from Local Attorney, Michael H. Wasserman

Tuesday, December 21, 2010

City of Chicago - In Color

I am a real estate lawyer. I help buyers buy and sellers sell their homes, their condos, their apartment buildings. One at a time. 

Each deal I work on is the most important contract in the local real estate market. To my clients and the parties on sitting accross the table they are. And because each individual transaction is to each individual client, that specific deal is also the most important case I am working on too. 

But in a wholly other sense, each transaction is part of a larger real estate marketplace. Each transaction adds another data point that economists and sociologists can pick over and analyze. The collective information gleaned from all transactions informs us all about the larger trends and patterns in our communities. The collective body of information gathered in real estate conveyancing and from census data, all helps paint a very different picture.

It is real estate pointillism. Think of Georges-Pierre Serat or Chuck Close.    

Now check out this New York Times interactive mapping display and see the bigger picture. Plug "Chicago, IL" into the search bar and chew on the  images that NYT generates. Uptown Libertarian does an interesting analysis of my local environs. Take a moment and see what you can learn about your own, too.   

Saturday, December 18, 2010

Homeowners - think back a moment to your last re-finance or purchase transaction....

How did you chose your lender? According to a just released study by Lending Tree & Harris Interactive, chances are you probably signed on with the first lender you spoke with. True?  Lending Tree reports that roughly 40% of homeowners surveyed went with the first loan officer they spoke to.
As restated in a Forbes article on the report, 2 out of 5  buyers take the very first home loan deal presented to them, regardless of whether a better one could be had.
Curiously, 96% of the survey participants said they compared prices when shopping for anything else besides mortgages.  Heck, the average consumer compared at least three home computers before buying. And special question for all the Realtors: How many houses did that buyer look at before picking "the one" to make an offer on?  The end result? Only 28% surveyed felt confident that they got the best possible deal on their mortgage loans.

Even in the current marketplace, there are hundreds of loan originators to chose from; mortgage brokers, mortgage bankers, credit unions and federally chartered retail banks. They offer any number of different loan programs. Different types of loans. Different lending guidelines. An array of up front closing cost requirements; loan durations, interest rates. Their are a veritable smorgasbord of money lending options.

Sure those choices can make the process seem overwhelming, but we live in a society where we choose from  20 or 30 different types of ragu spaghetti saucees or 41 types of crest toothpaste in the shopping aisle most every day. We are used to making choices.

A reputable loan officers can help a buyer sort through those offering to hone in on the best products and  get the job done, but why only speak to one loan officer? Any given loan comes to a borrower at a price; Two actually; upfront closing costs and then interests payments over the life of the loan. Combined they can add up to tens and hundreds of thousands of dollars.

I have long counseled clients to speak to two or three different lenders in order to ferret out the very best options available to them. I always stand  ready to help my clients chose the best loans offered to them. I know many other lawyers who do so too. It only seems reasonable to me to try to help clients get the cheapest loans they can, don't you think?

Federal law makes this easier than one might think. Every lender is required to provide their loan applicants with two documents to facilitate comparison shopping; a Truth in Lending Disclosure and a Good Faith Estimate of Closing Costs. The Good Faith Estimate even has room to allow for comparisons of different loans, right there on the form!

Buyers looking for purchase money mortgage loans and owners looking to re-finance are urged to take a second look - that is, talk to a second (or third) lender to find the best loan on the best terms possible. Feel better than the 60% of those survey participants who did not bother to shop around. Close with confidence.

Let your closing lawyer know if you have trouble comparing various offerings from the lenders you engage. We can help.

Wednesday, December 15, 2010

Monday, November 15, 2010

Closing Costs Heading Higher (again) ... another State Mandated Fee

Buyers and Sellers (and the knowledgeable lawyers, Realtors, and mortgage originators that represent them) should all brace themselves as title charges are going up again as of January 1st. When an amendment to the State's Title Insurance laws kicks in. Buyers should expect to pay at least $25 more on each transaction. Sellers will be shelling out at least $50 more. Those are minimum fees folks. Be on the alert for title agents who may charge more.

