CITY CLERK DEBUT'S NEW TIF PROPERTY SEARCH

WHY EVERY CHICAGO PROPERTY OWNER OUGHT TO CHECK IT OUT

Those property tax bills every Cook County owner received over the last week or two? Did you notice how they have that very detailed table that shows you "who gets what" from your tax dollars? Pretty detailed, right?

Well maybe not so much, if your property is in one of the City's Tax Increment Financing districts (TIFs). TIFs cover nearly one third of the City now. TIF districts divert money from the regular property tax stream to help "combat blight" in those areas.

For years, there has been no public accountability or accounting of its use. Property tax bills do not show any amount of directed being directed to the TIFs (nothing). In reality, TIFs fund a budget nearly 1/6 as big as the "official" city budget. Some quirk in the law or other allows them to hide the numbers from us.

A stunning Chicago Reader expose on TIF financing here. Among the many revelations - City funds will be used to refurbish the Willis (fka Sears) Tower and to help new tenant United Airlines move in. The Chicago Tribune editorial board opines on the matter, here.

Enter City Clerk David Orr. The Clerk''s web site has a new TIF property search function. Enter any property tax identification number, and see how what portion of a tax bill is diverted from the City's budget through the TIF programs.

Progress Illinois took a look at the Mayor's property tax bill in the context of the TIF controversy. It's report, here. (a whopping 92 percent of his property taxes were redirected into the Near South TIF last year. By contrast, cash-strapped schools get a mere 3.9 percent of the Daley's property tax dollars).

THANK YOU

More than 2,300 new Illinois lawyers will be admitted to the bar today, nearly 1,900 more for the Chicago area. Welcome to the fraternity - make sure they show you the secret handshake.

That swells our ranks to roughly 86,000 souls.

Collectively, we only closed 76,800 or so home and condo sales in the first 9 months this year - which works out to fewer than one contract per counselor - ok - 2 per, if you allow for a buyer's lawyer and a seller's lawyer on each deal.

I have been fortunate to work with a good many terrific buyers and wonderful sellers this year. There are obviously a great many lawyers to choose from. Thank you, for everyone's kind referrals, and Thank you to everyone who has referred a client or two along the way.

NOVEMBER MONTH END CLOSINGS - A Warning

Many are first time home buyers trying to squeak "under the wire" in hopes of closing contracts before November 30th - the sunset date for the Federal First Time Home Buyer's Tax Credit. The impending deadline presents some unique challenges for Buyers and Sellers.

That November 30th deadline comes smack dab at the end of the Thanksgiving day weekend. (What genious in Washington did that?) That means a host of closings are being scheduled for Friday the 27th and Monday the 30th the last two possible days to get closings done.

• Will the title companies and lenders cancel all holiday vacations and work at full capacity to get these closings done expeditiously, or will be have to sit for hours at the closing table while closers handle multiple simultaneous closings?
• Will loan officers and processors get files to the underwriters with time enough for review and to satisfy conditions before the inevitable holiday slowdown, or will some Buyers be disappointed when there lenders "blow" the November 30 deadline?
• What about those pesky property tax bills?

That last one worries me a bit more than the others. Don't forgot the interplay between the federal tax credit deadline and Cook County's Property Tax Deadline.

Cook County taxes are, of course, theoretically mailed in August to be due on September 1st. This year, as in what 16 of the last 17 before it, the taxes came out late; Mailed last week and due December 1st.

Sellers are going to have to pay those taxes at or before closing. If the Seller's mortgage lender pays the taxes from an escrow, the Seller is going to have to somehow prove to the title company that they in fact did so. We may be able to prove payment three different ways:

1. Show a paid receipt
2. Confirm payment on the County Treasurer's web site.
   
3. Show proof on the lender's mortgage payoff statement that the tax payment was disbursed (even if not posted paid by the County).

Lenders do not all pay tax bills as soon as they are received (do you?) Most wait until the deadline nears before sending the payments in. The Treasurer does not report payments to her web site in real time. No title company is obligated to accept that payoff statement as a proof of payment. Many might refuse them altogether. Others may require sellers (or their attorneys) to sign "personal guaranties or hold money aside from the closings.

Sellers, Attorneys, and Real Estate Agents are strongly encouraged to coordinate property tax payments with mortgage lenders as possible to minimize the possibility of a title clearance problem or a hold back of seller proceeds.

Mortgage Fraud still a Growth Industry?

New Report Predicts How, & Where its Happening

We may be done with the recession, but there is still a lot of pain left for the mortgage industry and for property values in distressed areas. A new report predicts increases in mortgage fraud ahead for states with high foreclosure rates. When fraud risks rise, increased foreclosure activites follow.

Nevada has the highest mortgage fraud risk, California Arizona and Florida. Chicago notwithstanding, Illinois risks trail the national average.

An abundance of distressed borrowers, oversupply of foreclosed properties, and relaxed lender valuation guidelines (??) all seem to be fueling new schemes.

Most involve property valuation fraud. A trend towards undervaluing REO and short-sale properties is noted, but most often values are falsely overstated so that borrowers can extract more equity from properties. Increased reports of inflated appraisals continue "with a vengeance", (the National risk index is up 25% in the last quarter alone, a trend that started in Q4 2006.

