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Single-family designation for duplex leads to mortgage headache

Dear Benny: I inherited my father’s duplex in 1970 upon his death, my mother having died much earlier.

I have not always lived in this duplex since my father first bought it in 1949 but have lived in it since 1970.

I had planned to sell the building and move to a retirement building, so I took one of those five-year mortgages, about eight years ago, and then realized it was not such a good time to sell, so I renewed the mortgage for another five.

Recently, when it appeared that it was a good time to refinance, I applied for a 30-year, fixed-rate loan. However, I was rejected because my house is designated single-family by the county assessor’s office.

This house is exactly the same as it was in 1949, except for some cosmetic remodeling and repairs over the years I have owned it. It has two units, two entrances and two of everything.

The mortgage has been refinanced several times, and the title brought up every time never showed this problem before.

I contacted the assessor’s office, and they say the value of the house has no bearing on the classification by the assessor and that it will take about 18 months to make any change.

There is no other house like it on this block or anywhere close by in the neighborhood.

Naturally, I need the money from the rental of the second floor in order to qualify and to be eligible for the mortgage.

The bank that currently holds the mortgage, and which I was dealing with for the refinance, took several months before it notified me I was declined. The only reason is the problem with the assessor’s office.

Can you give me some suggestions as to what I can do?

I have not tried to apply with anyone else. I was simply too aggravated.

The current mortgage has a conversion at the end of the five-year period to a 30-year mortgage, of course at a much higher interest rate. I have done nothing since the rejection of my application. –Brenda

Dear Brenda: I am not an appraiser, but I would think that a two-unit building would be more valuable than a single-family house. I welcome comments on this from appraiser readers.

However, there are two steps you should take:

1. Go in person to the county assessor’s office and start the process of having it reassess the classification of your house.

2. Go back to the lender that rejected you and ask when your application was completed. This is important, because under the Equal Credit Opportunity Act, a federal law, lenders must advise you within 30 days from the time a loan application is made whether you qualify or are rejected.

If, for example, more than 30 days have elapsed, you have a cause of action against that lender. I am not necessarily suggesting that you file a lawsuit, but you could use that information as leverage to convince the lender to make you the loan.

Also, show the lender pictures of your house, so that the lender will understand that – contrary to what the city assessor says – it is not a single-family house. Tell the lender that you have started the process to have that assessment changed but that it will take a long time and in the meantime you want to take advantage of the lower interest rates.

If the lender still refuses to give you a new loan, I would go to other lenders in your area.

Dear Benny: I was wondering if you could list your top five to 10 real estate or real estate finance or real estate-related books. –Tom

Dear Tom: Interesting question.

I have many friends and colleagues in the real estate community, many of whom have written books. Accordingly, if I merely list five or 10 such books, I am afraid that I may be overlooking someone and thereby insulting him or her.

Furthermore, quite often books such as “get rich on real estate using other people’s money” or “walk away from your house” (not real titles) go on the market and they give erroneous and misleading information.

And over the years, some of these authors actually had to file for bankruptcy relief. So, I won’t list any such books.

I do, however, have one book that I strongly recommend on tax-related issues. That is “Tax Guide 2010,” Publication 17 by the Internal Revenue Service. You can download it or order it free from irs.gov/pub/irs-pdf/p17.pdf.

In fact, the IRS has many excellent publications on a number of tax-related issues that you can find on their website, by clicking “forms and publications.”

Benny Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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