Make no mistake about it either, the new requirements for Closing Protection Letters are important. We will address the specific reasons why in a future post, but on the bottom line, they afford some parties to a closing aadditional title insurance coverage against losses caused by errors or infidelity of closing agents in the handling of the transaction. Important? Ask anyone who lost money when a mortgage loan was never actually paid off from the proceeds of a sale or loan re-finance, or who's title agent disappeared overnight, never to be seen or heard from again.

Monday, November 8, 2010


Cook County Homeowners - be prepared to put some of that gift-giving money aside.... those property tax bills that were supposed to be mailed out back on August 1st are heading towards your mailbox on Wednesday and   will be and payble by December 13th.

Friday, October 29, 2010


It has long been a standard operating practice in my office to make immediate inquiry with Sellers and in the public records to try to ascertain the status of a seller's mortgage liens at the outset of every Chicago area short sale transaction I work on. Buyers certainly want to know information like this as they determine how much (or whether) to make an offer in a short sale situation. If the deal is unworkable, why bother putting up earnest money or wasting time, right? 

Do listing agents have a duty to disclose this, even without a specific inquiry? According to one appellate court in California, the answer seems to be yes.

RIS Media reported today on a California appellate court decision earlier this week (Holmes v. Summers) to the effect that real estate practitioners (Realtors)  have the same responsibility as sellers to disclose information they have that affects the “value and desirability of the property.” 

In that case, the seller and the listing associate withheld from potential buyers knowledge of  three mortgages against the property totaling $1.141 million. The sellers accepted a buyer’s offer of $749,000, but the deal fell apart because the sellers couldn’t deliver clear title. According to RIS, the would-be buyers sued the real estate firm and the court found that the real estate practitioner had a greater duty to disclose facts affecting the desirability and marketability of the property than he did to protect the privacy of the seller.

Analysts say this decision makes it incumbent on practitioners with short-sale listings to provide specific information about circumstances surrounding the sales, including approvals required for the sales to close.

This is not Illinois law, but certainly seems like good advice to listing agents out there. Buyers and Co-operating agents should be asking this question as a matter of course as well. 

Tuesday, October 19, 2010

Do You REALLY Need Homeowners Insurance at Closing? (yes)

A cautionary tale for all my friends and colleagues who represent buyers in real estate transactions.

I had the good fortune to help a long time client close on her purchase of a three flat last Friday. In a year that has been replete with difficult transactions, this one was pretty easy. An all cash purchase of a bank owned property. Clean title to boot. (What can possibly go wrong, right?) The deal came together pretty quickly. We closed in just three weeks.

It is a lovely building  (purchased by a delightful client). The bank that was selling had foreclosed on a developer who (like many others) had apparently run out of money before he could complete a conversion from a rental to condominiums. Overall the place was in good shape. The first floor unit lacked finish plumbing, fixtures and  appliances on the first floor, but the second and third were pretty much rent-able and ready to go. The purchase price seems a bargain. My client is very likely to do well on this one

Thursday, September 30, 2010

REALTOR ALERT - International Scammers Have You In Their Sights

Realtors - What would you think of representing an all cash buyer who is moving his family to Chicago from out of the Country, and who needs your urgent help to find a suitable home? Sounds nice, right?  He needs you to send him listings ASAP as he really needs to move quickly. Even better. Oh yeah, one more thing, he wants to wire you money, lots of it now, so that he can have it ready for the closing. Still interested?

If you are, better take a deep breath before reading on. This is the script to a  fairly elaborate - and pervasive scam that is being perpetrated on unsuspecting Realtors all across the country. I have seen it now twice in just the last three weeks. One agent was approached via Trulia. The other received a lead directly from the brokerage's web site.

More details about the scam can be found in this Trulia posting, and this Orlando, Florida lawyer's blog.

The first time this came up, I advised the inquiring agent to take extra care to try to verify the would-be buyer's funds and identity. He sent photocopies of a passport and a bank statement, but quickly disappeared and dropped contact when we started making inquiries with the bank.

