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Showing posts from 2008

Market Conditions: November Sales Plummet 41.3% Year Over Year

Its not like anyone in the Real Estate market needs numbers to quantify the severity of the pain, but just the same, here Crib Chatter's is a quick, dirty summary of Illinois Association of Realtors' November sales reports:

Chicago home sales continue to plunge, as November recorded the sharpest year-over-year decline in the city in 2008.Sales of single family homes and condominiums in the city fell 41.3% in November compared to a year ago. Only 1,057 sales closed compared with 1,801 in November 2007.The median price declined 23.3% to $222,500 compared to $290,000 in November 2007.“The REALTOR® Association is calling upon the federal government and mortgage industry to address continuing problems that are impeding the delivery of mortgage credit to potential homebuyers.” said David Hanna, president of the Chicago Association of REALTORS®.“Mortgage insurers need to make sure they have not over-corrected and added unnecessarily strict underwriting standards preventing people fro…

Mortgage Appraisals

Here's a head scratcher....

My client wishes to purchase a bank-owned property. His mortgage lender orders an appraisal to confirm the property value. So far, so good, right?

The appraiser visits the property, checks for comparables in the neighborhood and reports that the contract price is fully $20,000 belowthe appraised value. The comps are all higher, too.

Yes, you read that right folks. Buyer would be get the house for less than market value. An instant (paper) gain of at least $20,000. More equity for the borrower/owner. A lower "loan to value" ration. That is a good thing, isn't it?

Apparently not; the underwriter denied the loan. Blames the appraisal.

huh?

Property Disclosures - tales of the Macabre

Back in September, we discussed the emerging trend that requires sellers in some states to tell buyers whether or not a particular property was ever used as a meth lab. Today, our discussion of disclosures turns on quite a different circumstance. This is an actual case decided in the Supreme Court of the great State of Alaska.

Factually folks, this one is pretty gross.

Ida Mae Johnson owned a home in Anchorage. In April, 2003 police discovered Ms. Johnson's body in the kitchen of the home. She had died of a heart attack approximately one month before her body was discovered, and during that time her body had partially decomposed. It was later learned that fluids released during decomposition caused structural damage to the kitchen subfloor. The sellers (Ms. Johnson's surviving daughters) told the buyers that their mother had died in of a heart attack in the home, without mentioning any of the other gruesome details.

The buyers moved into the house shortly after…

Pointilism in West Lawn

Here is a fairly sobering graphic. The map shows ONE ZIP CODE on Chicago's South West Side, 60629.

The red dots represent all of the properties in that zip code that are either in pre-foreclosure or are already bank owned. In just the first four months of 2008 alone, there were nearly 600 foreclosure lawsuits initiated in this area. The map was put together by the Southwest Organizing Project and LISC/Chicago. It was the centerpiece of Senator Durbin's testimony to the Financial Services and General Government Appropriations Subcommittee Hearing last week.

Just about every real estate lawyer I know has handled closing involving distressed properties. I certainly have worked on FAR TOO MANY bank-owned properties; foreclosure-pending properties; and short sales. I have seen an unsettling number of other sellers pay money at closing to complete a closing. These are not happy transactions.

But they are each individual tragedies. Isolated deals. Each family suffers the pain once. They…

Happy New Year (TItle Fees are Going Up Again)

Well, what else would you do if the volume of your business is down; and if the pricing scale for your product is tied to real estate sales prices , and the stockholders are upset that the dividends are being cut? Raise the rates!

Chicago Title announced their annual fee increases a bit early this year. (This is the second increase in just five months). The new fees go into effect January 2.

Watch for the rest of the still viable title companies to follow suit soon.

Compare title rates on my web site, here.

What the puck? Blago a hit in Las Vegas....

Who knew they even played hockey in Las Vegas? Apparently they do, and oh boy have they got a promotion cooked up. Kudos to their promotions department for getting way out ahead of the rest of the hockey-as-political-satire poser organizations.

The Las Vegas Wranglers face off against the much feared Victoria Salmon Kings on January 30. They will wear vintage prison uniforms, featuring broad, horizontal black and white stripes and a prison issue number that begins "ILLGOV" with the last two characters representing a specific player's regular uniform number.

