from Local Attorney, Michael H. Wasserman

Saturday, October 31, 2009

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 m
ost 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.

Thursday, October 29, 2009

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.

Tuesday, October 20, 2009

(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.