directly? -- Carole B.

DEAR CAROLE: No. Until a home sale closes and the title transfer is recorded, the real estate agents and the other parties handling the transfer cannot legally disclose who is buying the home. That is confidential information.

Nor can they reveal the purchase price without breaching their fiduciary duty to the seller and buyer. The only way to find out the buyer's name now is to ask the seller. But that individual doesn't have to disclose the buyer's name.

DEAR BOB: I feel the sellers from whom I bought my home did not disclose a material and expensive problem with the house. The neighbors tell me the previous owners tried extensive repairs over the years to remedy the problem but did not succeed. Is there any way I can learn the disclosures the sellers of my house were given when they bought? -- Diane S.

DEAR DIANE: No. You have no legal right to obtain the written disclosures made to your seller unless they are public information, such as local building permits, pest control inspection report, etc.

Of course, if there are any warranties, such as a 10-year roof warranty, you are entitled to the balance of the covered period. Consult a lawyer for details.

DEAR BOB: I gave my tenant notice to move, confirmed with a receipt of notice. She agreed to move out, but the unit is now locked and no one is there, though her car is parked in the driveway. I phoned several times, but no reply. What options do I have? I have already hired a contractor to update the unit, based on the tenant's promise to move out on schedule. -- Paras R.

DEAR PARAS: Consult a lawyer whose specialty is evictions. I'm sure you have thought of the possibilities: The tenant moved out but left the car, abandoned the apartment and the car, died either in the apartment or elsewhere, is in a hospital, is in jail, is avoiding you because she refuses to move out, or wants to drag out the eviction procedure to obtain as much free rent from you as possible.

All these situations have happened to me with my rentals. Ask the neighbors if they have seen your tenant or any activity at the rental. Then contact the local police to learn if they have any record of activity at the property or if they can trace your missing tenant. After that, follow your attorney's advice to regain possession of your rental unit.

DEAR BOB: Several years ago, my mother gifted her house to me because she was moving into her new husband's home in Florida. Now I want to sell that house, but my tax adviser says I am stuck with my mother's cost basis of only $23,000, while the house is worth about $375,000 today. At the time of the gift, the house was worth about $225,000. Will I have to pay tax on all that capital gain? -- Alan P.

DEAR ALAN: Your tax adviser is correct. The general rule for gifts is that the donee takes over the donor's basis for a property.

Unless the property is your principal residence and you have owned and occupied it at least 24 of the 60 months before its sale so that you can qualify for the $250,000 tax exemption of Internal Revenue Code 121 (up to $500,000 for a qualified married couple filing jointly), your capital gain will be taxable. The good news is the federal capital gain tax rate is only 15 percent.

DEAR BOB: Last year, my husband bought a house with his name on the title and mortgage. I help him pay the mortgage and property taxes. What is the best way for him to transfer 5 percent of the property to my name? How much will it cost? -- Patricia S.

DEAR PATRICIA: If you will be receiving only a 5 percent interest in the property, that means you probably want to hold title as a tenant in common with your husband, who will retain a 95 percent interest. Each of you needs valid written wills to pass your interests upon the death of either of you to whomever you each designate.

Your husband can convey a 5 percent interest in the house to you by a recorded quitclaim deed. The deed should include a legal description of the property, the percent interest transferred to you, the official parcel number, the method of holding title and his notarized signature so the deed can be recorded.

DEAR BOB: My parents divorced in 1995. The judge gave the house to my mom, but she had to either sell it or refinance the mortgage. She wanted to keep the house, but she couldn't refinance because her debt-to-income ratio was too high. My mother gave me a quitclaim deed, signing the house over to me, and I helped her refinance with a new mortgage. Now I want to get my name off the title and put my mother back as sole owner, as she desires. If I do that and my mother dies, am I responsible for the mortgage payments even though I don't hold title? What do I need to do to quitclaim the house title back to my mom? Do I need to go through a title company? -- David P.

DEAR DAVID: If you are now on the title alone, you can sign a quitclaim deed to your mother. However, you will still remain liable to make sure the mortgage payments are made even when you don't hold title to the property.

After your mother dies, the title to the house goes to whomever she names in her will or revocable living trust.

You don't need to go through a title company to quitclaim your title to your mother. The deed must include a legal description of the property, usually with its parcel number, and your signature must be notarized so the deed can then be recorded to transfer title to your mother.

DEAR BOB: Our next-door neighbor, Charlie, is about 65 and retired. He is divorced and lives alone. In 1995, he and his then-wife bought the house for $220,000. Today, it is worth about $650,000. His ex-wife is asking that he sell the house so she can receive her half of the profit. Charlie doesn't want to sell the house and move. My wife and I trust him completely and are willing to use our liquid assets to help him stay in his house. We are thinking of buying the house from him for cash and then selling the house back to him. Or perhaps we can lend him the money to pay off the mortgage and buy out his wife's share, with him getting a home-equity line of credit to pay us back. What should we do? -- Ashley S.

DEAR ASHLEY: If Charlie can qualify to get a home-equity line of credit for the amount needed to buy out his ex-wife and pay off the existing mortgage, let him do it on his own. No sense in you getting involved in a potentially messy situation.