Those nasty, sweaty frocks will be autographed and auctioned off for charity at the game's end. A seat between the two benches will go to the highest bidder as well.

Sure its embarrassing for us, but the team wants you to have some compassion for the players. Apparently they were forced to wear pink for cancer research last year, and had to grow mustaches and wear light blue helmets to auction for prostate cancer. M…

HOW TO MAKE MONEY IN REAL ESTATE - December, 2008

For the most part, I try to focus my real estate practice on residential properties, but as someone who offices downtown, I was particularly taken aback by two news items reported this morning. Both involve what appear to be real estate plays that will generate sizeable revenue streams, even in this "down" market; We're talking about parking. That's right, parking. Basically, build the parking area and lay down a few stripes. Invest in some payment collection meters or machines, and voila, you can pretty much kick back and enjoy the ride. Its like printing money.

Don't quite believe me?

First off, read (and weep at) this November 17 Sun Times piece on the "skyrocketing" cost of off-street parking downtown. Next, check out the details of the newly announced privatization of on-street parking. (Spoiler alert: the cost of Off-Street parking downtown has gone up 20% over the last three years. On street parking is about to increase 400% over the next five.

Lo…

FIDELITY & LAND AMERICA - the story continues

"Door Buster" is to Black Friday, as Turkey is to Thanksgiving. And so it will go on the day after the turkey day. Sleep deprived and crowd-worn citizens will set out in hopes of buying the things they want (or think they want, anyway) at a discount to what they had previously been selling for.

Business types (at least certain title insurance types) seem to be more interested in maximizing a four day work holiday this year, so they concocted their own door buster deal yesterday; before adjourning for Thanksgiving. According to news reports, Fidelity is buying LandAmerica's title insurance business after all - after LandAmerica files for bankruptcy protection and sheds off some less desirable assets. LandAmerica will then sell its principal title underwriting units to Fidelity National for a combined $298 million. Chicago Title will buy Commonwealth for $158.6 million, and Fidelity National will buy Lawyers and United for $139.4 million.not all of LandAmerica.

You may …

WHAT???? closing costs are going up?? again??

OK, maybe not everyone's. yet.

The McHenry County Recorder's office has announced an $8 fee increase for each document recording, effective December 1.

The minimum fee per document is now $50.00. Buyers record a Deed and Mortgage. Sellers record releases of all mortgages and other liens that are paid off in connection with a closing.

CONGRATULATIONS LANE TECH INDIANS!

Congratulations to the men of the Lane Tech High School football team, winners of the 2008 (Chicago) Public League Championship. Lane took the crown in a decisive victory over Hubbard over the weekend, with a most decisive 24-7 victory.

Full game highlights, and a nice mention of son number on the Booster Club web site

Next up for Lane, a showdown against Loyola on Friday at Soldier Field, the 75th annual Prep Bowl.

according to wikipedia,
As early as 1927, the Chicago Public Leage football champion met the Chicago Catholic League champion at Soldier Field for the city title. The game would be later dubbed the Prep Bowl in 1934 by Mayor Edward Kelly as a Thanksgiving fundraiser for the city's poor. Until the advent of the Illinois state playoffs in 1974, the Prep Bowl was the main attraction of the fall season, attracting crowds in upwards of 100,000 in its heyday and averaging close to 65,000. Since 1974, crowds have dramatically dwindled with the emphasis switching to earning a stat…

LandAmerica, we hardly knew you.....

Inman News Reports:

Fidelity National Financial Inc. has called off its plan to acquire troubled rival LandAmerica Financial Group Inc., the companies said Friday, calling into doubt LandAmerica's long-term prospects.Fidelity and LandAmerica both issued terse statements at 8 p.m. Eastern Time Friday saying Fidelity had exercised its right to back out of the deal during a due diligence period.LandAmerica lost $599.6 million during the third quarter and was in danger of defaulting on its debts, the company said in a recent regulatory filing. Fidelity announced an agreement on Nov. 7 to acquire LandAmerica in an all stock deal valued at $128 million

Guaranty Title & Trust Company bids Adieu

Title Insurance companies are licensed and regulated by each state the they are authorized to transact business in. In Illinois, that duty falls to the Department of Financial & Professional Regulation. On November 7, IDFPR announced the death of one of those companies, Guaranty Title & Trust Company.