Wednesday, September 29, 2010

UPDATE: Cook County Property Tax Bills will be mailed out (eventually)

Some news is (finally) starting to leak out regarding those inevitable Cook County property tax bills everyone has been waiting for.

We all, of course, know that local property tax bills are sent out in two installments. The first installment, a/k/a the estimated bill, is always taken as a percentage of the previous years levy. Formerly half of the prior years taxes, the most recent bill demanded 55% of the last known taxes, owing to a recently changed state law. The County, it seems, needs more money sooner. A prior blog post alerted readers to this change earlier this year.

The second, of final installment of the tax bills is supposed to get mailed out in August, providing a theoretical due date of September 1st. These bills are very often mailed much later. Last year they went out in November  and were due December. There has been a good deal of rumor mongering and speculation about the timing of the second installment 2009 tax bills. Harken back to this report in the Daily Herald from back in April for a tasty example. Both the County Treasurer's office, and  Today's Tribune confirms that the tax bills will indeed be delayed until middle or late  November, well after the November 2nd elections. At least we can finally start preparing for the inevitable reckoning and divert worried eyes from the mail box for the next couple of weeks.

But news of the timing of the tax bill is only the beginning of the story. We still await word as to the size  of those tardy invoices. That news too is starting to leak out and the news is not very pretty, offering yet another reason why the delay is taking place.

At least one learned colleague is reporting that the 2009 Cook County tax equalization factor (a/k/a the "multiplier") is increasing by more than 13%. The multiplier is intended to achieve uniform property assessment throughout the state. The equalization factor does not cause individual tax bills to go up or down, local taxing bodies determine tax bills when they finalize their budgets and request the dollars needed to provide services to their respective citizens. The assessment process determines how the bill will be divided among taxpayers, from County to County and Township to Township.    

Tax bills are determined (essentially) by multiplying a property's assessed valuation by the local tax rate, and by the multiplier. In 2007, the Cook County multiplier was 2.8439. For 2008 it went up to 2.9786. This year, it soars to 3.3701.

Check out your assessed valuation on the Cook County Assessors's web site. That tax rate? stay tuned.

Monday, August 23, 2010

Latest Real Estate Closing Disaster? Federal (flood) Disaster Declaration

Ronald Reagan famously remarked that "[T[he nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'"

I am reminded of the quote as a wave of emails and voice messages cascades through the office today. Last Thursday's declaration that Cook, DuPage and five other local counties are federal disaster areas should be a great help for the hundreds of homeowners and small business that were adversely effected by last months severe storms and flooding.

The disaster declaration however is fast becoming a disaster of its own for many Chicago area buyers and sellers hoping to close their contracts this week.  

As a direct result of the declaration of a flood-related disaster area, most mortgage lenders are requiring re-inspections on all appraisals dated August 7th, (the last date of the storm/flooding "incident" or earlier. 

How many closings will be delayed as lenders and appraisers scramble to document the absence of flood damage to homes now under contract?

Wednesday, August 18, 2010

Mortgage Fraudsters - if we could only harness their powers for good and not evil

I am continually amazed by the creativity and effort that goes into mortgage fraud. Ask anyone who has been through the process of trying to use a mortgage loan to buy a home or condo in the last two years. Dollars to donuts you are going to see an eye roll, hear a clucking noise, or a heavy sigh before that person describes an ordeal of verifications, re-verifications, and cross-verifications. The majority of transactions I have worked on this year have been delayed as loan originators and underwriters try to parse every bit of data presented in a loan application.

Lest your toil be for naught dear borrower, check out this story reported on Crib Chatter today that picks up on a report from Reuters about the scam running over by Back of the Yards.

How big is the problem?

In its first-quarter report, Interthinx said its Mortgage Fraud Risk Index rose 4 percent to 151, the first time it had passed 150 since 2004. A figure of 100 on the index would indicate virtually no risk of fraud.....Back of the Yards -- ZIP code 60609 -- had an index of 309.

