DEAR BENNY: I purchased a condo in California in January 2009 and was able to get a second mortgage through the seller to help me purchase. Dealing with the sellers has been a bit of a hassle.
When I contacted the sellers in order to assure that I received a statement of the interest paid on my loan about two months ago, they informed me they were unable to deposit two payments I sent them through my online banking system. One of these payments was in April 2010 and the other in September.
How long does the lender have to inform me of a missed or late payment? Since it has been so long it has been somewhat difficult for the bank to figure out what exactly occurred with the April payment. I am planning on refinancing in order to avoid dealing with this lender. –Brandy
DEAR BRANDY: That’s an interesting question that has never come up before. And I must confess that I really don’t know the answer. I do know, however, that commercial mortgage lenders who receive more than $600 a year in interest must send their borrowers a Form 1098 by the end of each January. However, if your lender (the seller) is not in the business of lending money, he has no legal obligation to send that form to you.
My suggestion: Figure out how much mortgage interest you paid. You can get some assistance from the calculators at www.mtgprofessor.com/calculators.htm.
To protect yourself, however, you should check with your bank to see if those checks were, in fact, cashed. Most banks allow their customers to research their account online, and this may be helpful to you.
One additional suggestion: Especially when you are not dealing with a commercial financial institution (such as a seller take-back mortgage), check with your bank monthly to see if your payment was negotiated and cashed.
DEAR BENNY: Regarding a recent column, sorry but you are wrong about the capital gains tax on the gifted million-dollar house. The tax would be 28 percent of the capital gain, not 15 percent. The alternative minimum tax (AMT) applies to capital gains, not just income. That million-dollar gain on sale of the house would push your reader way into AMT territory.
I received assets from my father’s bypass trust when my mother died. I sold the assets expecting to pay 15 percent on the capital gains. The capital gains pushed me into the AMT and I had to pay 28 percent tax on the appreciation of the assets since my father’s death in 1996. Look at page 2, line 53 of the AMT form for the calculation. No one mentions this little trap when they talk about the so-called Bush tax cuts. The bypass trust turned out not to be a great thing tax-wise. –William
DEAR WILLIAM: I don’t profess to be a tax accountant, and learn a little every day. I believe you are correct (I did look at Internal Revenue Service Form 6251). However, I cannot provide specific legal or tax advice and accordingly urge readers to consult with their own tax and legal advisers.
DEAR BENNY: I hope you can help me. I am a 78-year-old single woman living alone. Some weeks ago, my next-door neighbor fenced in his backyard with Gothic picket fencing. There was an old wire fence about 4 feet tall on my property separating our backyards. Before he started, he called me over and said he would do whatever I wanted: put the fence on the property line or take down my fence and put his in its place. Knowing he wanted an answer right away (as the installer was there with him), and thinking the fence was probably a foot or two at the most inside the line, I told him he could put it in place of mine.
I now believe the fence may be further into my yard than I first thought. Do you think it would be a good idea for me to ask him to purchase the strip of land, the entire length of which is 139.28 feet from front to back? I’m concerned there may be a problem (especially for him) if and when I sell my property. –June
DEAR JUNE: The first thing you should do is to obtain a survey of your property. A surveyor can quickly determine whether the fence is on your land or not. You can find surveyors in the Yellow Pages (or online) and the cost should not exceed $300-$400.
If the fence is really on your property line, you have three choices. First, demand that he remove it, since he is trespassing on your property. Second, ask him to buy that strip of land, although he may not want to do that. Third, you can just leave the situation as is.
However, the last alternative can cause problems for you if and when you ever want to sell your house. Mortgage lenders usually require that their potential borrowers (the homebuyers) obtain a survey, and if the fence is on your land, your buyer may be concerned about this.
Why? Many states have laws called "adverse possession." This means that if your neighbor openly, notoriously and hostilely puts his fence on your property, and the requisite statutory period of time has elapsed, your neighbor can claim the land as his own. This does require court action, but generally, when a person puts up a fence, the courts don’t have to spend a lot of time deciding the case.
If you opt for the third alternative, at the very least you should send your neighbor a polite letter, advising him that you are consenting to his encroachment for the time being, but nevertheless reserve all rights in the future to demand he take it down.
Why this letter? Remember that one of the tests for adverse possession is "hostility." That means that the fence was put up against your wishes. If you consent (and keep the letter in your files), you have removed this defense.
DEAR BENNY: I own a manufactured home and recently paid off my chattel loan. However, in order to clear the lien, our secretary of state requires that I pay an additional cost. The bank stated we might not have to do this. Will this impact selling the home in the near future? –Phil
DEAR PHIL: That’s a good question, and I first have to explain what a chattel loan is. Oversimplified, it means "personal property" — whether that be a car, a refrigerator or a mobile home. It is something that is not real estate. A mobile home can be moved from place to place.
When you get a loan on a house, you give a deed of trust (also called a mortgage) to your lender, who records that document on the land records in the jurisdiction where the property is located. Recording puts the world on notice that there is a lien (a cloud) on your title.
However, when you get a loan for a mobile home, technically there is no mortgage document to be recorded. But the lender still wants to make sure that if you are in default, there is security against your property. Accordingly, many years ago, a system of recording such personal property was developed and was called "chattel loans"; this recording system put the world on notice of your financial obligation to the lender.
In recent years, most states (except Louisiana) have enacted the Uniform Commercial Code (UCC), and chattel loans are now recorded in the UCC filing in each state.
Since I suspect that your mobile home loan was, in fact, recorded in the UCC filing, you have to have it released from the records. Otherwise, when you go to sell your home, that obligation will show up in a search.
Accordingly, I strongly suggest that you pay the nominal fee to the secretary of state and have that loan released from the records.
DEAR BENNY: We have recently paid off our mortgage loan and received two documents from the bank that state the loan was "paid and canceled." We also received a "disbursement check voucher" that states the mortgage was paid in full. Are these two documents all we need or are there more that we need to prove that we own the house outright? –Luis
DEAR LUIS: That is not all you need. As discussed above, your mortgage (called a deed of trust) was recorded in the county where your property is located, and you have to have it released from land records. You can either have your attorney do this, or you can go to the recorder of deeds in your county and they should be able to assist you.