Inquiries regarding the GTT liquidation and requests for Proofs of Claim forms should be directed to: The Office of the Ohio Insurance Liquidator, Attn: GTT, 50 W. Town Street, Third Floor, Suite 350, Columbus, OH 43215. The telephone for that office is (614) 487-9200.

SHOULD CONSUMERS TAKE ACTION? Well, that is going to depend on where you closed or who insures your title.

If your title insurance comes from Chicago Title, Ticor Title, First American, Stewart or LandAmerica, or Old Republic (which collectively control roughly 93% of the title insurance markets) you probably don't have any worries. Guaranty was not one of the "big five." Same goes for titles written…

Title Insurance Company Woes Continue

Most Chicago area home closings take place at a title insurance company's office. Just setting foot into those offices these days tells you all you need to know about the current state of the Real Estate business: Still open, ready and willing to do business, but it's just not happening. Most are pretty lonely places right now.

The numbers seem to bear this out. According to the American Land Title Association and Inman News, All five of the nation's five biggest title insurers lost money during the third quarter.

Those grisly numbers:
First American, the nation's largest, reported an $8.3 million third-quarter loss Fidelity, number two in 2007, lost $198 million and closed 115 title and escrow officesStewart reported $30 million in losses, closed 40 branches, and canceled 1,750 independent agencies LandAmerica lost $599.6 million! which may explain its recent announcement that it was being acquired by Fidelity, and the urgent need for an immediate $30 million in secure…

A Brief Respite on a Chilly November Morning...

Good News: It took two days of hearings to get there, but an Oregon Judge cleared a man of public indecency charges, following his arrest for riding his bicycle, ahem, unclothed. Riding your bicycle naked (in parts of Oregon, anyway) may well be a protected form of public expression (your right to free speech)! Read the whole Oregon News report here.

Chicago's next World Naked Bike Ride will take place Saturday June 13, 2009

HUD TAKES ACTION (sort of)

The body of federal law that governs most aspects of residential closings that involve a new mortgage loan is known as the Real Estate Settlement Practices Act (RESPA). Our US Department of Housing and Urban Development, among other things, issues and enforces the regulations that flesh out andimplement the law.

HUD announced today that it amending its regulations to require mortgage loan brokers to actually give prospective buyers a standardized Good Faith Estimate of their closing cost. OK, the truth is that they already require GFEs, they are changing the format. What was once a fairly incomprehensible one page form is now a three page colorized incomprehensible form, that will come with a fourth page of "explanations"

HUD estimates that the new regulation will save the average consumer $700 at the closing table. Cool right?

Here's the catch:

The reegulation does not go into effect until Janury 1,


2010!

the TITLE INSURANCE pool gets a bit smaller

There are five major title insurance "families" in the United States. Together, they account for roughly 93% of all title insurance here. Last week, two of the five announced a merger. Subject to regulatory and shareholder approvals, Fidelity National Financial and Land America will combine forces, becoming the nation's largest title insurance provider. If so, they will control nearly half of the overall market.

This is not really so much of a merger as it is an acquisition: One of Fidelity's subsidiaries, Chicago Title, is going to bail out Land America with a $30 million in stand-by secured credit to provide liquidity and to help Land America's subsidiaries Commonwealth Title and Lawyers Title pay down other debts.

Conventional wisdom, and historical indications suggest that the title insurance industry is usually a hugely profitable one. In 2003, according to ALTA, the industry paid out about $662 million in claims, about 4.3% percent of the $15.7 billion take…

The Sterling Condos - a follow up

The Sterling residences are just up the street, across the river from my office. I wrote about them some time ago and the high rate of foreclosures there, owing in large part to the developer's creative marketing efforts that fed the greed of many condo investor/speculators.

Here's a pretty grim example of the train wreck that we are all witnessing. The owners of this unit are having trouble selling it at a 40% discount to what it sold for four years ago!

Yikes.

PROPERTY DISCLOSURES

Most Illinois sellers are required to give several different disclosures to prospective home buyers, so that those buyers are made aware of various types of possible (or known) defects. Such property disclosures are required in at least 32 states, some are pretty bare-boned, some are 10 or more pages long.

