HOMEOWNERS BEWARE

I was in a store the other day; actually, the State Store, if you must know (buying for a friend, of course), when an acquaintance of mine asked me if I was still writing the column for the magazine. I answered that I was, and he said, and I quote, “I’ll never forget that one you wrote about the true spirit of Christmas being to spend quality time with friends and family, and you said, ‘I would rather have your presence than your presents.’” It was there and then I realized that there are people who read these articles, remember them, and are sometimes moved by them: a very sobering experience for a guy who was in the State Store (buying for a friend, of course).

So, with that in mind, I want to discuss the home mortgage market. It is in the headlines, and it is very distressing. If you own a home and have a mortgage, did you get a fixed rate? If so, you have passed the first part of the test. If your mortgage does not have a fixed rate, then it must have a variable or adjustable rate. These adjustable mortgages are changing their rates upward, so your monthly payments are headed up. That is bad, especially when your income may not have gone up.

And if you want to refinance your home to lock in a fixed rate, perhaps the value of your home has not gone up enough to allow you to qualify for an attractive fixed rate. Or something may have happened at work, such as a layoff or a downsizing, that has negatively affected your credit to the extent that you do not qualify for a new mortgage. You may find yourself in trouble with your lender.

There are many reasons for a property to go into foreclosure, other than late mortgage payments. Some have unpaid taxes, and some are due to a death or a divorce. For instance, when a person dies, and if the person was living paycheck-to-paycheck, once those paychecks stop, there may not be any money saved up to allow the estate to make the payments.

What these homeowners need to be aware of is the potential for abuse. I have read about scam artists with all types of ideas to make money for themselves while causing the homeowners pain. For instance, some will promise to help you out of your debt by finding you another loan or offering to negotiate with your creditors for you, but they will insist upon an upfront fee for doing so. Then they do nothing for you.

Another one involves the homeowner making the monthly payments to a company that promises to “work out something” with your mortgage company. While you are making payments to this person, he keeps your money and your mortgage slips further behind. Now these are extreme examples, but they are happening around the country to the desperate homeowners who don’t have anywhere to turn.

Another one involves the last minute “sale” of the property to a company or an individual (we will refer to them as a “helper”) who promises you that you can continue to live in your home and pay rent to them until you get back on your feet. Sometimes this pitch includes a transfer of ownership, i.e., a deed over to the helper. Then you, the owner, who are making payments and think you are buying the home back, learn that the old loan is layered over with a new, higher-rate loan, so by the time you are ready to buy the home back, you cannot afford to. Now you are out of the house, the original lender has foreclosed, and the helper has helped himself to many months of payments. This is sometimes referred to as equity skimming.

How can you protect yourself? Well, if the “helper” person contacts you rather than you contacting him, that is a tip-off. If the person tells you not to communicate with your lender, that is a tip-off. If he or she tells you not to consult with an attorney or look into bankruptcy or credit counseling, that is a tip-off. And the old adage “If it sounds too good to be true,” applies here, in spades.

All mortgage lenders will tell you the same thing: “If you have a problem, let us know.” Mortgage lenders would much rather have your payments coming in every month than spend thousands of dollars in legal fees and court costs to foreclose on your home, evict you, pay your taxes, insurance and utilities, and clean it, fix it and sell it. They are lenders of money, not property speculators.

Of course, one place to turn when you are up against it on a home mortgage is your attorney. He or she can guide you through this maze and watch your back if you are approached by someone with a plan to help you. Your attorney can help you weigh the good and the bad, and may be able to show you some ways to get back on your feet by yourself. Not all of these stories turn out well, however. But as one homebuyer told his wife at a recent closing I conducted, “The mortgage is simple, honey. We pay, we stay. We don’t, we don’t.” That says it all.

Chris Abernethy is an Elder Law attorney in the North Hills, and concentrates his practice in estate planning, probate, wills, trusts, powers of attorney, living wills and real estate. He is a member of the National Association of Elder Law Attorneys and a charter member of the AARP Legal Services Network.