No surprise to me that appraisers are missing the mark high or low. I have seen plenty of deals that have been impacted by "problem" appraisals, but I am a bit impressed that scammers have figured out how to get "the right" valuations on distressed properties - for sales and re-fis, what with the whole HVCC thing and all.

The 2009 3rd Quarter Mortgage Fraud Risk Report was released by Interthinx, a mortgage industry "risk mitigation" firm that apparently screens loan applications for client mortgage lenders.


BONUS: You gotta love the introductory video on this firm's web site. Simply wonderful.

EZ DEC to debut soon

Cook County real estate professionals will soon need to follow new protocols and procedure in the reporting of property transfer taxes due in their client's transactions. The new EZ Dec system is said to be going live next week, and in the new year, it will become the only way to do so.

Transfer taxes are assessed against just about every real estate transaction. The State, County, and City each levy a tax based on the sales price. In 2008, the City tax was famously increased to give a new revenue stream to the CTA. At present, we file three separate forms - one to pay each transfer tax. Frankly, the process is a collosal pain. The forms each ask for a whole lot of common information, but each form is (predicatbly enough) worse than the next. The County gets all the data it needs in a 2 page form. The State form runs 4 pages. The City's 7. Data idata input is sloppy, often inaccurate. I cannot even begin to speculate how cumbersome it is for the tax revenue agents to unspool the reported sales information or monitor compliance.

The new process funnels everything to a singe web portal. According to the Illinois Department of Revenue:

• Combines City, County and State real-property transfer forms (over 300 fields) into a cohesive online website;
  
• Eliminates five real property transfer tax forms;
• Automates tax calculations, and identifies exemptions;
• Eliminates tens of thousands of real property transfer tax paper declarations;
• Validates property data electronically with Cook County;
• Enables title companies to sell, print and issue a "smart" stamp that can be placed on the deed that captures the amount of tax to be paid to each governmental body including the CTA. The new application:
• Creates electronic files for appropriate agency data that will be distributed to each governmental body on a daily basis.

This change should certainly streamline things on the goverment side of the tranfer tax process. It should not probably cause to much inconvenience on the user side of the deal either, though I imagine that there will some rough patches as lawyers and title companies change their work flows to integrate this new procedure.

For myself, I prepare closing documents using a proprietary set of forms using HotDocs. It took me a long time to get the transfer declarations coded properly so that I could full them out automatically at the same time I prepare all the other necessary paperwork. The key benefit has always been that I need only enter data into my computer one time. Everything is produced from a single "answer file." Looks like I am going to have to enter most of that data onto the EZ Dec platform as a separate task. Bummer.

For Buyers, Sellers & Realtors at large, this is going to cause some trouble whenever a deal involves a legal Luddites who or unrepresented seller that is not "computer enabled" or one of the 70,000 or so Illinois lawyers who handles one transaction every five years or so. The rest of us are going to have clue them in early - or do the work ourselves in order to avoid delays at the closing table.

(Cook County Property) TAX MAN COMETH

The Cook County Clerk's Office has released the 2008 annual property tax rates. The state has set out the equalization factors. Look forward to the County treasurer's letter soon folks. Property tax bills will be due December 1st.

The Sun Times reports that, on average, Chicago landowners can expect to see a collective 6.04 %increase from last year. Across Cook County, property owners will pay 4.2% percent more.

Property taxes are computed using four factors:

1. A property's assessed value (look it up here.);
2. The property tax rate (check it out here.);
3. The state equalization factor of 2.9786 (aka the "multiplier") up 4.74 % from last year; and
   
4. Applicable exemptions (described here)
   

Homeowners exemptions (available to anyone who lived in the property as their principal residence as of 1/1/08) can vary based on the property's location and any increase in assessed valuation over the three year assessment cycle, but the minimum homeowners exemption increased for the 2008 tax year, from $5,000 to $5,500, for all Cook County homeowners, Next year this minimum is scheduled to increase to $6,000.

The Senior Citizen Exemption entitles qualifying residents to an additional $4,000 exemption, up from $3,500 last year.

FHA LOAN STANDARDS GETTING TOUGHER

At the same time that conventional lenders are starting to show interest in the Chicago condo market, FHA seems to be pulling back a little bit.

On Friday, FHA announced plans that will tighten many lending standards, some outline below. This action is thought to be a pre-emptive effort as FHA will soon notify Congress that its capital reserve ration is dropping below 2% - the minimum threshold mandated in the legislature.

Under the announced changes:

• Refinance loans will require tighter income & asset verifications and quality controls
• Appraisals will be required whenever a borrower wants to add closing costs to the transaction.
• Mortgage brokers will be prohibited from ordering appraisals, but will not be required to use appraisal management companies. (changes here are consistent with the Home Valuation Code of Conduct, or HVCC).
• Appraisal reports will only be valid for 4 months, down from 6.

There are a couple of less restrictive changes proposed too:

• Appraisals will be portable (a borrower can ask one firm to turn over an appraisal report to another if he/she decides to change lenders. In some circumstances, they will be allowed to order a 2nd appraisal.
• FHA approved lenders must will have to prove more than $1,000,000; up from $250,000.
• FHA supervised lenders will be required to submit annual audited financial statements to assure their financial stability (WAIT - they don't already require this?)
• Mortgage brokers on the other hand, will not have to file financial statements, meet net worth requirements or register directly with the FHA. Instead, the FHA direct endorsement (approved) lenders they deal with will have guaranty all brokered loans.