Locally, we have (a) real property disclosures; (b) lead based paint disclosures; (c) radon disclosures; and in the City of Chicago, (d) heating cost disclosures.

Our real property disclosure covers 21 specifically enumerated types of material defects ranging from unsafe drinking water, to defects in the roof or ceiling, to boundary and lot line disputes.

I just learned of a new one that seems to be an emerging trend in some of our sister states. (Mississippi, Missouri, and South Dakota) now require a seller to disclose whether or not a given property has ever been used as a methamphetamine lab! This disclosure must be made regardless of whether the persons involved in the production…

COOK COUNTY PROPERTY TAX BILLS - the wait is over?

This just in from the WasserlawDepartment of Unconfirmed Facts and Useless Speculation (DUFUS):

2007 Cook County 2nd Installment Property Tax Bills might possibly be mailed out October 3, 2008. That would make them payable on or before November 3, 2008.

This is sourced to a title company closing officer I worked with yesterday and is attributed to a conference call with one of the "higher ups" at the Treasurer's office. The treasurer's web site seems to substantiate the rumor.

I anticipate a rash of louder, more shrill complaints from City of Chicago property owners and from "tax reformer" types when those bills hit peoples mail boxes. More than the usual moans and groans we hear this time of year. We are confronted with a confluence of troubling factors:

For starters, the property tax system is based in part on triennial re-assessments of property values. Chicago properties were last re-assessed for the 2006 tax year, back when property values were (gener…

HELP FOR TENANTS LIVING IN FORECLOSURE PROPERTIES

As of July, one in every 583 Illinois households was in foreclosure. According to RealtyTrac, there were 8,915 foreclosure pending statewide, 5,378 in Cook County, alone. The July numbers represent a 9% increase over June and is 61% higher than in July, 2007.

By now, just about every real estate lawyer in the area has faced a transaction that has involved a bank selling a property already lost to foreclosure, a seller with a pending foreclosure, or a pre-foreclosure "short sale." Sadly, I've seen them all.

Most of the time, these properties are (or were) the seller's principal residence. Others however have been investment properties. A couple of those investment deals have been complicated by the fact that a tenant is/was living in the distressed property.

There is much uncertainty about tenant rights in a foreclosure action. Most often, the lender does not know that a tenant is living in the building and the tenant does not know that the landlord is losing the buildi…

The Current Real Estate Market - Explained in 5 Quick Photos

Your House As Seen By:



Yourself...







Your Buyer...









Your Lender...







Your Appraiser...







Your County Tax Assessor...


Home Buyer / Seller Customer Satisfaction Study

This just in from the Wasserlaw Department of Meaningless Statistics:

J.D. Power & Associates has published its first ever evaluation of customer satisfaction for Real Estate Brokerages.

The inaugural study measures customer satisfaction of home buyers and sellers with the largest national real estate firms. Overall satisfaction is determined by examining three factors for the home-buying experience: agent (65%); office (21%); and services (13%). Four factors are examined for the home-selling experience: agent (43%); marketing (38%); office (12%); and services (7%).

I'll not waste your time (here) citing the winners or losers. Let them brag on themselves if they want to, and you can satisfy your own curiosity by following those links in the paragraph above.

Suffice it to say that I am just not all that impressed with the study or the finding. I know a whole slew of really able and talented (nice) agents working at the "winning" firms and just as many who work for other…

Gloom and Doom Report of the Day

Zillow reports that: 29.1% of homeowners who purchased in the past five years are currently underwater on their mortgages (i.e., owe more on the mortgage than the house is worth). We also reported that almost half (45%) of those that bought at the national market peak of 2006 currently have negative equity. Nearly 14% of all single-family homes in the U.S., regardless of when they were bought, are currently in negative equity.

Read more (if you dare) here.

Gov. to Legislature: "Thumbs Down of Thumbprints"

The Governor has amendatorily vetoed Senate Bill 546 (requiring that notaries take thumbprints of grantors signing deeds for Cook County property transfers, to delay its effective date for one year (making it July 1, 2009) and also delay the sunset repeal for two years (making it July 1, 2013). It will be on the General Assembly's this fall for acceptance of the amendatory veto or override.

