Cook County Delinquent Tax Information

About 80,000 people visit the Cook County Clerk's office each year, just to find out if a parcel of real estate they own or are interested in has delinquent property taxes.  Additionally, the Cook County Clerk's office gets 96,000 calls a year, for the same reason.  This doesn't include all of the other phone calls and visitors they field.

In order to be more efficient, the Cook County Clerk's office has now posted this information online.  Visitors to this new database can view the status of properties with unpaid taxes in the last 20 years, including information about whether the taxes have been sold or not.  This information helps not only homeowners and prospective purchasers, but real estate attorneys and title companies as well!

If you would like to visit the database, click here.

New Bill to Fast Track Foreclosures

A bill passed the state house and senate earlier this month, and if it is signed into law by the governor, it could change the foreclosure landscape significantly when it takes effect on June 1, 2013.

What would the new bill accomplish?

First, the bill would charge more money to banks who file frequent foreclosures.  Any lender that filed at least 175 foreclosures in the last year would have to pay an additional $500 for every new foreclosure complaint it files.  Lenders that filed between 50 and 174 foreclosures in the last year would be charged an additional $250 per new filing, and lenders that filed between 1 and 49 foreclosures in the last year would pay an additional $50 per new complaint.  With the amount of foreclosures filed annually, it is estimated that an additional $41 million in revenues will be collected in the year after the law takes effect.

Second, the fees collected for the foreclosure filings would be used for the benefit of homeowners and communities.  Specifically, thirty percent of the funds collected would go towards counseling and foreclosure prevention services for people in danger of being foreclosed.  The rest of the funds would be distributed to municipalities to help them maintain abandoned properties. 

Third, the bill would speed up the foreclosure process for certain types of properties.  Instead of taking eighteen months to two years to be foreclosed, abandoned single family homes, condominiums and townhouses could be foreclosed within 100 days.  Apartment buildings with six or fewer units that are not owner-occupied could be fast-tracked also.  Moreover, homes that are under construction but where construction activity has ceased for at least six months could be foreclosed quickly also, if there has been damage to the property.  Speeding up the foreclosure process will help get these properties to market quickly, instead of allowing them to become rundown and potentially dangerous, blighting the community.

Keep in mind that homes that are going through the probate process, as well as vacant buildings that are for sale but compliant with all local regulations and are safe and locked up, are not subject to this new bill.

Fourth, if the property being foreclosed is in Chicago, the local alderman will receive a notice of foreclosure for properties in his or her ward.

Again, it's up to the governor now.  If he signs off, the new law will go into effect June 1, 2013.

Condominium Owner May Claim Neglect in Evictions

A recent case, Spanish Court Two Condominium Association v. Carlson, 2012 IL App (2d) 110473 (June 27, 2012) is going to affect forcibles involving condominium associations throughout the state. 

In that case, the condominium association filed a complaint in forcible entry and detainer against the defendant based on defendant's failure to pay regular and special assessments for six months.  The defendant did not deny that she had not paid assessments.  Rather, she claimed she did not owe assessments because the condominium association had failed to maintain the roof and the brickwork above her unit, causing damage to her unit and its contents.  Further, she claimed that the condominum association had ordered her bathroom to be partially "destroyed", believing that it was causing a leak in a neighboring unit.  When the plumber determined the leak did not originate in her unit, the association repaired the bathroom, except for the toilet, which was inoperable.  Based on these items, the defendant claimed that the association's claim should be estopped, and she should be reimbursed for the various repair expenses she had incurred as a result of the association's failure to maintain the property.

Based on an analogy to landlord/tenant law, the court determined that 1) the defendant could certainly claim neglect as a defense to the association's suit, but 2) she could not counterclaim damages. 

This brings the practice of forcibles for condominium associations one step closer to landlord/tenant law!

Are you getting the short sale incentives you should?

When you apply for a short sale, you have to submit a LOT of paperwork.  It's a time-consuming process.  And if you fail to respond to the bank quickly, well, they just close out your file and you get the privilege of applying all over again.  It's not a fun road, but it's traveled all too often these days. 

If they're going to put you through all that, make sure at the end you get what you deserve!  There are a number of incentives out there to encourage short sales.  For example:

1.  If you are a seller who qualifies for a short sale under the Home Affordable Foreclosure Alternatives program (HAFA), you could receive up to $3,000 in relocation costs.

2.  Larger banks are offering their own incentives to sellers.  Bank of America, Chase and Citibank often offer some relocation assistance as well, even if the loan does not qualify under HAFA.

