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Protest overcharge on escrow

I recently received a new mortgage payment coupon booklet from my lender. It says my payment will be increased by $76.08 because of increases in my property taxes. That's understandable. However, it appears to me that the balance in my mortgage escrow account for property taxes and insurance will be more than enough at the old payment rate because of over-collection. Whenever I phone the mortgage company, I get put on endless hold. I've tried writing several times and have received no response. What can I do?

This is a common problem to which there is no easy solution. Federal law requires mortgage lenders to provide annual escrow fund accountings and respond within 30 days to borrower letters and inquiries. But there is no enforcement or effective legal remedy for borrowers who are abused by their mortgage lenders.

If you have the time, you might want to write one more letter to your mortgage company, outlining why you believe you are being overcharged on your escrow account, giving a 30-day deadline to straighten the situation out. If you don't receive a satisfactory reply, sue the lender in local Small Claims Court for the disputed amount each month. When the lender is served with a summons and complaint, the dispute will probably be promptly resolved. If not, then you will get a default judgment if the lender doesn't show up to explain the arrogance. Do this for a few months, and I can almost guarantee that the lender will resolve this problem when you attempt to collect your judgments.

Assigning purchase contract

I signed a contract to buy a new home that will be completed next April or May. The price and terms are locked in. But my plans have changed, and I will be moving away from the area. When I asked the developer about assigning my purchase contract to a friend who wants to take over, the developer pointed to a clause that says the home cannot be sold within 12 months of completion. Is this legally enforceable?

Many developers and home builders include resale prohibition clauses to prevent buyer speculation, especially during the first phase of a new subdivision. I am not aware that such clauses are illegal. However, I am not aware of any appellate court decisions allowing enforcement of these clauses in court.

After your new home is completed and the home builder or developer has his money, he may not care if you resell to your friend within a year. But some developers don't want to see competing "For Sale" signs in their new subdivisions on homes offered at prices that may undercut their own. This is why developers often limit the number of homes they sell to speculators. A lot of "For Sale" signs (other than the builder's) may make some potential buyers wonder, "Why are people bailing out of this place so fast?" even when nothing's wrong.

It appears you want to assign your purchase contract at a profit and move on now. Please read the contract very carefully to see if it prohibits assignment (as many contracts do). That is usually enforceable in court. You could, of course, lease the place to your friend with an agreement to sell as soon as it's legal for you to do so.

An interest-only mortgage

My wife and I barely earn enough income to qualify for a mortgage to buy our first home. The mortgage broker suggests a 40-year mortgage because it will reduce our monthly payment to rock bottom. But it has negative amortization. As I understand it, if the adjustable interest rate goes up faster than our monthly payment is adjusted each six months, we could owe more than we borrowed. Is this a good or bad deal?

Negative amortization is a bad deal for borrowers. If home mortgage interest rates rise gradually, as they are expected to do in the next few years, you could owe more than you borrowed. In my opinion, a 40-year mortgage is not a good deal for either the borrower or the lender. Lenders apparently agree, because very few lenders offer these mortgages.

A better alternative for you, since you want to keep your monthly payments as low as possible, is an interest-only mortgage. Most lenders now offer these mortgages, which are good for both lenders and borrowers.

From your viewpoint, your interest-only monthly payment will be at rock bottom because all you pay is interest. The disadvantage is that you will build no equity from gradually paying down the mortgage. But home equity increase comes from market value appreciation, and mortgage balance reduction is very slow.

Shop around for an interest-only home loan if you want to minimize monthly payments and avoid negative amortization. If your income increases within the next few years, you can refinance with a conventional mortgage so you can build equity.

Leaning tree poses danger

My neighbor's big old tree appears healthy, but it is clearly leaning toward my home. If it falls on my house, I'm facing major damage, perhaps even death. My neighbor refuses to trim the tree to reduce the risk that it will fall on my home. Because the branches don't overhang my boundary, my lawyer said there is nothing I can do. Any suggestions?

Just to establish the facts, you or your attorney should write a polite letter to the neighbor informing her of the negligence risk if her tree should fall on your house. If the tree falls on your house, that letter could prove negligence if the neighbor fails to trim the tree to reduce the danger or even cut the tree down to prevent a loss.

A few years ago, before my neighbor even complained, I noticed that several of my trees were leaning toward her house. Rather than risk damage, I had those trees removed. I hope your neighbor will do the same after receiving your polite but strong letter.

You can send e-mail to Robert J. Bruss by visiting his Web site, www.bobbruss.com. Click on "Ask Bob a Real Estate Question." Or write to Robert J. Bruss, 251 Park Road, Burlingame, CA 94010.

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