NOVEMBER UPDATE:
The Senate and House both approved the Governor's changes. The new law becomes effective June 1, 2009.

...while we wait

The Illinois Association of Realtors is due to release its July sales statistics next week. I'm staring at the computer waiting, with my hands over my eyes but peeking through my fingers. Can anyone say train wreck?

Its getting hard to post on a real estate blog like this one this summer without whimpering or whining or bemoaning the state of the market. Instead, I've been spending a bit time on the bike lately and reading the occasional blog. Sure I like my work and all, but hey - there are worse things than actually taking time to enjoy the really terrific weather we have been blessed with.

Riding the bike is terrific on many different levels. Having your bike stolen is not. So as a public service, I would like to refer you to an important reference point: The Chicago Stolen Bike Registry; and a couple of irreverent ones: Bike Snob NYC and a wacky U-Tube vid.

In the words of its creators, the bike registry exists:
To provide a public forum for the distribution of information abo…

END OF MONTH CLOSINGS

As a general rule, more closings happen at the end of any given month that at any other time, and most of those closings would happen on the last day (or perhaps the last Friday).

So it being the end of July and all, I would ordinarily expect to be closing files with completed transactions. I am still closing lots of files this month, only the number of closed files due to mortgage companies (a) denying loan applications or (b) rejecting short sale proposals, is out-running the number of loan funded.

We are still fighting the good fight, but oh my goodness, how things have changed.

CT ANNOUNCES TITLE INSURANCE FEE INCREASES

Starting August 1st, it is going to be a bit more expensive to buy and sell real estate in the Chicagoland area; title insurance and escrow closing fees are going up.

Chicago Title's new rate structure includes a $50 bump up on all owners title insurance policies (a seller cost) and $50 more for all escrow closings (typically a buyers charge). The charges for "title indemnities" and (Chicago) water department full account payment certifications are also being increased.

I will not be surprised to see similar announcements from other title companies in the not to distant future.

Kudos to CT for kicking up that TI fee, effective August 1, pure nefarious genius there. Property tax bills are supposed to be mailed out on August 1st - payable September 1. When Mortgage Companies expect a tax bill due, they demand that the title insurance company guaranty payment of the taxes. Title company are happy to oblige. They collect money from the buyers who will be responsible to pay t…

NEW NOTARY LAWS in COOK COUNTY

Stand-by for a neat little change to the Illinois Notary Public Act that will likely impact the way we transact real estate closings here in Cook County. Both houses approved SB 0546 as the recent legislative session ended and we are awaiting the Governor's signature. This change, if implemented will require anyone who is selling residential real estate in Cook County will have to present proof of identity, including a thumb print image.

It will fall to the Notaries who witness closing documents to collect this information. We will be obligated to prepare newly devised "Notarial Records" that will include the "signor's" personal identity information, the aforementioned thumb print and even a certification that the transfer involved "residential" real property (Looks like all those childhood hours with a Dick Tracy Crimestoppers Club Junior Detective kit did not go to waste... where'd I put that thumb print pad anyway?)

The form itself promises…

Getting to the FInish Line - the hard way

Its that time of year when my morning work efficiency and intensity is slightly diminished whilst I watch the flash reports of the daily tour defrance bike races on velonews or eurosport. THE most dramatic sporting even of the year (please don't get me started....)

So here is a link to the everyday athleteblog piece on a completely unrelated bike race, the Cascase Cycling Classic and Chris Horner's remarkable Stage Five finish. For those who care about such things, Horner finished 82nd, nine minutes behind winner Moises Aldape, who won the stage. Billy Demond finished with the same time, in 83rd.


(Thank you to friend and chicago cycling club mate Rob Sindelar for the head's up on this one)

Good one Chris!!

BOB DYLAN in the SUPREME COURT

The legal (and music) world is abuzz in response to Chief Justice John Roberts citing Bob Dylan in his dissent in Sprint v. APCC Services. From the New York Times:


Four pages into his dissent on Monday in an achingly boring dispute between pay phone companies and long distance carriers, John G. Roberts Jr., the chief justice of the United States, put a song lyric where the citation to precedent usually goes.