3.  If you qualify under HAFA, the bank is required to respond within 30 days after they receive your offer, and render a decision within 60 days (assuming, of course, that the required paperwork is turned in).  In theory this is a great benefit to sellers, making their homes competitive with the homes of people who are not in a short sale situation.  In other words, potential buyers who need to move quickly may be willing to consider a short sale if they know they will have a decision in 60 days.  In practice, however, I have not seen banks meet these deadlines with any regularity.

HAFA also offers $1500 to the servicer bank if the short sale gets done, and up to $8,500 to secondary lienholders. 

If you are involved in a short sale, make sure you get what you deserve!

Short Sale Update

Short sale rules are changing all the time.  Here are some new tidbits that may be of interest to you:

1)  Effective June 2012, lenders must provide a response within 30 days of receiving a short sale offer if the loan is backed by Freddie Mac or Fannie Mae, or is subject to the Home Affordable Foreclosure Alternatives Act (HAFA).  Also, those lenders must make a final decision within 60 days.

2)  HAFA is no longer limited to owner-occupied homes.  Certain investment properties may qualify under HAFA as well.

3)  Homeowners who are in the military, and need to move quickly as a result of receiving new orders, can qualify for short sale assistance automatically if their loans are backed by Fannie Mae or Freddie Mac, and if they owe more than their home is worth.

Can I buy another house if I have been foreclosed?

Can you buy another home if you have gone through the foreclosure or short sale process? Well, it's not going to be easy, especially if you need financing. But the Federal Housing Administration has some programs that could help you out. You could qualify for an FHA loan if you meet various criteria. For example:

1) It has been at least three years since you have owned any real estate that was foreclosed (including regular foreclosures and deed-in-lieu transactions).

2) You did a short sale, but you were current in your mortgage payments for the 12 months leading up to your short sale.

3) You did a short sale, and you were current on all installment payments (i.e. credit cards, etc.) for the 12 months leading up to your short sale.

On the other hand, you would be ineligible for an FHA loan if you fall in one of the following categories:

A) You did a short sale only to take advantage of the real estate market, and/or bought property nearby at a reduced price.

B) It has not been three years since you have had real estate that went through the foreclosure or deed-in-lieu of foreclosure process, unless you have significantly improved your credit since the foreclosure and the foreclosure was caused by certain circumstances beyond your control, such as the death or illness of one of the primary wage-earners involved. Failure to sell the real estate, divorce, and relocation, however, are not enough to get you an FHA loan.

C) You were not current on your mortgage payments for at least 12 months before you did a short sale, unless that was due to the death or illness of one of the primary wage-earners involved.

So all is not lost. Conventional financing, much of which is backed by Fannie Mae and Freddie Mac, may not be an option for you. You would have to wait 7 years after your foreclosure to qualify. But an FHA loan may be available to you in just 3 years. If you have been through, or are going through, the short sale or foreclosure process, be optimistic! You could be a homeowner again soon!

The Benefits of Having a Survey

Usually, when I represent someone purchasing commercial property, an apartment building, or a single-family home, I don't have to worry about ordering a survey.  That's the seller's job.  But with more and more of my clients purchasing real estate that has been foreclosed directly from the bank, I find myself advising my clients to obtain surveys before closing.  Why?  Many bank-owners of foreclosed property don't provide surveys as part of their agreement with the buyer.  As a result, something that the buyer did not anticipate having to pay for becomes an additional expense.  Surveys range in price from a few hundred dollars for residential property to thousands of dollars for large parcels of commercial property.

But really, you should get that survey.  Why?  Here are a few reasons:

1) You may not be able to purchase the property without a survey even if you are willing to.  Many lenders require a survey as a condition of financing.

2) Having a survey gets you extended coverage on title.  This is a little bit more comprehensive and stronger form of title coverage than you would get otherwise.

3) There may be an encroachment or other serious issue with the layout or location of fixed structures on the property.  It's better to know now than find out later.

4) You may find the property lines are entirely different from what you thought they were.  That apple tree you thought was yours?  Surprise, it belong to your neighbor, and so does that whole hedge.  Again, it's better to know now than to find out later.

5)  Sometimes surveys are needed when you apply for a tax appeal, especially if you believe you are being assessed for property that is not yours.

6)  If you intend to subdivide the real estate you are purchasing, you will need a survey to submit as part of the subdivision process.

Revised FHA Condominium Rules

It's become harder and harder to find a condo that is eligible for FHA financing.  Just when everything seems okay, the buyer finds out the association doesn't have enough reserves.  Or perhaps, the association has too many commercial units, like a shopping center on the first floor.  Or maybe, too may homeowners in the association have been hit hard and are no longer making assessment payments.  When these things happen, the unit becomes ineligible for FHA financing, sometimes dashing the buyer's -- and the seller's -- dreams of a purchase or sale.

