Q: My mortgage was sold twice, ending up with an out-of-state lender. That is when the problems started. It paid our insurance from escrow when we are escrow waived and have been for 24 years. Then they dropped my wife’s name from the account and have even sent us a default notice. All of these are “keystroke” errors as they told us. On top of that, they have the worst customer service I have ever seen. I never asked for this company; we were sold to them.
Is there a way to get out from under this company other then a refinance that will cost a lot of money? Do borrowers have any rights in where the mortgage ends up?
A: Unfortunately, you have no choice what your initial lender will do with your loan. Most mortgage lenders are not loaded with cash, so to make more loans, they have to sell their loans. In many cases, that lender will continue to service the loan. This means that you will continue to make your payments to that lender. However, many loans are sold to third parties — could be to Fannie Mae or Freddie Mac, or could be to one of the syndicates we have heard so much about during the mortgage meltdown.
But if your lender or the servicer of your loan is making mistakes, you have certain rights. Make sure any mistake does not affect your credit rating.
You can also file complaints against your lender. At the federal level, contact the Federal Trade Commission and the Federal Reserve Board. In your state, complain to the attorney general.
If your current loan carries a high interest rate, you can refinance.
Q: We have owned a condo for 21 years. We would like to sell it for about $310,000 and buy another condo. First, we will buy the new condo, and than we will sell our existing condo as soon as we can. Both condos are for our residence only, not for rent. We do not want to lose $500,000 in exclusion taxes. Both properties are joint husband and wife. Can we do a Starker exchange?
A: A Starker exchange, also known as a like-kind (or Section 1031) exchange, is only applicable for investment properties. But if you and your wife have owned and used your condominium for two out of the last five years before it is sold, you can take advantage of the up-to-$500,000 exclusion of gain. This is known as the use-and-ownership test.
Note that I used the words “up to.” This does not mean when you sell your principal house and meet the use-and-ownership test, you can exclude $500,000 from your income tax. You can only exclude your profit, no more, no less. I suspect you can sell your condo, keep all of the net proceeds and invest that in another unit.
Q: Can you explain what the words “fee simple” mean?
A: Your question brought back memories of my real estate property course when I was in law school. Oversimplified, the property owner who has title in “fee simple” has absolute ownership. It is the highest form of ownership; you can sell it, rent it or mortgage it.
The word comes from our common law. In older days in England, the king was the supreme owner of property. He gave property to his knights, which was known as a “fief.” So when the property was conveyed, it was called an “estate in fee simple.”
I can own my home in fee simple, but not my condo unit. That is because a condo owner does not own the land, the fief. A condo association also does not own the land. Every condo owner owns his or her percentage interest in the land.
Benny L. Kass Housing Counsel – 9:58 p.m. CDT, April 4, 2014
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