"The absence of any right to the substantive recovery means that respondents cannot benefit from the judgment they seek and thus lack Article III standing," Chief Justice Roberts wrote. " 'When you got nothing, you got nothing to lose.' Bob Dylan, Like a Rolling Stone, on Highway 61 Revisited (Columbia Records 1965)."

Alex B. Long, a law professor at the University of Tennessee and perhaps the nation's leading authority on the citation of popular music in judicial opinions, said this was almost certainly the first use of a rock lyric to buttress a lega…

RETURN of the ILLINOIS ANTI-PREDATORY LENDING PROGRAM

Its back!

Today marks the effective date of the new Illinois Anti-Predatory Lending Database Program. From this point forward, title companies must record a certificate of exemption or compliance with all residential mortgages. Here's one over here --->

Got this sucker at a purchase this morning. Gotta figure its one of the first ones to be issued, given that the law went into effect only hours ago. Cost my clients $50 (a title company charge to handle the paperwork) plus an additonal buck to the County Recorder for the additional page to be recorded. Tacked about twenty additional minutes onto the closing, but all in all (so far) not too bad a disruption of the closing process.

Of course, the real test will be when compliance (non-exempt) certifications start making their way through the closing pipeline. This may not begin for another week to 10 days as compliance certifications will only be necessary for certain specified types of mortgage loans applied for on and after July 1.…

MORE ON AMERICAN INVSCO CONDO FORECLOSURES

Way back in March, I posted some comments on the foreclosure troubles at the Sterling Private Residences, a near-north high rise apartment building that American Invsco converted to condominiums. Today Crains gives statistics to something I "knew" and reported anectdotably back then: the foreclosure problem extends to many of its other conversion projects as well.

According to the story, eight of American Invsco's downtown towers have accounted for 57.7 percent of all foreclosure cases brought against original buyers in all 76 downtown condo projects of 175 units or more since 2001. (Invsco accounted for 12 percent of the homes sold in big downtown projects over the same period of time.)

Crains picks up on the same issue I did in this Spring (and back when clients were showing me contracts to review): "Why do American Invsco buildings lead downtown Chicago in foreclosure cases? One explanation may be the role of investors, buyers who intend to flip or rent out their u…

NEW ILLINOIS MORTGAGE COUNSELING PROGRAM BECOMES LAW

Ray Cohen of Revere Mortgage sent out the alert this morning.

Starting July 1, every mortgage closed and recorded in Cook County must carry a "certificate of exemption" or a "certificate of compliance" for the State's new mandatory mortgage counseling program. Counseling will be required for

ALL loans where all the borrowers are deemed "first time home buyers" (anyone who has not owned a home in the past three years); andAll refinancers, who are taking a loan that include prepayment penalties, interest only payments, negative amortizations interest rates that adjust in 3 years or less, OR where fees, YSP and points exceed 5%.
Ray goes on to note that jumbo adjustable rate loan for lenders with pre payment penalties are currently 2% cheaper than those without penalties. Thus as a practical matter all Jumbo adjustable buyers will need to submit to this (massive waste of time
and money).

The program will cost $300 and will only be offered between 9:00 a…

DO I REALLY NEED A LAWYER FOR MY CLOSING?

Far be it from me to answer that question. Too much self interest to be objective or unbiased. But here is a cautionary tail from Sunny Florida that might (or might not) persuade:"Bill Prekker has been planning to build his retirement home on land he owns in Cape Coral for the better part of three decades.Then, he discovered someone else had already built a home on his property, and the 1,900-square-foot residence has been there for 11 years."

LENDERS BUNGLING THEIR FORECOLOSURES - part 2

The lenders, as a group, seem to be doing a good job at screwing things up even before they get to their orders of foreclosure. They are making it harder and harder for distressed owners to offer compromise or "short sale" proposals. In just the past month, I have seen three contracts canceled in situations where the mortgage holder has taken too long to decide whether to accept a short sale or out-right dis-approved the sale.

Short sales are a necessary and utile solution for owners (and their lenders) where the value of the property is less than the amount owed on the mortgage. The owner, if they can sell for the current market value can get out from under the mortgage obligation without having to resort to foreclosure or bankruptcy and at least minimize the damage caused to their credit ratings. The lender can get back much of the mortgage money lent without having to incur costs of a foreclosure or the time delay involved in a foreclosure.