The good news is, the FHA finally revised its rules for condominium financing, making it a little bit easier to get approved for an FHA loan.  For example:

1) If you are buying a residential unit in a condominium building where up to 50% of the space is allocated for commercial use, you can still qualify.  Previously, the cutoff was 25%.

2)  A single investor can now own up to 50% of the units in the condominium building, and other units will still be eligible for FHA financing.  Previously, if any one investor owned more than 10% of the units in a building, the other units could not qualify for FHA financing.

3)  You can still be eligible for an FHA loan if up to 15% of the units in the building are no more than 60 days delinquent on assessment payments.  This is an increase from 30 days. 

So if there was previously a condominium you had your heart set on, but it didn't qualify for FHA financing, you may want to go back and see if you can get that loan now!

Future Foreclosure Listing Information Now Available Online!

There is one specific home I remember driving by often on my way home a few years ago.  It was clearly foreclosed -- the lights were never on, the yard was a shambles.  Occasionally there was a sign on the door.  But despite that, it looked like a beautiful house in a nice neighborhood, and I kept wondering when it would come on the market.  Well, lo and behold, it eventually did come on the market.  It must have been at least six months later, if not more.

Apparently, there is a new tool out there that can give you more information about when a foreclosed home might make it to market, along with other details -- address, the amount of the original mortgage and how much is still owed, an estimated price, and even details of how far along the property is in the foreclosure process (to help you figure out when it might be listed).  This could be a great new font of information for all of you potential home buyers and investors out there.

Who is offering up this information?  Apparently, Zillow is.  As of a week ago, there were 11,000 pre-market homes listed on the site in Chicago alone.  If you are in the market, or wondering about a foreclosed home you're interested in, or just plain nosy, it looks like Zillow might have some interesting information for you.

Bank Must Have Standing to File Foreclosure!

A recent case, Deutche Bank National Trust v. Gilbert, 2012 IL App (2d) 120164 (September 25, 2012), highlights how important it is for a bank to have standing -- in this case, the bank must actually own the loan -- when filing a foreclosure suit.

In 2005, the defendant homeowner entered into a mortgage with Mortgage Electronic Registration Systems (MERS).  At some point, he defaulted.  In March 2008 the plaintiff, Deutsche Bank, filed a foreclosure action against the defendant.  In August 2008, MERS assigned the mortgage to Deutsche Bank.  The next month, Deutsche Bank amended its complaint and attached the assignment from MERS.

The defendant claimed that Deutsche Bank did not have standing because it did not own the mortgage when the foreclosure was filed.  While the trial judge initally agreed with the defendant, upon motion for reconsideration, he sided with Deutsche Bank.

The home was foreclosed, and the defendant appealed.  The appellate court found that Deutsche Bank did not have standing when the suit was filed, and therefore the foreclosure action was inherently defective.  The appellate court reversed the judgment of foreclosure.

If you are a bank filing foreclosure, you must make sure that the mortgage has been properly assigned to you before filing suit.  If you are a homeowner facing foreclosure, this little loophole could buy you more time!

More Legal Aid Funds for Distressed Homeowners and Tenants

The funds from February's $25 billion national settlement are being distributed as we speak.  Back in August, $4.7 million were given towards assistance for distressed homeowners and tenants in Cook County.  A few weeks back, $4.5 million were earmarked for foreclosure assistance in Winnebago County, and northern and central Illinois generallly.  Shortly thereafter, $1.4 million was awarded to provide legal assistance to renters in the Chicago area. 

 

The attorney general plans on distributing $20 million towards legal aid.  As more funds become available, the organizations receiving them are hiring attorneys to assist distressed homeowners and tenants.  If you are facing foreclosure, help may be just around the corner! 

 

Unrecorded Declaration Provides Sufficient Notice Under Illinois Condominium Property Act

A recent case, Seth v. Aqua at Lakeshore East, 2012 IL App (1st) 120438 (September 26, 2012), provides insight on how courts interpret the portion of Section 22 of the Illinois Condominium Property Act (the "Condo Act") requiring that developers present a copy of the condominium declaration to buyers purchasing new condominiums. 

In 2006 and 2007, the plaintiffs in Seth signed contracts to purchase units in a new development, Aqua at Lakeshore East.  The condominiums were scheduled to be delivered in December of 2010.  When they signed their contracts, plaintiffs received a Property Report with the proposed condominium declaration as an exhibit.  The Property Report stated that the developer had a right to modify the condominum documents in certain respects. 