If he can't qualify for a new mortgage, perhaps you can buy the house and rent it back to him. That would give you the rental-property tax benefits, and Charlie and his ex-wife could each claim their principal-residence-sale tax exemption, up to $500,000 total. Consult a tax adviser for details.

DEAR BOB: I have heard that some people can have a custom home constructed by a builder and after construction is complete wind up with 50 to 60 percent equity in their new homes. Is this true, and how can I go about doing this? -- Greg H.

DEAR GREG: Hire a quality custom home builder who charges low construction prices. If you already own a building lot, that gives you a head start. There is no guaranteed way to turn a fast profit on new custom homes unless you can lock in a low construction price and market values rise during construction. (washingtonpost.com)

Baltimore City: Fire highlights lack of shelter for poor

The rowhouse fire in East Baltimore that claimed the lives of six people and left seven injured highlighted a hidden problem of Baltimore housing: poor families who are unable to find or afford decent shelter banding together under one roof.

Advocates said yesterday that the problem is the result of an acute shortage of adequate housing for the city's neediest residents.

They pointed out that the Housing Authority of Baltimore City's inventory has declined by more than 5,000 units in the past 15 years, and that as many as 3,000 other federally subsidized units have been lost during that time. They also said that the loss of permanent subsidized units is not being made up by increases in housing vouchers that allow low-income families to rent in the private market.

"The question I've always tossed out is, 'What happens to all these folks? Where are they?'" said Gregory Countess, assistant director of advocacy for housing and community economic development for the Legal Aid Bureau of Maryland. "The fact that you've got thousands of units of housing lost means that you've lost opportunities for people to live in places that are safe and decent and affordable."

Barbara Samuels, an American Civil Liberties Union lawyer who specializes in housing issues, said about 29,000 Baltimore families are on the waiting list for public housing - a number that is double the number of units available in the city's portfolio of properties.

"Certainly, it symbolizes the desperate need and demand for affordable housing and the diminishing supply of opportunities," she said of the number of people who were living in the Cecil Avenue rowhouse near Green Mount Cemetery. "You see that in the families that have doubled up, tripled up, in this case maybe even quadrupled up."

The loss of low-income units is not restricted to Baltimore. In recent years, Baltimore County has demolished or plans to demolish about 1,500 units in projects such as Kingsley Park, Samuels said. Because the housing market is regional, the loss of those units can also affect the demand for low-income housing in the city, she says.

"Was some of that housing bad?" she said. "Sure. But nothing is being done to replace it."

Nationally, the National Low Income Housing Coalition wants to create 1.5 million new rental units for needy families, a goal that carries a price tag of about $5 billion, said Nicole Letourneau, a spokeswoman for the advocacy group.

A first step toward reaching that goal was taken Tuesday, when the House of Representatives included $600 million over five years for a national housing trust fund as part of reform legislation for federally chartered private lenders, Letourneau said.

"From the standpoint of the NLIHC, doubling up and tripling up in housing is one of the effects of having a lack of housing that's affordable to people with the lowest incomes," she said.

In Baltimore, the practice - which appears to have been the case in the Cecil Avenue rowhouse - is nothing new.

"It's always been a problem," said Stanley Sugarman, a longtime property owner and manager who recently got out of the business. "I used to go around and see the tenants and you'd see people in the basement or my plumber would tell me there are people sleeping next to the hot water heater. They'd say, 'The people are just visiting.'"

The problem is partly a lack of money in a city where the poverty rate for individuals is nearly 23 percent and for families is nearly 19 percent, figures that are nearly double the national average, according the Census Bureau's most recent American Community Survey.

"A lot of people don't have the ability to pay for decent housing," Sugarman said. "They have to double up. They rent rooms."

The phenomenon is also reflective of broader problems in the city's low-income rental market.

In a 2005 study funded by the Abell Foundation and published by the Urban Institute entitled "Low-End Rental Housing: The Forgotten Story in Baltimore's Housing Boom," Sandra Newman found that the low-income rental market was in "poor shape."

Newman, the director of the Johns Hopkins Institute for Policy Studies, found that as of 2000, half of the rental units in the city were costing less than $400 a month.

"But because so many renters are poor, even these low rents are unaffordable to many," Newman wrote. "There are about two poor renters for every affordable housing unit in the city."

Advocates say the situation may be getting worse, as the gentrification of some city neighborhoods and the redevelopment of others have led to the loss of private low-end rental units.
In addition, the waiting list for the city's housing voucher program has been closed for four years. Exceptions, according to the Housing Authority's Web site, are made for families who fall into several categories, including being victims of natural disasters, being intimidated victims or witnesses to crimes, being displaced by public action or having a member with a disability.

Presumably, at least one of the families in the Cecil Avenue rowhouse would have qualified under these circumstances, because one of the children used a wheelchair.

But Lauren Young, of the Maryland Disability Law Center, said being on the waiting list is no guarantee of immediate housing.

"It's a long waiting list," she said.

The Housing Authority did not respond to a request for comment.

