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from Local Attorney, Michael H. Wasserman

Monday, January 28, 2008

Even PROPERTY TAX RELIEF FOR (most) HOMEOWNERS !

All Illinois homeowners will be eligible for at least some property tax relief with regard to their qualifying principal residences, as part a new law, passed in October, 2007.

The GENERAL HOMESTEAD Exemption is granted to properties that are the owners’ principal residence. The exemption reduces a property’s “Equalized Assessed Value” (EAV), one of the three critical data points used in calculating tax bills (together with the local tax rate and state equalization factors).

Effective with the 2008 tax year (payable in 2009) the maximum homestead exemption will rise from $5,000 to $5,500. In 2009 (payable in 2010) the maximum will increase to $6,000.

PROPERTY TAX RELIEF FOR SENIORS TOO !

Illinois homeowners who are also SENIOR CITIZENS will be eligible for at least some property tax relief with regard to their qualifying principal residences, as part a new law, passed in October, 2007.

The SENIOR CITIZEN Homestead Exemption, granted to persons that are 65 years old or older for their principal residence, will increase from $3,500 to $4,000 effective with the 2008 tax year (payable in 2009).

The exemption reduces a property’s “Equalized Assessed Value” (EAV), one of the three critical data points used in calculating tax bills (together with the local tax rate and state equalization factors).

The SENIOR CITIZEN ASSESSMENT FREEZE Exemption freezes a property’s EAV, provided that the maximum household income does not exceed a stated amount. That income level increases from $50,000 to $55,000, effective with the 2008 tax year (payable in 2009).

The exemption reduces a property’s “Equalized Assessed Value” (EAV), one of the three critical data points used in calculating tax bills (together with the local tax rate and state equalization factors).

PROPERTY TAX RELIEF FOR VETERANS and the DISABLED PERSONS

More Illinois veterans and disabled persons will be eligible for property tax relief as part a new law, passed in October, 2007.

Starting with 2007 property tax bills (payable in 2008) the following NEW tax exemptions will be available to qualifying homeowners:

The RETURNING VETERANS Homestead Exemption, affords a one time $5,000 reduction of a property’s “Equalized Assessed Value” (EAV) to veterans returning to Illinois from active duty in an armed conflict involving the armed forces of the United States.

The DISABLED PERSONS Homestead Exemption, affords a $2,000 reduction in EAV to qualifying property owned by a disabled person. The exemption may be taken every year, provided an annual application is filed with the County.

The DISABLED VETEREANS’ STANDARD Homestead Exemption will also reduce EAV to qualifying properties owned by vetereans who suffered service connected disabilities (certified by the US Department of Veterans’ Affairs) and for which annaial applications are filed with the County. Veterans with disabilities rated above 75% may received a $5,000 reduction of EAV. Disabilities between 50% and 75% qualify for a $2,500 reduction.

The previously enacted DISABLED VETERANS HOMESTEAD EXEMPTION that provides up to $70,000 EAV reduction for federally approved specially adapted hosing is still available through local VA offices.

The only bad news is that a person can only claim one of these special expemtions for Disability per year.

(Some) new Mortgage Woes for Anyone in the New Contruction Mortgage Market

As many bad experiences as I am subjected to when working with inept or indifferent mortgage brokers, I really do appreciate the good ones. One such Mortgage Broker is Richard Cohen of Professional Mortgage Partners. I have been fortunate to have worked with Richard several times over the last few years. Aside from being a customer-oriented and hard working lending professional, he is a nice guy and a good writer.

Richard recently described the currently mortgage for buyers and sellers of new construction condominiums - (stop me if you've heard this before) - things are getting tougher.

He writes:

In the last several years, buyers of new condo projects had little difficulty in obtaining loans. It didn't matter if the condo was warrantable (in essence: certified by the lender that the condo meets Fannie Mae/Freddie Mac condo guidelines) or non-warrantable (not certified to the guidelines). A buyer could be the first one in the complex and have no issues.

