Q–One day I saw an available HUD-foreclosed house. I checked the price on the Internet and contacted a Realtor friend so I could buy it. When I contacted a mortgage broker, at first he was very good and prompt and said he could also get me an improvement loan (the house needs work). I told him I planned on renting the house that I’m currently living in. He said it would take about two weeks to close the new mortgage loan.
I found a contractor to do the work, got bids and even found a renter for my old home, but it has now been six weeks. The mortgage broker won’t return my calls or give me a copy of the appraisal that I paid for. My renter is ready to rent elsewhere. I’ve missed out on building material sales. Is there some agency that governs mortgage companies? This has been the loan from hell. Can they treat customers like this and get away with it?
A–When it comes to real estate, my 30 years of experience has taught me that everything takes longer than expected. However, if a mortgage broker says he can get your loan in two weeks and if it’s not completed in six, something is seriously wrong.
Was your mortgage approved in writing? Most reputable lenders can get fast, written loan approvals within a day or two, subject to the property appraisal. Funding often takes an additional week or two after the paperwork is ready.
Unfortunately, there isn’t much of a practical remedy when a mortgage broker doesn’t deliver on time. State laws regulate mortgage brokers. You can file a complaint with the appropriate state agency about that mortgage broker, but it won’t do much good.
Your situation shows why personal recommendations are so important when getting a mortgage loan. Your Realtor probably could have recommended a reliable lender who would have closed your mortgage loan by now. The best mortgage loan agents know referrals are their top source of business. Rather than getting even with that bad mortgage broker, I suggest you find a more reliable lender.
Q–Since 1972, I have owned several rental houses. If I sell them, the capital gain taxes will be huge. Recently, you wrote about periodic, tax-free refinancing to take out cash for more investments. If I don’t sell, my adult children will inherit these houses. What should I do?
A–Death is the ultimate tax shelter of all. If you die owning those houses, Uncle Sam will never get any capital gain tax from you (but their net value will be included in your estate). Periodic refinancing to take out tax-free cash is a great way to enjoy your equity without paying profit taxes. Please consult your tax adviser.