So basically, the wicked scammers found a way to exploit lenders even with their newly improved, more rigid underwriting systems, and loan guarantors (FHA, Fannie Mae, Freddie Mac) (taxpayers) will continue to eat the losses. In the mean time, legitimate borrowers will still have to dot all I's, cross all T's, and show receipts for their last three ATM withdrawals, with letters of explanation for the use of those funds.

Tuesday, August 17, 2010


On Monday, the Federal Reserve Systems' Board of Governors issued a final rule that places strict new limits on the way in which mortgage loan originators can get paid.

The new order:

  1. Prohibits lenders from paying originators added compensation when borrowers agree to accept higher interest rates or other loan terms than they might otherwise qualify for  (the yield spread premium or "YSP").
  2. Disallows originators receiving compensation from lenders or other third parties if the borrower pays them too, and
  3. Mandates that originators not "steer" consumers to loans that increase originator compensation but that are not in the consumer's best interest. 
Consumers have long been at risk when dealing with loan originators who are compensated based on the terms of the loans offered. Loan officers, having superior knowledge about various loan programs were often offered very lucrative inPublish Postcentives (i.e. more money) if they could convince (or mislead) borrowers to take higher-cost loans. The Fed's action will now require lenders to at least show borrowers the cheapest costing loans and lowest interest rates available to them. 

The new rule does not go into effect until April, 2011

Thursday, August 5, 2010

Mercury Title - Closed

I was very sorry to learn today that Mercury Title Company closed its doors yesterday. Great company. Really nice staff. Another victim of the down real estate market. Mercury is transitioning all active files and post-closing matters over to Chicago Title.

Friday, July 23, 2010

Fallin' & Flying

I really enjoyed watching  Crazy Heart on the Netflix with Susan last week. A whole lot more than I expected to.  The scenery and music were really nicely captured. A fair mix or sweet/sappy romance and fortune re-gained. Nice show, with one significant problem - every time Bad Blake hit the chorus on Fallin' & Flyin'  my mind kept wandering from whatever west Texas bowling alley or honky-tonks he was singing in to that other Southwester icon, Wile E. Coyote. More specifically, the look on Wiley's face every time he ran off a cliff while chasing road runner, just after he lost all forward momentum, and looked down. In terms of Chicago area real estate transactions, I wonder - where are we on the falling/flying continuum?

This weeks' Illinois Association of Realtors news release certainly has a lot of  pundits feeling lighter than air. The headline says it all really: Illinois Home Sales Up 10 Months in a Row, Chicago Region a Full Year, Statewide Home Prices Stabilizing. In Chicago, June closings this year bested last year by 27.5%. Comparing the first six months of 2010 to 2009, the numbers increase by 41%. Since then? Well the story seems to be changing. Dramatically. Preliminary numbers suggest that closings are down more than 40% over the first weeks of July. See here  and here

Is the market changing? Over the last six months, the market has been driven by three types of buyers: all-cash buyers, little or no cash buyers (using FHA 95% or 96.5% loans) and buyers who capitalized on the (now expired)  federal first time home buyer tax credit. Those channels all seem to be drying up. There are only a finite number of buyers who have the financial strength to make all cash purchases. Those ranks must be dwindling. The tax credit? sure buyers who missed the "close-by" deadline got a three month reprieve, but that pipeline dried up on May 1 when the "contract-by" deadline passed. That ship has sailed.

Which leaves our hopes for a continued  real estate recovery pinned squarely placed on the backs of buyers using  FHA guaranteed mortgage loans. - Folks who cannot (or do not want to) put much of any money into transactions. Folk who, in many cases, are making the down payments with gifts from families, withdrawals from retirement funds, and seller concessions. Folks who (I suggest) are going to be least able to stay afloat in their mortgages if things go from bad to worse - the most vulnerable of all buyers

FHA, for its part, recognizes that the loans it is guarantying are risky - and they are tightening up. FHA Reform Act H.R. 5072 will increase the annual mortgage insurance premium for an FHA loan from .55% of the total loan amount to up to 1.25%, which is paid monthly throughout the year. Additionally, proposed changes in lending guidelines will further limit seller concessions, mandate higher down payments and credit scores for loan eligibility. All these steps, taken together will likely deter use of FHA loans, and this will in turn, slow home sales further.  