Things have changed in the last 30 days. Because of the losses in the market, Fannie and Freddie have gone back to the old days. For new construction, depending on the project, loan, and other factors, a buyer will probably have to wait until the appraisal has been performed,a condo questionnaire has been completed, and, in some cases, the lender has reviewed other documents such as the condo budget, decs and bylaws, etc.

It is going to be more difficult and time-consuming to fully approve condos. It's not the loans, but the condos themselves.

Here's my two cents how to work with this:

  1. Buyers should ask their loan officers if they are aware of the changes. If they get a blank stare, find another lender.
  2. Agents should make sure that they have the various docs ready to send to the lender for review.
  3. Both buying and listing agents should make sure that the lender can do both warrantable and non-warrantable condos.
  4. Listing agents and developers might want to have a preferred lender who can have the entire project warranted so that prospective buyers have a guaranteed lender.
All too often, I see "lesser" lenders who neither understand these market changes, or simply choose not to adapt or are slow to change when they occur wait. Such lenders tend to wait until week of closing to begin the process of trying to secure condo project approval. Inevitably, delays ensue, frustrations rise-up, and good will is lost. In the worst cases, lender delays have cost buyer's money in the form of delayed-closing penalties or the loss of earnest money.

I've long counseled clients to make sure they are working with knowledgeable, experienced, aggressive lenders, and to start the mortgage application process as early as possible on the timeline of a real estate transaction. This is just another example of why I do so.
Chicago Attorney Peter Olson operates a general civil practice not unlike my own. He also blogs actively on Chicago area real estate matters at Closing Real Estate in Chicago.

I don't know him personally yet, but I owe him some modest debt of gratitude for inspiring me to start this blawg. I have been looking at Peter's musings and alerts for some time now. If you have not seen it yet, you might probably ought to.

Now that I have praised him, lets all agree that he may have questionable tastes in regard to reviews of other blogs...

(thanks Peter, its nice to get noticed)

Wednesday, January 23, 2008

How Mortgage Fraud Can Destroy a Neighborhood

updated - Feb. 6, 2008

We all know that the mortgage industry is in turmoil and that local, national and global economies are all reeling as a result. The losses announced by lenders are surreal. For the most part, the numbers are too staggeringly large to comprehend. There is plenty of finger pointing going on, some of which has been detailed on this site. Certainly, some borrowers got in over their heads; others never understood what they were getting into in the first place; institutional investors demanded more “product” from loan originators who in turn utilized relaxed guidelines (loan approval standards) and gimmick loans to encourage more money lending. None acted alone or in a vacuum. Each parties “fault” is inter-twined with the others. There is shared culpability, more than enough for everyone.

As with most things in our society, clever, nefarious individuals and collectives find ways to take full advantage of these situations. Mortgage scammers took millions of mortgage dollars out of the system. Mortgage fraud was a huge part of the melt down. Any doubt? Just scan the Mortgagefraud.com blog to get a taste of the depth and extent of criminal infiltration into the mortgage lending system.

One such scamster is Mohammad "Mike" Taghie Kakvand.. He was just sentenced to a nine year jail term for his role in a local scam, more fully reported in the Chicago Sun Times this morning.
His story puts a real face on mortgage fraud. Set aside for the moment the financial losses that were worked on the mortgage lenders and their investors ($29 million in loans, all of which were defaulted). Here is a frightfully ugly example of what can happen to an unsuspecting community.

Kakvand bought 33 apartment buildings, mostly in Rogers Park and South Shore. His company, Residential Realty Development sold the individual units at inflated prices, that is, he increased property values / costs in otherwise affordable neighborhoods, by portraying the units as “rehabilitated” condos. Kakvand lined up buyers by telling them that the units would be improved and converted to condominiums. Some buyers were lured into the scheme with promises of "no downpayment." Others were told they would be paid for agreeing to make the purchases. More than 150 mortgage applications were submitted to dozens of lenders.

As Kakvand converted the rental buildings to condos, he displaced the former tenants who were forced to move out.

