About Real Estate: Scamsters find a new way to rip off troubled homeowners
Q. My husband and I are in foreclosure. We recently received a letter from a law firm asking if we would like to join a class-action lawsuit against the bank. It said this would guarantee to immediately stop all of the foreclosures the lender has begun against borrowers like us, plus wipe out our entire mortgage debt. The upfront fee to join the lawsuit would be $3,500. Are these types of offers legitimate?
A. A few such offers are legit, but many others are not. And the fact that the law firm would #147;guarantee#148; its success suggests the offer you received is not on the up-and-up.
So-called class-action or mass-joinder schemes are the latest way con artists have found to steal what little money that financially troubled homeowners have left. The scamsters typically promise that owners who join the bogus suits can stop or avoid foreclosure, get a reduction in their loan, outstanding balance or interest rate, and sometimes even void their mortgage altogether so the owner will own the home debt free.
With few exceptions, it#146;s illegal for most individuals or law firms to charge upfront fees to homeowners seeking help in mortgage-related matters. Scamsters either take the upfront cash and do nothing to help the borrower, or milk even more money out of the unwitting owner in coming months by claiming they need thousands of dollars more to file new legal motions, ask for an appeal or the like.
Federal law, however, allows licensed attorneys to charge upfront fees to help stop foreclosure or pursue other mortgage relief if each of four conditions are met: They#146;re licensed to practice law in the state where you live or your house is located; they#146;re providing you with real legal services; they#146;re complying with state ethics requirements for attorneys; and they place the money in a client trust account and only make withdrawals after they have completed actual legal services and notify you of each withdrawal.
Several states have even stricter regulations.
If you#146;re still interested in possibly joining the supposed lawsuit, make sure the attorney or law firm that sent you the invitation letter is licensed to practice in your state. Your local or state bar association can confirm the license and also may be able to provide information about whether the lawyer has been disciplined in the past.
Also type in the name of the individual or firm in a popular Internet search engine, such as Google or Yahoo, followed by the word #147;complaint.#148; You might be surprised at what you find.
The Federal Trade Commission also offers useful brochures and other information through its toll-free hotline, (877) 382-4357, and on www.ftc.gov.
Q. We have been looking at real estate ads in this newspaper, but we can#146;t figure out one term. What, exactly, is a #147;half bath?#148;
A. It#146;s a bathroom that has only a toilet and sink.
A three-quarters bath has a toilet, sink and shower stall. A full bath has a toilet, sink and full-size bathtub.
Q. We recently applied for a mortgage to purchase our first condo, and everything was fine until the lender contacted the homeowners association and discovered that about 75 percent of the development#146;s units are currently occupied by renters rather than owners. The bank has now sent us a letter stating that our application has been rejected because the bank does not loan on condo projects where 70 percent or more of the homes are rented. The bank is giving us all of our money back, but isn#146;t this a weird policy?
A. Weird or not, many lenders won#146;t issue loans in condo or townhouse developments in which 70 percent or more of the homes are rented to tenants. One reason is that they fear, rightly or wrongly, that developments with a large percentage of renters may deteriorate in upkeep and value more quickly than in projects where a greater number of the units are occupied by owners who have a financial stake in the value of the home.
Not all banks share the same opinion. If you call a few more lenders and also some mortgage brokers, you#146;ll likely find a lender who will finance the purchase.
Also consider the Federal Housing Administration#146;s low-rate, low-down-payment mortgage program. It can provide eligible buyers of condos and townhouses with a loan if just 51 percent of the development is occupied by owners instead of renters.
For details, call the FHA at (800) 225-5342 or go to its website, www.hud.gov.
Ÿ For the booklet #147;Straight Talk About Living Trusts,#148; or #147;Free and Clear: Getting the Mortgage Monkey off Your Back,#148; send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.
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