But the lenders are either unwill…

LENDERS BUNGLING THEIR FORECOLOSURES - part 1

Any looking to understand how and why the mortgage companies got themselves into the financial mess they are in will appreciate the experience a client of mine had recently while trying to buy a foreclosure property from the bank.

The property in question was one of three units in a condominium building. For whatever reason, all three units are now owned by the three banks that foreclosed on the three mortgages used by the three original unit owners.

Each bank undoubtedly made their borrowers covenant to maintain insurance on the condominium common elements. After all, if the building were to burn down, the lender would want to either see it rebuilt or to apply the insurance proceeds towards the loan repayments. Each of those banks also insisted that, in the event of an insurance policy lapse or cancellation, they would have the right to purchase insurance - at their borrowers expense - to prevent such losses. Standard procedure there. No surprises.

BUT, now that the banks took control…

CONSUMER "CONFUSION" LEADS TO HIGHER LOAN CLOSING COSTS

Yesterday, the United States Department of Housing and Urban Development released a study conducted by the Urban Institute that suggests that "[m]any American consumers overpay by thousands of dollars in total closing costs when they purchase their homes. There are significant and unsupported variations in loan charges, title fees and other closing costs charged to unsuspecting (most typically minority) home buyers.

The study found significant disparities in closing costs even when it compared borrowers with identical credit scores, loan terms and mortgage amounts. Variations appeared to be based on education level, geography, race and ethnicity.

Of course, in an information-era, free market system this shouldn't happen. HUD mandates that all mortgage loan applicants receive two critical documents: a "Good Faith Estimate of Closing Costs" and a "Truth in Lending Disclosure Statement" (the "TIL") that should enable consumers to compare the costs of…

FBI: ILLINOIS IN THE TOP TEN STATES FOR MORTGAGE FRAUD (again)

The FBI has released its "2007 Mortgage Fraud Report." Its a fascinating study and quick read. It covers all the basic types of mortgage scams and cites statistics from several different sources. An excellent overview of the scope and magnitude of the problem, including a particularly fascinating description of "short sale" and "mortgage rescue" scams that are particularly popular in the current market climate.

Illinois (again), makes it into the national top ten for states most effected by such criminal activity.

CHICAGO TRANSFER TAX takes ANOTHER BITE OUT OF BUYERS

Nothing should be simpler than a real estate closing. The buyer shows up with money. The Seller has a deed and some keys. They shake hands and trade. Nice.

Turns out (over and over) that in the Venn Diagram of life, "simple" and "closing" seldom intersect. We learned of yet closing-related complication this week, courtesy of our friends at the City of Chicago, Department of Revenue. The Department is charged with "maximizing revenue collections to support the City's "vital" infrastructure.

One way they are doing this is by scrutinizing tax declarations filed with the County Recorder, every time a deed or other document is recorded of record. The Department is, apparently, checking the transfer tax declarations to see when they are dated and then comparing them to the dates when the transfer tax stamps are actually purchased.... and they going after purchaser's who may not being paying the tax in a "timely" fashion.

For better or for …

NEW CAR CONTRACT FORMS now online!

Our good friends at the Chicago Association of Realtors have published new stock contracts for local real estate transactions. It had been about five years since the last set of revisions. At first blush, it seems like some good work.

Then again, one of the occupational hazards of being a lawyer is the compulsive need to read all the fine print and I'm still reviewing mine to decide how happy (disgruntled) There is at least one silly gaffe on the condo contract -> sellers are supposed to purchase surveys for their buyers? Fat chance that. But until my colleagues pick up on that one or the board revises the revision, I am looking forward to poking some seller lawyers in the sides when they show up at closing without....

MORTGAGE FRAUD & MONEY LAUNDERING

I help a lot of buyers slog through stacks and stacks of mortgage loan documents at closings. Anyone who has sat through a closing with me has heard "the routine" my explanation of the various disclosures and certifications that lenders subject their customers to.