What will bring more buyers into the market? The Coyote, I suspect wants us to call his friends over at Acme to get some sort of  price eroder or tax incentivisor or perhaps their new, easy, no cost financing kit. Perhaps we just need to find the right gadget to keep us from crashing back to earth. If we go that route, I hope we find one that will do the trick, but for the life of me, I just cannot recall a single cartoon episode where Acme products worked out as intended.

Bad Blake on the other hand was falling hard, but he fought back and flew again - certainly higher that he was at the start of the show. He did it using hard work, and discipline, with a healthy dose of help from some supportive friends.

These past few months, closing real estate has felt like flying (just a little bit). Deals may get harder, and harder to come by, but my aim in the coming months - as always - remains the same. Work hard to help clients soar or to at least keep from falling as they make and close real estate contracts... Let me know how I can help you do the same

Thursday, July 15, 2010

Buyers/Sellers Prepare to Pay More to Close your Contracts - Title Rates are Going Up

Chicago Title Insurance Company sent out notice today that, effective August 1st, it is increasing escrow closing fees and title insurance premium charges for residential closings.  Escrow services will cost an additional $100 per transaction. Fees charged for Owners and Lenders insurance policies will also rise, $50.00 each.

I have not yet checked with any of the other title insurance companies but do not be surprised if others follow suit with rate increases of their own in the coming months. For the records, this is CT's 4th rate increase in the last in the last three years. Owners policy premiums have increased 20% since July, 2007. Lenders policies are up 33%. The cost of escrow closings, depending on the amount of insurance purchased, have increased as much as 55% in that time span as well.  (To be clear, these historical rate increases span the whole Chicago Residential Market, not just at CT). 

Chicago Title remains my preferred source for title services. I am an attorney-agent and am proud of  that affiliation. The company has provided my clients with excellent service over the years and I really like working with its closers, examiners and the other support staff I interact with. That said, costs matter - especially in this tough market environment.  There are (at least for now) other, somewhat cheaper alternatives available. One of the many reasons why I write title with several companies. Does a $50 or $150 cost increase matter in the relative scheme of things?  For most people, probably not, but all the same, it  has got to be hard for sellers confronting the deflation of home values (and resulting losses of equity in a sale) to bear increasing costs. Cheaper alternatives exist and I am grateful to have the ability to offer my clients choices.

Let me know if you have any questions about title insurance charges for your next real estate transaction or if you have leads on other cheaper (high quality) alternatives.

Wednesday, July 14, 2010

Illinois Housing Development Authority Awards $2.8 Million to First Time Home Buyers

Last week, the I.H.D.A. announced that it awarded a total of $2.8 million to 436 first time home buyers in the form of down payment assistance and contributions towards closing costs of up to $5,000 and subordinate financing (0% loans of up to $30,000). The funding for this program is derived from the Illinois Affordable Housing Trust Fund, which itself is funded from property transfer taxes.

Has the economic slowdown impacted this very important and valuable program? You betcha. In 2009, the IHDA awarded $4,178,000.

Thursday, July 1, 2010

Welcome to the Machine: the Illinois Anti-Predatory Lending Database Now Playing in Peoria. Kane & Will Counties, Too

Two years ago today, the Illinois Department of Financial and Professional Regulation initiated the Illinois Anti-Predatory Lending Database (IAPLD) project. Since then, details of most every Cook County mortgage transaction have been manually entered into the State's super computers, not once, but twice, sometimes even three times.... all at additional expense to the borrowers the process aims to protect. Closing are taking longer too. Predatory lending, while "discouraged," remains legal.

Today, the program expands to three neighboring counties, Kane, Will and Peoria. As with Cook, all three have been hit hard by foreclosures, many the result of those too-good-to-be-true loans we saw so much of  back in those go-go days before the bubble burst.  