The now vacant buildings were never renovated as claimed. Nothing but wall studs and exposed copper pipes separated some supposed condo units. Instead, they remained dilapidated and decaying wrecks.

Most buyers never actually moved in. Those that did quickly fell behind in mortgage payments and defaulted on their loans. Before long, squatters and drug dealers took residence in the empty units. Crime increased and quality of life in the area worsened. Fire and water damage only worsened the condition of many of these properties.

Fraudulent or not, the sale transactions all artificially inflated the market prices in the area, making it harder for buyers of “real” condos to afford to purchase them. The costs of restoring or replacing these buildings will increase. The gangs and related crime will have to be beaten back as the remaining neighbors try to reclaim their communities.

The properties involved are:

6963-69 North Ashland Ave, Chicago, Illinois
7309-11 North Ashland Ave, Chicago, Illinois
1949-51 West Birchwood Ave, Chicago, Illinois
6201-03 South Champlain Ave, Chicago, Illinois
639-41 East 62nd Street, Chicago, Illinois
1606-08 West Chase Ave, Chicago, Illinois
1810-24 West Chase Ave, Chicago, Illinois
6940 South Dorchester Ave, Chicago, Illinois
7316-18 South Dorchester Ave, Chicago, Illinois
7700-04 South Essex Ave, Chicago, Illinois
2451 East 77th Street, Chicago, Illinois
1633-35 West Estes Ave, Chicago, Illinois
6157-59 South Evans Ave, Chicago, Illinois
740 East 62nd Street, Chicago, Illinois
7201-03 South Evans Ave, Chicago, Illinois
741-43 East 72nd Street, Chicago, Illinois
1324 West Greenleaf Ave, Chicago, Illinois
2423 West Greenleaf Ave, Chicago, Illinois
7633-39 North Greenview Ave, Chicago, Illinois
7311-13 North Honore Street, Chicago, Illinois
1600 West Jarvis Ave, Chicago, Illinois
7749-53 South Kingston Ave, Chicago, Illinois
6752 North Lakewood Ave, Chicago, Illinois
5922-24 South Michigan Ave, Chicago, Illinois
12130 South Normal Ave, Chicago, Illinois
7647 South Phillips Ave, Chicago, Illinois
4843-45 South Prairie Ave, Chicago, Illinois
5037-39 South Prairie Ave, Chicago, Illinois
5326-28 South Prairie Ave, Chicago, Illinois
1301 West Pratt Blvd, Chicago, Illinois
6752 North Lakewood Ave, Chicago, Illinois
7527-31 North Sheridan Rd, Chicago, Illinois
3215 West Sunnyside Ave, Chicago, Illinois
4400-02 South Vincennes Ave, Chicago, Illinois
4510-12 West Washington Blvd, Chicago, Illinois
7407 North Winchester Avenue, Chicago, Illinois

Tuesday, January 22, 2008

The Mortgage Graveyard -

Here's a pretty grim web page -> The MortgageDaily.com, a subscription site that covers the mortgage industry, has gone live withe the Mortgage Graveyard which details historical data of failed, bankrupt, acquired/merged, and struggling lenders. the data goes back to 1999. Your gonna have to subscribe to the service to actually read the details underlying the numbers on this page, but does make a rather impressive point about the breadth and depth of the carnage

According to the Wall Street Journal, the Mortgage Daily project joins an already crowded field of online lists of failures in the wake of our subprime mortgage "situation," including Aaron Krowne’s Mortgage Lender Implode-O-Meter, SNL Financial’s subprime scorecard, and National Mortgage New's list of defunct firms.

Market Slow Down? Blame your Agent!!!

Who takes the blame when a buyer over-pays for a property? That question is about to be answered in a North County, California courtroom.

It seems that disgruntled Buyer Marty Ummel thinks that she over-paid for her new home, perhaps as much as $100,000 too much. How upset did that make her? Upset enough to have sued her real estate agent, her mortgage broker and the mortgage company's appraiser. The claim seems to be that they (the professionals knew she was overpaying, but withheld information from her so as not to "lose the deal." The appraiser and mortgage broker have already "settled out" but the case against the agent will be presented in court next week.