But in a March draft of its plans for the next two years, the authority said that its "fundamental problem" was "inadequate and unpredictable funding."

Over the past several years, the draft said, the agency's federal operating funds have been cut by $26.2 million and its housing voucher monies have been cut by $18.9 million.

"Maximizing the number of households served will be extremely difficult in light of the inflationary nature of the rental market," the report said.

But Samuels, of the ACLU, said the Housing Authority lost funding for 2,000 vouchers that it failed to use during a six-year period from 1997 to 2003, and that it was diverting millions of dollars worth of vouchers from 2006 through 2008 to other uses.

She charged that the authority is using federal regulatory flexibility to "downsize" its low-income housing assets and calculated that the agency is serving 750 fewer families with vouchers and public housing units than it did in 1992.

Samuels said the authority should be serving more families because of additional vouchers it received to compensate for the loss of demolished public housing and federally subsidized rental units.

"The need is always there," she said. (baltimoresun.com)

Baltimore: Tax sale proceeds amid fairness concerns

Baltimore's annual sale of rights to collect back property taxes proceeded as usual Monday despite pending city legislation that would keep homes from being included in the process over unpaid water bills and Mayor Sheila Dixon's suggestion of amnesty for such debts.

Stanley Milesky, chief of the city's Bureau of Treasury Management, said he didn't yet have information on how many of the 7,699 liens sold to investors involved water bills or other small municipal liens. About 750 such liens changed hands in last year's tax sale.

Rather than trying to collect back taxes themselves, many Maryland jurisdictions sell the collection rights to investors in annual auctions. Those investors buy the right to charge interest and fees that often amount to thousands of dollars, and the right to sue to seize the homes through foreclosure if the debts aren't paid. Some jurisdictions include debts other than taxes in the lien sale process, though that is rare outside of Baltimore.

The Sun reported in March that 400 city homes have been lost to foreclosure over debts other than property taxes in the past three years. Most stemmed from unpaid water and sewer bills, though some also included alley repaving charges, sidewalk repairs and even fees to register rental property. About half involved unpaid charges of $500 or less.

Milesky said city officials have been meeting weekly to discuss tax sales and are expected to make recommendations to Dixon within the month on possible improvements to the system.

"All the other issues with tax sales notwithstanding, it still remains a really effective means for the city to collect the amounts due," Milesky said.

The status of the mayor's amnesty idea, which she brought up during an interview with The Sun for the March story, is unclear.

"That wasn't necessarily the course of action that she charged the work group with," said Demaune Millard, a spokesman for the mayor's office. "The mayor is looking for more than a short-term fix. She's looking at a long-term solution."

City Councilman Bernard C. "Jack" Young, the 12th District councilman who has twice proposed a bill to end tax sales stemming from water bills, is frustrated by the slow pace of reform. City officials have contended that many people would not pay their water bills without the threat of a tax sale and potential foreclosure.

"Working with the Finance Department to get a remedy is just not moving fast enough," he said yesterday. "They're talking about it hurting the bond rating, but I just don't buy that. I'm still concerned about people losing their homes over water bills and especially such low water bills."

Young said he also is considering proposing bills to reduce the amount of interest that can be charged by people purchasing tax liens.

City Councilwoman Mary Pat Clarke, of the 14th District, has introduced a bill to keep liens of less than $1,000 out of tax sales. She also has said that she does not think that water bills, alley pavings and other small bills belong in tax sales.

Yesterday, Circuit Court Clerk Frank M. Conaway Sr., an announced candidate for mayor, sent a letter to the attorney general's office asking him to look into what "seems to be a consumer rights problem." Conaway said that people whose homes are put into tax sale might not realize that they can receive the difference between taxes owed and the bid price minus interest and expenses.

"I think there are millions of dollars that have been taken away from people," Conaway said in an interview yesterday. "It bothers me that people might be getting ripped off - that they aren't getting proceeds they should be getting."

State Sen. George W. Della Jr., who has introduced legislation to reform tax sale law, said he does not know of any summer study planned. But he intends to introduce legislation next session.

"I don't get disappointed nor do I get discouraged," he said. "It's not a fair way for local government to do business. I understand they want to get paid, but let's do it in a fair and equitable way."

Della, too, is concerned about the inclusion of water bill liens in tax sale.

"I think it's ludicrous for residential properties," he said. "It shouldn't be. Is that going to break the back of the city of Baltimore, if they don't get paid their water bill? I don't think so." (baltimoresun.com)

O'Malley heads to Las Vegas for shopping convention

BALTIMORE - Governor Martin O'Malley doesn't have much time to rest after the Preakness Stakes. He's headed to Las Vegas tomorrow for a shopping center convention, where he'll pitch Maryland for retail real estate deals.

The governor will be joined by Baltimore's mayor and county executives from Baltimore, Harford, Howard and Prince George's counties.

The International Council of Shopping Centers is a can't-miss event for local officials looking for economic development deals. Organizers say one out of every three retail real estate deals are either conceived at this meeting or completed there.

Maryland will spend 160-thousand dollars on the convention, including airfare, hotels, a large reception and building a booth that includes three meeting rooms. (abc2news.com)