Anti-fraud help for home buyers, refinancing owners
If you've bought a house or refinanced a mortgage, you signed a lot of paperwork. Did you understand every word? (Did you even read it?)
Civil Justice, a Baltimore nonprofit that offers legal help to people on real estate matters, has found the answer is a resounding no. Even among the well educated and high income.
Now it has a grant from the Governor's Office of Crime Control & Prevention to try to change that.
The new Maryland Mortgage Fraud Prevention Project will match eligible buyers and refinancing homeowners with pro bono attorneys, who will look over documents, explain them and help folks figure out whether it's actually a good idea to sign them.
"We know from the foreclosure crisis, and from all our representation over the years of people ... who get into bad loans or buy a house and it was property flipping, for example, that nobody had consulted an attorney who was going to be looking out for their best interests," said Diane Cipollone, manager of the project and an attorney with Civil Justice.
Her goal is broader than just getting some buyers and refinancing owners free legal assistance. She wants to change everyone's mindset, so the people who can afford to pay an attorney to look over mortgage documents and home-purchase contracts will do so.
"This is a legal document," she said. "This is a binding agreement. ... I think if we can change the way people think about this, we can avoid many future defaults."
The project is in the early stages. Civil Justice trained more than 90 attorneys (in person and by webinar) at the Federal Reserve Bank of Richmond's Baltimore branch last Friday. (UPDATE: Actually, it trained 54 attorneys. Not everyone who registered could make it.) It hopes to start pairing attorneys and clients in mid-April.
Here's who will qualify:
--First-time home buyers getting a primary residence priced at or below $425,000. (You're considered a first-timer if you haven't owned a primary residence in Maryland in the past three years. Unlike the first-time buyer tax credit, only one spouse has to meet that test, not both.) Buyers also have to attend one-on-one pre-purchase counseling at a state-approved nonprofit housing counseling group.
--Homeowners refinancing their mortgages on their primary residence. Maximum loan amount is $425,000, and the owners can't be in default or getting a reverse mortgage.
If you like the idea but don't qualify, Civil Justice says you can call for referrals to attorneys who will charge a fee.
Ellen Janes, regional manager for community development at the Federal Reserve Bank of Richmond's Baltimore branch, said the Fed intends to study the project's effectiveness and spread the word.
"We are, all across the country in every region, looking for promising approaches to not only help prevent foreclosure and stabilize neighborhoods, but on the front end, come up with as aggressive approaches as we can to help prevent financial harm," Janes said. "I don't think any of us would want to rely on our own wits to get through a complex legal transaction like a home purchase."
Categories: Mortgage fraud/scams, Mortgages, The foreclosure mess
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Comments
Sounds like a waste of money if you ask me. This may have been a good idea during the boom, but the toxic mortgage products are no longer available today. Either you are getting a Fannie, Freddie, FHA, or VA mortgage. Also, the new GFE spells everything out for you. More taxpayer dollars going to waste. As always, they are a few years late to the party. The rules have changed so much since '07 that these issues are no longer valid. They continue to change on a regular basis. There is something called an "Adjustable Rate Note" so you know if it is fixed or not. Also, the lenders have new disclosures to follow so the rate, term, and closing costs can't change during the process. This sounds more like the attorney giving advice if the consumer is getting a good deal such as a low enough rate or paying too much in fees. If so, why not do that with the car business, health insurance, homeowner's insurance, car insurance, life insurance, and every other business where a company tries to earn a profit?
Posted by: Frank Rizzo | March 29, 2010 9:16 AM
Just a week ago we tried to put in an offer on a bank-owned property. It was a standard contract and the scary bank addendum. I did read everything and had some concerns. Randomly, I called some attorneys specializing in the real estate law. Every single one was unavailable until at least the next day. While I was on the phone, someone else made an offer and it was accepted.
I'm not advocating signing the papers that one doesn't understand. But in the below 425K market right now the properties are selling fast. If we had to spend time on mandatory "counseling" (which I don't care for, personally) and then wait for an attorney to become available, we wouldn't be able to buy any property that is a good deal. This is the sad truth in MD.
Perhaps the state and the realtor association should do a better job and come up with a contract that is much shorter and easier to understand for an average homebuyer.
Posted by: Jelena | March 30, 2010 2:06 PM
Good point about timing, Jelena. I think the idea for this effort is to connect early on, but we'll see how it ends up playing out.
Posted by: Jamie Smith Hopkins | March 30, 2010 2:20 PM
Kind of like trying to close the barn door after the horse has bolted.
1. Restore Glass-Steagall
2. Outlaw credit default swaps and financial derivatives
3. overhaul the ratings agencies
Anything short of this is rearranging deck chairs on the Titanic.
Posted by: Josh Dowlut | March 30, 2010 3:27 PM
While the recently revised Good Faith Estimate (GFE)is extremely helpful to borrowers, unfortunately, not all mortgage brokers and lenders are in fact giving the prospective borrower the required GFE. Instead, the customer is receiving some other type of worksheet with estimated closing costs, which are not binding. The best way to protect yourself and be fully informed about legal requirements, complex legal documents and the options you have if anyone in a real estate or lending transaction is not following the law, is to consult with an attorney whose obligation is to protect your interests. First time homebuyers can contact Civil Justice prior to finding a particular house to get connected to a volunteer attorney as early as possible in the home buying, as well as those who are in the early process of a mortgage refinance. Send an email to mfp@civiljusticenetwork.org or call 410-706-0174 to obtain an application for free legal services.
Posted by: Diane Cipollone, Esq.,Manager of the Mortgage Fraud Prevention Project | April 1, 2010 3:55 PM
Thank you for sharing this informative post. This is a big help to avoid scams and frauds in this business. Government should be more vigilant on this illegal activities.
Posted by: Anonymous | April 27, 2011 9:54 PM
I think Janes is right on! This was a great article!
Posted by: Bill Tanner | June 10, 2011 10:28 PM