Its easy to write this one off as another case of someone refusing to accept personal responsibility for a mistake or for a bad decision. Blaming the other guy it seems is the "american way."

The buyer may have taken guidance from the agent and placed misplaced reliance on the appraisal, but shouldn't she have done some due dilligence of her own? With web services such as Zillow.com and Trulia.com its pretty easy to check what other properties in any given neighborhood are selling for. Local newspapers carry this information too. According to the defendant's expert consultant, that seems to be the point. "They (Ummell) simply didn't do what is expected of a knowledgable, sophisticated buyer."

Should she have used such facilities to make sure she wasn't over-paying? I would have expected as much, but not everyone is that sophisticated. It would be wrong to hold every home buyer to that type of standard.

On the other hand, if you hire a professional to represent you in a transaction, particularly one that involves hundreds of thousands of dollars, wouldn't you expect that professional to have some loyalty to you? I cannot say at this point whether or not the agent actually knew of adverse information. Until then, all we can do is rely on his assessment of the case: "The lady's a nut job. I didn't do anything wrong."

I suspect that the answer is going to lie somewhere between the two extremes on this one. If the agent really was hired as a buyer's representative, and if the agent knew adverse information, he should have spoken up. We'll all find out soon enough.

Source: The New York Times, David Streitfeld (01/22/08)

Friday, January 18, 2008

How Mortgage Guidelines Effect the Marketplace

Dan Green, of Mobium Mortgage created this visual reference to explain what happened when mortgage lenders relaxed lending standards and then tightened them down borrowers began to default on too many loans.


Buy a House, Save a Municipal Pension.... (part 2)

Now that the State legislature approved the Hamos bill (our mass transit bail out) all eyes turnb to the City Council who must now vote on the proposed transfer tax increase. As realtors and others in the industry wring their hands with worry about how the increased fee will effect the already slow market, it looks like our neighbor to the north in Evanston may well get into the act themselves.

I'll explain in a minute, if you'lll indulge me this digression about my closing this morning.

Most of the parties late to arrive, as they all had trouble finding nearby parking. One of the real estate agent proudly announced that she avoided that problem by riding the el. She proceeded to grimace, look the buyer in the face, and comment to the effect that at least she (the buyer) saved money by closing before the City raised the transfer tax. She proceeded to lambast the legislature for making her poor buyers bear the brunt of saving the transit workers pension funds. I, rather smugly, suggested to her that everything was going to be ok. If we (Chicago) enact a transfer tax increase, Evanston and/or Oak Park will follow right behind, just to stay ahead of us (cost-wise, that is). Some guffaws and the conversation returned to the business at hand, closing the contract.

I said that in jest, of course but upon my return to the office, I saw this notice in this morning's Daily Northwestern: Evanston is looking to increase its real estate transfer tax 20% from $5 per $1,000 to $6 per. Evanston residents will vote on the proposal on the same ballot with the State-wide primaries on Feb. 5

As with the transit bailout, this property tax increase is intended to fund a shortfall in municipal employee pensions. Instead of helping provide for retired transit workers, this one will benefit that City's retired police and fire personnel.

A new trend in government finance? Time will tell.

Walk Score - a new tool for home buyers

Did you hear the news? Apparently oil prices have been rising, and gas for our cars is getting more expensive. Then there's also something or other about global climate change and carbon emissions and such. Oh, and the kids are all getting really, really fat. Obesity seems to create health problems and there is some crisis or other in the healthcare industry too. Wow, I though the real estate market slow down and mortgage lending crises were a mess.

So much bad news.

So, here is a neat tool that could help buyers, renters, and their agents identify properties in neighborhoods that are "walkable." Enter a street address into the system and walk score will show you a map of what's nearby and calculate a "Walk Score" rating of the relative "walkability" of the area for you. Its not perfect, but hey - its a (great) start and a really cool idea.

