Loan Discrimination Debate Continues

I was disgusted by a letter in Robert Bruss’ July 25 column (“Former Loan Agent Reveals Ways Lenders Disguise Discrimination”).

The writer admits that he and his company committed felony crimes in discriminating against minorities in the issuance of home loans and indicts the entire industry with no link of the activities to discrimination. The writer’s comments are irresponsible as well as unrepresentative of the professionals in the mortgage industry.

The letter is dangerous in that it continues the self-fulfilling prophecy of discrimination--it is likely to increase the attribution of any negative action to discrimination.

And the charges of discrimination fly against logic. Most commissioned loan officers are more motivated by the commission dollars they earn if and only if the borrower is successful in obtaining financing.

Further, the letter writer confuses efficiency with discrimination. The writer demonstrates that he was selective in the loan applications that he receives, indicating an unwillingness to “waste his time.” Finally, his recommendation that the lady “file a discrimination complaint” shows the recklessness with these charges in general--there is no proof of discrimination offered.

Most of the professionals in the loan business are interested in helping as many homeowners as possible finance as many homes as possible so they can make the most commission dollars possible.

The anonymous letter writer did everyone a service by leaving the industry.

WILLIAM GROSS

Division vice president, CTX Mortgage Co.

Diamond Bar

*

Thank you for your article regarding subtle forms of loan discrimination. Recently, I applied for a loan with a large mortgage corporation and we were denied a fixed-rate loan. When I received the denial notice, I was upset and thought it was the incompetence of their staff and wrote them a letter expressing my dissatisfaction.

After reading your article, I truly believe it was a form of subtle loan discrimination. I will take your advise, contact the Department of Housing and Urban Development and request Fair Housing Form HUD-903 to file a complaint.

We took our loan package to another bank and it was approved.

SANDRA DAVENPORT

Fontana

‘Tenants From Hell’ Story Helps Bad Guys

Well, thanks a million for the step-by-step guide on how to defraud landlords as outlined in “Tenants From Hell” by Stephanie O’Neill in the Real Estate Section (Aug. 8). In case those “professional deadbeats” who knowingly scam property owners missed a possible gouge, this article will provide a needed update.

LILLIAN TRUBERT

Lake Mathews

*

As I was indirectly the subject of an Aug. 8 article (“Con Art Tenant Coolly Poses as a Serious Executive”) concerning “Tenants From Hell” I would like to clarify a point that may have great significance for landlords in dealing with deadbeat tenants.

As the landlord, I never attempted to cash the check that I received from my prospective tenant but simply attempted to verify the funds, by telephone, from the bank through which it was drawn. The legal principle that landlords should be aware of is that by simply accepting the check, even in the absence of a signed lease, that landlord has committed himself to a lengthy and costly unlawful detainer action should the check prove to be uncashable.

Unlike many standard business contracts that contain recision clauses or specifically outline remedies for breach, the standard real estate lease offers no expeditious solutions to residential landlords who simply want to regain custody of their own property. I do not profess to be expert in the area of real estate law but did consider myself reasonably familiar with residential leases having owned other income properties. What I did not know and what became such an expensive education for me was the extent to which current real estate law and court decisions so unfairly favor tenants over landlords.

CHRISTOPHER RESTAK

Santa Monica

Risk to Sellers Carrying Back 2nd Trust Deeds

As a real estate litigation attorney, I took interest in your Aug. 1 article “Precautions in Taking Back Trust Deed” by Benny L. Kass.

The article contained a misstatement about the right of sellers who carry back a second trust deed to sue for a deficiency judgment after the first trust deed holder has already foreclosed on the property.

Kass states: “A second deed of trust means that you are in a second position to find a first trust lender. If the first trust lender forecloses, and there is not enough equity in the house to pay off your second trust, your trust will be wiped out.” This is a true statement. My problem lies with his next statement: “While you still have the right to sue the person who bought your house under the promissory note, obviously if they are in financial difficulty, this right to sue will be meaningless.”

Although this may be true in other states, it is not true in most cases with respect to California law.

California Code of Civil Procedure Section 580b is one of several anti-deficiency statutes in the California Code. It bars deficiency judgments against buyers of real property who give deeds of trust to “vendors” of real property to “secure payment of the balance of the purchase price of that real property. . . .” The term vendor is broad and includes residential seller carry-back loans currently advocated by many brokers.

In most cases, a first position seller carry-back deed of trust will be adequate to ensure repayment in full to the seller. Unfortunately, the same is not true with a second or third position carry-back deed of trust. And this is where I fear Kass is misleading sellers and sellers’ brokers.

Case law construing Section 580b provides that even when the first trust deed holder’s interest is foreclosed by sale, the standard second trust deed holder normally cannot seek a deficiency judgment, even if the security is completely extinguished by the trustee sale on the first trust deed.

It is very risky from a liability standpoint for a seller’s broker to urge a seller to accept anything less than a first position carry-back deed of trust without explaining in full the attendant risks to the seller in writing.

By contrast, a buyer’s broker puts the buyer in a very favorable position by obtaining a seller’s carry-back second trust deed, but such broker should be careful not to misrepresent the legal effect of such a position.

PAUL A. HOFFMAN

Los Angeles

Caretaker’s Tenure Was Short, Costly

You ran an article Aug. 8 about companies putting caretakers into vacant properties. The idea of living in a nice property at a discounted rent may have attracted some people. However, I would like to share my own experience so that they may be forewarned of pitfalls.

I signed with a company and paid a $400 refundable security deposit plus the rent, which was $400 a month. As I would be moving in the middle of the month, I also paid a prorated amount. The actual amount I paid was $931. I moved in on Aug. 21. The cost of moving my furnishings was $800.

On Aug. 30, I was informed that the house had been sold and was asked to move out by Sept. 27. That being a Monday and a workday, I would actually have to move by Saturday, Sept. 25.

While I am not faulting the company with which I contracted, I am suspicious of the listing realtor since it seems strange in this economy that the house would be sold within a week, the escrow closed and the new people moved into the house--all in less than one month. I believe this was already in the works before I moved in.

I lived in an ordinary house for 35 days, and the cost to me was $1,731 plus money I expended in buying items for the house, e.g., watering devices because the house did not have automatic sprinklers. I also paid to have the utilities installed and the telephone put in (a requirement in the contract). The $400 deposit will presumably be returned.

Even if this was an isolated case, there is an inherent problem built into this program. For situations where an individual moves in, absorbs the moving and other assorted ancillary costs and then is told they have to be out within a month, the result seems to be unfair.

There should be some warranty in a case where the caretaker is in the house for a short time (between two to three months). He or she should be remunerated in another way, e.g., free months at another location or company-paid moving costs.

JANN BOINUS

Northridge