The APLD law requires loan originators to enter details of proposed loans into a state database. The state computer screens the loan and - where appropriate - mandates that would-be borrowers attend  loan counseling from a HUD approved agency before proceeding to a closing. This (theoretically) reduces  the number of foreclosures resulting from unfair loans. The counselors cannot stop borrowers from taking high risk loans, but at least buyers are alerted to risks associated with inappropriate loan programs.

Title company closing agents must also enter loan details into the system to assure that the loan being closed has similar characteristics to the loan entered by the originator (and counselor). Whenever a closing agent discovers material changes to the terms of the loan, the closing must be called off until further re-counseling takes place. 

In my experience thus far, I have had many, many closings delayed while data is entered into the system by loan originators and title companies. I have not yet seen a single closing called off due to a change in the terms of the loan. 

Here is a quick refresher to see just what loans trigger the counseling requirements: 

> The rules apply to one to four unit, owner occupied residential properties.

> Non-owner occupied, commercial, government, and multi-unit (5 or more) properties are exempt.

Counseling is requires if ALL of the borrowers are first time home-buyers or the loan is refinancing a primary residence. AND
  • The loan permits interest-only payments, OR
  • the loan allows for 'negative amortization," OR
  • the borrower must pay 5% or more in total points and origination fees, OR
  • there is any pre-payment penalty, OR
  • the loan has an interest rate that can change (adjust) within three years of closing. 

Tuesday, June 22, 2010

Keep your eye on Chicago City Council

Is the City of Chicago preparing  to start taxing foreclosures?

@ Properties agent Robert Darrow of @ Properties posted an interesting piece yesterday on his always informative blog, suggesting that very thing, Apparently, 26th ward Alderman Roberto Maldonado has  introduced proposed legislation to the City Council, assessing the transfer tax on bank acquisitions of foreclosed properties.  There is not much other information on the internets to flesh this story out, so it may be a bit premature to take sides on this one. What the heck, here is my take so far:

Tuesday, May 18, 2010

Fannie Wants Second Credit Report Pulled

It is just not getting any easier for home buyers hoping to finance their deals with mortgage backed loans.
Beginning June 1, lenders originating mortgages being sold to Fannie Mae will have to pull a second credit report just before the loan closes. According to the National Mortgage News, the new quality control requirement is designed to prevent a type of mortgage fraud called "shotgunning," a mortgage scam in which someone obtains several loans (from multiple, unwitting lenders) on the same property. all at the same time. Typically, a shotgun fraudster skips town with the proceeds of all his loans. Most of the lenders do not recoup a cent because their mortgages are subordinate to the first one recorded and the home will not fetch enough in a sale to cover the junior liens. 
The second credit reports, it is thought, will alert lenders to other creditors who have recently requested information about the mortgage applicant. 

Buyers are cautioned (as always) to defer major purchases like cars or boats in the months leading up to a home closing or to otherwise request new lines of credit in order to avoid last minute hassles as lenders may insist on delaying  closings while they investigate last-minute credit inquiries.

Saturday, May 15, 2010

Bicycle Rush Hour Utrecht (Netherlands) I

direct from the you tube:

markenlei April 28, 2010Morning rush hour in the 4th largest city in the Netherlands. Streets look like this when 33% of ALL trips are made by bicycle!

This is an ordinary Wednesday morning in April 2010 at around 8.30 am. Original time was 8 minutes that were compressed into 2 minutes, so everything is 4 times faster than in reality. The sound is original.

This is one of the busiest junctions in Utrecht a city with a population of 300,000. No less than 18,000 bicycles and 2,500 buses pass here every day. And yet Google Street View missed it. Because private motorized traffic is restricted here.

These cyclists cross a one way bus lane (also used by taxis and municipal vehicles), two light rail tracks and then a one way street that can be used by private vehicles.

Behind the camera is a railway (you can hear the squeaking sounds of the trains passing) and the main railway station is very close too. A number of rental bikes from the station pass and many of the cyclists will have come by train for the first part of their commute.

For those who frown upon the total absence of bike helmets in this video, consider these findings from a US study:

"Cycling in the Netherlands is much safer than in the USA. The Netherlands has the lowest non-fatal injury rate as well as the lowest fatality rate, while the USA has the highest non-fatal injury rate as well as the highest fatality rate. Indeed, the non-fatal injury rate for the USA is about 30 times higher than for the Netherlands.