Pick the right house - reduce your dependence on the car; get some exercise; support your local (micro) economy. Hire me for a closing. Win-win-win.


oh, if you "need" to look at driveability, you can also check out the Drive Score too.

Tuesday, January 15, 2008

Market Slow Down? Recession? Not for the FBI, anyway

I posted last week about concerns that arson claims will increase as borrowers fall behind on their mortgages. Looks like that they aren't the only scammers out there....

The FBI has announced that mortgage fraud investigations tripled during the last fiscal year compared to 2003. Conviction rates may not be holding pace (they doubled in 2007). Fear not, Financial crimes section cheif Sharon Ormsby predicts that the number will likely rise this year.

The prime growth areas in this field? what else but sub-prime/distressed borrower situations and reverse mortgages held by senior citizens.


Source: Donna Leinwand, USA Today (01/14/08)

the 4 most dangerous words your loan officer will ever tell you: "Your Loan is Approved"


Most loan officers I work with are nice people. They are hard working. They are well intentioned. They want to make loans for the buyers they work with. Turns out however, that many of them speak an entirely different sort of English than the rest of us.


When your friendly loan officer assures that "your loan is approved," she does not necessarily mean that you are going to get your loan. "Approved" does not mean "Approved!" weird, huh?

Most Buyers who hear this however are willing to take the Loan Officer at his work and they direct me to waive their mortgage financing contingencies. BAD MISTAKE.

Two or three weeks later, when that same loan officer tells those same buyers that the underwriter denied their loans, it is too late. The protection of that contract provision is long gone and, in the worst of situations, so it that Buyer's earnest money and dream of buying that dream home.

The loan officers, like D-Day in the 1978 Film Classic, Animal House, essentially say [don't] "spend your whole life worrying about your mistakes! You f----d up - you trusted us! Hey, make the best of it!"

When a loan officer tells you your loan is approved, she is quite often trying to tell you "I completed your loan application - or at least most of it - and the computer software my company uses tells me that you are credit worthy. Now let me just send to this on the underwriter who will actually decide whether or not you can get your loan."

Which is why those four words make me shudder, every time I hear a loan officer utter them; Your Loan is Approved."

It goes without saying that most home buyers cannot proceed with their transactions without a mortgage loan. We are dependent on our loan officers and processors to help us either obtain the necessary financing or to at least notify us in a timely way that we need to "eject" from a contract if the loan is not going to be approved.

So why do they do it? who knows. Does it serve their clients? Not at all. Is there recourse? Almost always, no.

Whats a buyer to do? Trust nothing that is spoken, demand a written loan approval in writing.

Save Public Transportation -> Buy a House !

Until this morning, few of us would have made a direct connection between the funding of public transportation in the metropolitan Chicago area and real estate conveyancing.

But now the link has been established and it spells bad news for anyone wanting to buy or sell real estate in the City of Chicago. Buyers about to absorb the brunt of yet another closing cost increase; a possible (likely) 40% increase in the amount of the City of Chicago Real Property Transfer Tax.

With just five days left until the 3rd public transit funding "doomsday" in the last six months, the cat has finally jumped out of the bag. This morning, we all woke to the news that the proposed transit "bail out" will be funded by a combination of local county sales tax increases, state general funds, and that transfer tax increase.

Never mind that the transfer tax is levied by a completely different body of government - the City of Chicago and not the State. We must all prepare for the coming reality: Its gonna cost an additional $1.50 for each $500 that buyers will pay for their Chicago properties to cover the transfer tax, $5.25 per $500 in all.

Some of our more outspoken alderman are in the news this morning posturing that they will not vote for the tax increase. But, even as unpalatable as it is, how can they do anything but pass the tax on to buyers? Aldermen are the closest elected officials to the CTA ridership and workers and local businesses who will be most severely effected by transit cuts. Chose your poison: who do you want to anger less - the masses who rely on transit daily, or the much smaller population of home buyers and sellers?

