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from Local Attorney, Michael H. Wasserman

Wednesday, June 29, 2011

HUD ANNOUNCES FINAL RULE SETTING STANDARDS FOR STATE COMPLIANCE WITH SAFE ACT

Big news today from Washington, for sellers who would consider offering financing to potential buyers and for
lucky souls who's parents or other benevolent freinds or family might consider financing their real estate purchases - HUD announced rules that may actually let you execute on your plans.

Shockingly, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, or SAFE Act seems to have outlawed these sorts of financing tools. The SAFE Act established  minimum standards for state 
licensing of residential mortgage loan originators in order to increase uniformity, improve 
accountability of loan originators, combat fraud, and enhance consumer protections. but in enacting restrictions on their qualifications and authority, the law included everyone in the universe who made, or wanted to make, mortgage loans.


 The SAFE Act defines “loan originator” to mean “an individual who takes a residential mortgage loan application; and offers or negotiates the terms of a residential mortgage loan for compensation or gain,"  including individuals who “engage in the business” of a loan originator.  


As interpreted in Illinois, a parent  could not lend money to a child to purchase a home or condo unless that parent was a licensed Illinois mortgage lender or originator. Making even a single loan is deemed to be a venture for compensation or gain.

Sad to say, I have had several clients who's plans were dashed by this nasty, and surely unintended consequence of SAFE act implementation.


Today's HUD announcement 11-133 appears to (finally) change all of that. 

  • HUD notes that nothing in the SAFE Act rule prohibits an individual property owner from financing the sale of his or her own property, nor does the SAFE Act require an individual to become a licensed loan originator in order to provide financing in the sale of his or her property.
  • The rule change also clarifies that individuals are not required to be licensed by states) when offering mortgage loans on behalf of an immediate family members. 

To soon to know how the State of Illinois will interpret this one, but it seems pretty clear. Seller financing and parent-financing of mortgages can resume in Illinois. Buyers who are looking for "creative financing" have some new options - that is to say, some classic old-school financing tools  that fell out of favor may be back.

Have a question about seller financing or other family-funded financing of your next real estate purchase? give me a call.

Thursday, June 23, 2011

This is what the 'Next wave' of mortgage fraud looks like

I do not really know why I am so fascinated by mortgage fraud, but I just am. Here is a fascinating description of the level of sophistication and determination of the fraudsters.

Next time you - or your client - or your client's buyer complains about all the paperwork they need to submit to document their loan applications, consider how much tougher it must be when you are making the stuff up as you go along...

'Next wave' of mortgage fraud strikes | StarTribune.com

Monday, June 20, 2011

BUYER BEWARE: the Mortgage Loan Handoff Rip-off Scam is Back

There are about as many ways to scam the unwary real estate consumer as their are stars in the sky, or so it seems. This one is an oldy, but a goody: the mortgage hand-off scam.

The con is a pretty simple one:

send an official looking notice to a hapless homeowner (typically, but not always, an unsophisticated new buyer).

Tell the owner that his mortgage has been sold to Mega Mortgage Financial Security, Co. and direct all future payments to the scammer's post office box.

Collect a couple-three payments and move on before the real lender starts calling on the homeowner to find out why he stopped paying on the loan.

FEDERAL LAW REQUIRES A "WELCOME" FROM YOUR NEW LOAN SERVICER and an "EXIT" FROM THE OLD ONE - NEVER MAKE A CHANGE UNTIL BOTH CONFIRM THAT A CHANGE IS TAKING PLACE.

A more detailed report here, from the Chicago Tribune:

I have been warning home buyers about this particular fraud for years now. I hope and trust that no one I have represented has fallen victim.

Do let me know if you have seen this - or any similar scam in the area.

Feel free to contact me if you have any questions about these or other mortgage rip-offs.

Thursday, June 2, 2011

CHICAGO TITLE ANNOUNCES NEW POLICY FOR ACCEPTING CHECKS AT CLOSINGS

The old standard operating procedure for Chicago area residential closings may be changing a bit, based on an announcement I recently received from  Chicago Title.

Outbound emails from CT's REO unit in Carrol Stream now advise recipients that the title company will no longer accept third party checks at closings. Apparently, company auditors  want all funds to be made payable directly to the title company. The new rule is effective May 1, 2011, but I am told that Carrol Stream is implementing a  "soft" introduction of the new rules  to allow time for word to get out of the change.

The rule of thumb for as long as  I have been handling Chicago area real estate closings has been that any funds a Buyer (or Seller) would bring to the closing table would be in the form of a wire transfer or a cashiers/certified check made payable to that Buyer (or Seller). Once the parties were satisfied with all of the closing documents and settlement figures, the Buyer would endorse that check over to the title company, who routinely accepted and deposited funds into the closing escrow.

If something went wrong at closing, the conventional wisdom holds that a Buyer can more easily reclaim the funds intended for closing by merely endorsing and re-depositing funds back into his or her own bank account.


Sure from time to time, instructing a client to write a check payable to "your self" had unintended consequences, but the system has worked well for my clients up to this point and Buyers had that extra measure of confidence that their money is safe and that they have full control over it up until the last possible moment in the closing process.

Switching over to the new system should not be too much of a problem - at least for those "in the know." There will no doubt be lawyers, loan originators and real estate agents who do not get (or read) the memo, who's clients will have to make an emergency run to the bank from a closing to get their closing checks re-issued. The rest of us will sit at the closing table and wait.