July 2006 "Beware Of Bad Advice From Mortgage Companies"
PLANNING FOR WEALTH & SECURITY
By attorneys Jennifer & Jeff Hawkins
BEWARE OF BAD ADVICE FROM MORTGAGE COMPANIES
This column has indicated in the past that you must be careful when you rely on the advice of others. Unfortunately, bad advice flows freely from people who seem to be reliable authorities. One major source of bad advice continues to emerge from the real estate industry – mortgage companies.
Much of the home mortgage industry uses local mortgage brokers to drum up home mortgage lending business. The mortgage brokers are paid a fee for each loan that they assemble and the brokers have a strong incentive to force loans to close no matter what. Often, mortgage company representatives no little or nothing about real estate law. Unfortunately, the most ignorant mortgage company representatives dish out legal advice by the truck load.
One common problem caused by mortgage companies involves trusts. If a borrower owns real estate in a carefully designed trust, a mortgage company may require the borrower to remove the real estate from the trust before completing the loan. There is absolutely no reason to do this and the removal of the real estate from the trust dismantles the estate plan unnecessarily.
Another problem plagues married people. If one spouse earns much more money than the other spouse, a mortgage company may insist upon titling the real estate and establishing the mortgage loan in the sole name of the wage earner. Unfortunately, if the wage earner dies, the real estate must pass through a probate estate and a surviving spouse may be forced to share the real estate with the deceased spouse’s parents and children.
Mortgage companies often misunderstand the law concerning estates, trusts, and guardianships. In general, if a buyer or seller of real estate or a mortgage borrower is involved with an estate, trust, or guardianship the attorney handling that matter should be involved in all dealings with the mortgage company to prevent the mortgage company from making a mess of the entire transaction.
Real estate remains one of the most valuable assets that most people own. The best way to protect your investment in real estate is to discuss your intentions with an attorney before buying, selling, or taking out a mortgage loan upon real estate. The best legal advice from the people trained and licensed to give it – lawyers.
THIS ARTICLE IS NOT LEGAL ADVICE. ALWAYS CONSULT AN ATTORNEY DIRECTLY BEFORE RELYING UPON THIS ARTICLE OR CHANGING AN ESTATE PLAN.