Friday, January 11, 2008

Hey Buddy, Got a Match? (or, How to Get Out from Under Your Mortgage with just NO easy payments

Here's more proof that I am a better lawyer than white collar criminal. If they would only use their higher level thinking for good and not evil....

The time honored tradition of burning one's note and mortgage AFTER the loan has been repaid seems to be falling victim to our short attention spans, need for immediate gratification, - and harder economic times.

Seems that "with the national foreclosure rate zooming and the real estate market in a two-year funk, the insurance industry fears more homeowners will see arson as a way out of their financial woes. A recent report by the industry-funded Coalition Against Insurance Fraud notes that with "untold thousands of homeowners struggling with ballooning subprime mortgage payments, fraud fighters are watching closely for a spike in arsons by desperate homeowners who can no longer afford their home payments." more details in the CNN press release of the full report from Fortune Magazine

Following the perverse logic that flows from these schemes, arson offers homeowners a SHORT TERM solution to (a) get out from under their mortgages and (b) save whatever equity they have left in their homes from those nasty foreclosures;

in the longer term, they (c) guaranty employment for the arson investigators, police & insurance adjusters; lawyers; court personnel and prison workers; and (d) secure some mid to long term state subsidized (prison) housing; and the finally, they

(e) help reduce the overall inventory of houses available on the open market, easing the over-supply problems the rest of us are facing.

a win/win/win solution, if it werent so dang illegal!!!

Thursday, January 10, 2008

The Bizzare Rituals of Mortgage Lending

My brother, a corporate lawyer, used to carry a bag of lapel buttons with him in his attache. When one of his deals took an odd turn, he would whip one out and offer it to his opposing counsel. They bore the legend "thank you, for turning a routine transaction into a bizarre ritual" I've coveted those buttons for years.

Just imagine how many I'd have to print, if I could only find a way to meet the mortgage underwriters my clients are subjected to. If there were ever an industry that specialized in the bizarre, could anyone do better than the mortgage underwriters?

In the past four days, I have seen
  • A lender demand a sales contract be modified to exclude the seller's bar stools from the transaction
  • A lender assert that Fannie Mae guidelines require a 6 unit condo association hire a lawyer to give a written opinion that the association meets all FHA guidelines and is properly organized
  • Another lender refuse to consider the rental income generated by a four flat under contract for the purposes of considering the buyer's ability to repay his purchase money mortgage
  • A lender is DEMANDING that a seller remove burglar bars from the bedroom windows or fit them with quick release handles before it will approve the loan. (a safety hazard? perhaps, but somebody help me understand how they could possibly effect the home's value or the loan itself?)
and, saving the best for last, now this:
  • A lender has just red flagged a client's file because the borrower is putting 25% of the purchase price down from his own savings! Imagine that, the buyer has TOO much money to qualify for a loan!

It is truly a world gone mad.

Monday, January 7, 2008

Income Tax Deductions for (some) PMI payments extended until 2010

Most recent news relating to the costs home buyers must pay has been bad. Its not only getting harder to obtain the mortgage financing, its getting more expensive to do so. Finally, some good news for at least some of us. The Feds have finally gotten around to extending the income tax deductability of private mortgage insurance (PMI) through 2010.

The tax deduction is available to mortgagors

(1) of a personal residence and a non-rental second home,

(2) that originated after January 1, 2007.

(3) for the purchase or refinance, provided that the loan amount did not exceed the acquisition loan amount.


(4) BUT ONLY IF your family may earns no more than $100,000 per year. If your family’s income is over $109,000, the PMI deduction will not apply. The deduction is reduced by 10% for each additional $1,000 of household income, in between.


hey - its better than nothing!

Friday, January 4, 2008

2008 market outlook

Real Estate Agent Peter Fugiel's 2008 market outlook report for the Chicago area sets out a pretty thorough analysis of the local market conditions. On the whole, a pretty positive assessment and an interesting read. American real estate is still right up there with other high demand world markets. American real estate, like oil, scarce commodities, fine art, and an American college education, are all still in wide demand. The full report is available on my web site.