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from Local Attorney, Michael H. Wasserman

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?