Injury rate per million km cycled: USA 37.5; NL 1.4
Fatality rate per 100 million km cycled: USA 5.8; NL 1.1"

From: Pucher, John and Buehler, Ralph (2008) 'Making Cycling Irresistible: Lessons from The Netherlands, Denmark and Germany'.

Friday, May 7, 2010

SO FAR - The Long Strange Trip Continues

Not only is Sunday Mothers Day and my sister Judy's birthday, it marks the 25th anniversary of my admission to the Illinois Bar. A heart felt thanks Mom (& Dad) for encouraging me in my studies, and in my pursuit of a life-long dream. Thank you to everyone who has supported my efforts and who helped me reach this goal.

Thank you.

Tuesday, February 9, 2010

EZ Dec Goes Live - here goes nothing.

The concept of exchanging a deed & keys for money still remains the same, but the steps to the crazy tribal dance we perform while helping buyers buy and sellers sell keep changing.

Whereas closings ten years ago could best be thought of as graceful arm in arm waltzes and minuets, todays closings are more akin to post-modern amalgams of sudden thrusts, breaks, pops, and martial arts-flavored acrobatics.

The dance just keeps on changing and anyone who's lawyer is not prepared to embrace these changes is going face a heck of a time trying to get their closings done.

Wednesday, February 3, 2010

You lost your house - but you still have to pay

This morning, reports on an ugly phenomenon - the fact that many mortgage lenders are chasing borrowers for "deficiencies", the difference between what is owed and what is recouped whether by "short sale" or foreclosure or a deed in lieu of foreclosure.

You lost your house - but you still have to pay

Posted using ShareThis

Notes, Mortgages, and Deeds are all legal documents. Short sales and Foreclosures are transactions that significant legal consequences. The cases described in this report all seem to have involved borrowers who entered into these arrangments with their mortgage lenders without legal counsel.

Good Lawyering can help distressed homeowners avoid these sorts of deficiency judgments. I have helped clients avoid these and other pitfalls as they try to extract themselves from distress situations.

Please let me know if I can help you (or anyone you know) too.

Tuesday, February 2, 2010

2010 North & Northwest Suburban Triennial Property Tax Reassessments

Local property tax bills are computed using a formula that takes four important variable into consideration:

  • Governmental tax rates (set every year based on the budget needs of the various taxing bodies that collect property taxes
  • Assessed Valuations (what the County thinks your property is worth)
  • The State Equalization Factor, a/k/a the multiplier (a formula used to balance the assessment formulas used by various counties state-wide), and
  • Exemptions (special discounts afforded to particular classes of tax payers, such as Homeowners, Seniors, and Veterans).
All Cook County properties are all reassessed on a triennial basis (see graphic), that is, once every three years. Properties in our north and northwest Townships are due  for re-assessments in 2010.

Chicago Property Tax Assistance Grants

A friendly reminder to readers who own real estate in the City of Chicago -

If you call Chicago your home and reported income of less than $200,00o, the City wants to give you back some of your tax money.

For real!

Up to $200 of it.

Details here.

The deadline for this program is March 31st. Do not delay.

As always, please feel free to contact me if you have any questions or would like additional information about this program.

Sunday, January 24, 2010

Cook County Property Tax Bills

We all know that the first installment, the "estimated" installment comes out every spring - due and payable on the first business day in March. (March 2nd for us here in 2010).

Two big changes this year - one expected and one a surprise:

First installment tax bills are higher than in past years - Previously, the County assessed 1st installment taxes at 1/2 of the previous year's taxes. This time, we will pay 55%.

Now the surprise - bills were mailed out this week and hit many mail boxes this weekend - a full week earlier than in past years.

What does this say about the state of governmental cash flows?

Monday, January 18, 2010

FHA "no-flip" Rule to be Suspended for 1 Year

A significant change in FHA lending guidelines is likely to spur quicker rehabilitation and absorption of foreclosure properties back into the real estate markets. On Friday, the Department of Housing and Urban Development announced that it is suspending the "90-day no flip" rule for one year, beginning on February 1, 2010.