Buyers produce photo ID to the closer. A whole lot of trees give there lives to help the lenders and title companies verify borrower identities and to warn borrowers of the penalties for mortgage fraud. Multiple promises that the borrowers have told the truth. Affidavits attesting that the Buyer is using his/her true signature. Stern warnings that the lender is going to comply with the Patriot Act. Even the scary FBI notice over on the margin here. Cynical me. I tend to poke fun at a lot of these documents, and all the redundancies, and the silliness attendant to them.

Turns out, I may be wrong for making light of these issues. Inman news reports today that:
About one in five suspicious activity reports banks file wi…

PLM Title Shuttered

Title insurance is a critically important part of any real estate transaction; or at least it should be. The title company guaranties the "quality" of an owners interest in the property - that there aren't any (unknown) liens or defects. No buyer that I work for will purchase a property without it.

Title insurance is only as good as the insurer. We want to know that the insurance company, like the Rock of Gibraltar, will always be there. We want to sleep easy at night, knowing that the client is protected.

That said, it was a bit distressing to see that PLM Title Company shut its doors, without any forewarning last week. Worse still, this morning's news is that there is a criminal investigation underway - and that we do not yet know why. Old timers like me shudder with memories of the great Intercounty Title debacle five years ago. Here's to hoping that this one is nothing like that one.

Set aside the problems involved trying to make a claim against a defunct title …

March Home Sales Report - Now What?

The Illinois Association of Realtors released data today on the number of existing home sales for March, 2008.To me, there are two ways of looking at the this data. One - the cup half full. or, as Woody Allen said in the movie Scoop - a cup also half full; with poison.

In Chicago, median prices on homes sold (single family and condominiums) increased 5.3% comparing March 2008 to March 2007. But then again, only 2,045 homes sold, 11.5% fewer than last year.


For the larger, Metropolitan Statistical Area (Cook and surrounding counties), there were 5,753 total sales in March, 2008, up 33.5% from February. But then again, that March number is down 29.0% from last year.

There is a small part of me that wonders how much of the statistical bump-up from February to March can be attributed to those Chicago home buyers and sellers who wanted to "beat" the City's transfer tax increase, versus a typical Spring market effect versus overall economic recovery (or malaise). Probably won…

UPDATE: Mortgage Appraisers Regain some Indenpendence from the Mortgage Brokers that hire them

Back in February, I posted about an IRELA conference I attended in which two mortgage appraisers described the current market conditions from their vantage. They both expressed concern that Mortgage Brokers were demanding that appraisers find the "right" value for properties in order to get mortgage loans approved, and were threatening to stop doing business with those appraisers who would not "play ball"

On March 3, 2008, Fannie May, Freddie Mac, the NY Attorney General and the Office of Federal Housing Enterprise Oversight reached agreement to address this problem. Effective January 1, 2009, mortgage brokers will no longer be able to order "Made as Instructed" appraisals (requests for appraisals that contain instructions for a report to match the purchase price, or that have real or implied threats that continued business orders will only be made if the appraiser establishes a property's value "as instructed."

After December 31, only specia…

Slow Real Estate Market? Blame your Real Estate Agent - Part II

Back in January, I wrote about the disgruntled home buyer who sued her real estate agent for not telling her that other properties in the neighborhood sold for less than the one she bought. That case went to a jury trial. As reported this week by Stefan Swanepoel over at RealBlogging, took the jury only two hours to decide that the Buyer was just plain wrong.

City Council Bungled the Transfer Tax Rebate

Kudos to fellow lawyer / blogger Peter Olson for uncovering this nugget. He hit a home run on this one. I have been cry-giggling about it since I read his post last night Real Estate in Chicago: Chicago "CTA Portion" Transfer Tax Refund?

Yes, yes. City Transfer Tax increased effective April 1. Yes, yes, the City Council made a last minute switch so that Sellers are paying the increase, not buyers. Yes, yes, the revised tax declaration form may be the worst, most confused tax form ever. Yes, yes, in the short term many Buyers will be forced to pay the seller's share of the tax based on the contract language they agreed to months ago, before anyone ever considered the increase or the fee shift.

The absurdest cherry on top turns out to be the "CTA Portion Refund." Recall that refund, was proposed and passed as part of the original ordinance, in February, 2008, when the entire transfer tax was going to be borne by Purchasers. At that it made good political sense fo…