If you've bought a house or refinanced a mortgage, you signed a lot of paperwork. Did you understand every word? (Did you even read it?)
Civil Justice, a Baltimore nonprofit that offers legal help to people on real estate matters, has found the answer is a resounding no. Even among the well educated and high income.
Now it has a grant from the Governor's Office of Crime Control & Prevention to try to change that.
The new Maryland Mortgage Fraud Prevention Project will match eligible buyers and refinancing homeowners with pro bono attorneys, who will look over documents, explain them and help folks figure out whether it's actually a good idea to sign them.
"We know from the foreclosure crisis, and from all our representation over the years of people ... who get into bad loans or buy a house and it was property flipping, for example, that nobody had consulted an attorney who was going to be looking out for their best interests," said Diane Cipollone, manager of the project and an attorney with Civil Justice.
Her goal is broader than just getting some buyers and refinancing owners free legal assistance. She wants to change everyone's mindset, so the people who can afford to pay an attorney to look over mortgage documents and home-purchase contracts will do so.
"This is a legal document," she said. "This is a binding agreement. ... I think if we can change the way people think about this, we can avoid many future defaults."
The project is in the early stages. Civil Justice trained more than 90 attorneys (in person and by webinar) at the Federal Reserve Bank of Richmond's Baltimore branch last Friday. (UPDATE: Actually, it trained 54 attorneys. Not everyone who registered could make it.) It hopes to start pairing attorneys and clients in mid-April.
Here's who will qualify:
--First-time home buyers getting a primary residence priced at or below $425,000. (You're considered a first-timer if you haven't owned a primary residence in Maryland in the past three years. Unlike the first-time buyer tax credit, only one spouse has to meet that test, not both.) Buyers also have to attend one-on-one pre-purchase counseling at a state-approved nonprofit housing counseling group.
--Homeowners refinancing their mortgages on their primary residence. Maximum loan amount is $425,000, and the owners can't be in default or getting a reverse mortgage.
If you like the idea but don't qualify, Civil Justice says you can call for referrals to attorneys who will charge a fee.
Ellen Janes, regional manager for community development at the Federal Reserve Bank of Richmond's Baltimore branch, said the Fed intends to study the project's effectiveness and spread the word.
"We are, all across the country in every region, looking for promising approaches to not only help prevent foreclosure and stabilize neighborhoods, but on the front end, come up with as aggressive approaches as we can to help prevent financial harm," Janes said. "I don't think any of us would want to rely on our own wits to get through a complex legal transaction like a home purchase."