Simply put, FHA policy denies mortgage loan guaranties to buyers if the seller had owned the property for less than 90 days. Buyers and Sellers that were agreed on sale terms were being forced to sit on the sidelines and wait until the Seller's title was properly "seasoned." This loan regulation tripped up several would-be buyers and sellers that I worked with last year. No doubt many other buyers and sellers hit the same road block.

"Flipping" is the practice of selling a property quickly after acquiring it. The idea of course is to buy low and sell high. The idea here is to enable entrepreneur/rehabbers to purchase bank-owned or distressed properties, fix them up, and sell them as soon as they have been rehabilitated. Having to wait 90 days - even if it only takes 21 days to complete a property renovation - adds to a flipper's carrying costs and lowers the bottom line. The new rule will streamline this process of bringing distressed REO properties back to market condition, and should help stimulate interest in this class of properties for buyers who intend to use FHA financing.

The 90 day rule is a necessary regulation to guard against the sort Flipping abuses that plagued the market for years before the bubble burst (and lets face it, folks, many of these REO properties that will be rehabbed & flipped became REO properties because of bad flips in the first place). Recall that many scammers were buying properties at below market prices and selling them (often the same day or week as they bought 'em) to unsuspecting buyers at inflated prices. Some of the more brazed schemes produced "laddering" of sales that inflated prices well above market. The most outrageous schemes involved flipped condominiums that were never even completed or occupied.


The rule change is likely to encourage rehabbers to buy distressed properties and to bring them to market as quickly as possible. Many of the investor - rehab deals that I have been seeing have been the properties that are most attractive to first time buyers - "starter" homes and condominiums. These are also the buyers most likely use FHA guaranteed loans. The timing of the announcement should make a wider array of these homes available to buyers as the spring market approaches.

These homes will likely feature a combination of newly completed or renovated kitchens and bathrooms, fresh paint, and upgraded electrical systems, all attractive benefits to first time buyers.

This will necessarily cause some disadvantage to sellers of non-distressed "starter" homes. These more lived-in properties will likely compete for buyers' attention with older, more worn, fixtures and appliances and perhaps dated design schemes. Developers who are still selling off condo conversion inventory will likewise face stiffer competition from the one-off investors.

As with all of these loan guideline and regulation changes, there is of course some fine print. Stricter procedures and higher loan costs will be charged when the prices FHA financed buyers pay exceed the investor's aquisition purchase price by more than 20%.

I can help buyers and investors alike as they evaluate the impact this change will have on their real estate transactions over the coming months.

Let me know if you have questions about any of this. Until then, the complete details of the waiver requirements are lined, here.

Thursday, January 14, 2010

Mortgage Foreclosures up 33%

In all likelihood, someone you know is facing (or has already had to address) some sort of mortgage delinquency. One in every 31 households in the Chicago area received a foreclosure filing last year. That is up 33% from 2008 and nearly five times the number in 2007.

No doubt many news outlets and real estate bloggers will be reporting this data as well, but for more of the gory details, check out FRANCINE KNOWLES' summary in the Sun Times.

There are many ways that homeowners confronted with delinquency notices or foreclosure lawsuits can minimize - or avoid - financial loss. This can only happen if the homeowner is willing to confront the problem and acts quickly to mitigate potential losses.

Homeowners facing mortgage delinquencies or foreclosures should consult an experienced real estate lawyer to evaluate their situation and to help deal with their lenders.

There are often several options available including -
  • loan forbearances
  • loan modifications
  • deeds in lieu of foreclosure
  • short sales
Each of these options have significant legal consequences that should be carefully considered before proceeding, as mortgage loans are binding contracts and all of these options involve some aspect of enforcing or changing the terms of those legal documents.

If you do know someone facing foreclosure, the best thing you can do to help them, it is to urge them to seek legal counsel at the earliest possible opportunity.

Please let me know if you want to learn more, if you know anyone who is in need of assistance.