In September of 2009, the developer recorded the condominum declaration.  It was not identical to the condominum declaration that had been previously presented to the plaintiffs.  There were seven additional units, and the units had different percentage interests assigned to them.

A few months later, the plaintiffs filed suit.  While their allegations were specific, the reality is that the economy had changed drastically since they initially signed their contracts, and perhaps they no longer wanted to purchase the condominiums.  Whatever their motives, plaintiffs claimed, among other things, that their contracts were void because the developer did not provide them with a recorded declaration.  The trial court ruled that the defendant should have provided a recorded declaration, and since it did not, the plaintiffs could rescind their contracts. 

The developer appealed, citing Section 22 of the Condo Act and setting forth a number of fairly logical and practical reasons why it was not required to provide a recorded declaration before the project was complete.  The appellate court stated that they would not focus on whether the developer or the trial judge intepreted the Condo Act correctly.  Rather, they decided that since plaintiffs had actual knowledge of the unrecorded declaration, that was functionally equivalent to the document being recorded.  The presentation of the unrecorded declaration was sufficient under Section 22 of the Condo Act. 

The Condo Act has a provision for how amendments to a condominium declaration must be handled, and, as the trial court pointed out, the plaintiffs had knowledge of that too.  As long as changes are consistent with the requirements of the Condo Act, the fact that the declaration was modified is insufficient to nullify the sales contracts.

Mortgage Rates May Increase in Illinois!

We just found out recently that Illinois has the highest foreclosure rate in the country.  Well, now homebuyers may have to pay the price for that.

Fannie Mae and Freddie Mac want to increase the fees charged for the mortgages they acquire in Illinois and four other states.  In all five states where Fannie Mae and Freddie Mac are trying to increase fees, foreclosures take an inordinately long time.  In Illinois, for example, the average foreclosure takes well over 500 days.  Fannie Mae and Freddie Mac feel that they need to recoup the increased costs they suffer as a result of this lengthy foreclosure process in Illinois, Connecticut, Florida, New Jersey and New York.

Fannie Mae and Freddie Mac are increasing some of their fees nationwide effective December 1, 2012.  The fees for Illinois and the four other states with long foreclosure processing times, however, are in addition to the nationwide increase that will take effect towards the end of this year. 

If the new plan takes effect, it will kick in on January 1 of next year.  Illinois homebuyers will be charged an upfront fee of 0.15 percent of their loan amount on condominiums, townhomes, single-family homes, and even apartment buildings up to four units.  For every $200,000 in loans, the increased fee will translate to $42 annually.  This fee is anticipated to be less than the fee that will be paid by homebuyers in Connecticut, Florida, New Jersey and New York.

The fees are not a done deal yet.  The Federal Housing Finance Agency is still weighing the pros and cons.  So maybe we won't end up with extra fees in Illinois after all.  Or, maybe, we'll end up with even greater fees than the ones they anticipate now.  It remains to be seen.

Illinois Has Highest Foreclosure Rate in the Country!

According to date recently posted by RealtyTrac, Illinois had the highest foreclosure rate in the nation in August 2012.  Nearly 18,000 Illinois homes received a foreclosure notice in August; approximately 8,600 of those were new foreclosures, meaning the lender just initiated the foreclosure in August.

Over 90% of the homes receiving foreclosure notices last month were in the Chicago area.  Of those homes, most were in Cook County.  4,842 Cook County homes received their first foreclosure notice last month.  Another 2,210 Cook County homes received a notice that their home was now foreclosed and scheduled for auction.  Lastly , 2,035 Cook County homes were repossessed by lenders.

Overall, there was a whopping 42% increase in foreclosure activity between August 2011 and August 2012.  Foreclosure activity increased nearly 30% in just one month, from July 2012.  What does this mean?  Expect an influx of foreclosures on the market in the coming months!

Religious Use Real Estate Tax Exemptions for Religious Property Only

A recent case, Franciscan Communities v. Hamer, 2012 IL App (2d) 110431 (August 28, 2012) clarified that only the religious portion of a property, the owners of which are seeking to reduce taxes based on the religious use real estate tax exemption, qualifies for such an exemption.  

The plaintiff in this case, Franciscan Communities, owns a retirement home in Lindenhurst, Lake County, Illinois.  To live at this retirement community, an individual must pay an entrance fee (90% of which is refundable), coupled with a monthly service fee.  In 2007, the entrance fees ranged from $127,596 to $332,608.  The monthly fees ranged from $1,248 to $4,741. In 2007, the retirement home earned gross revenues of $17.4 million.  The retirement home has a dedicated chapel.  The plaintiff requested a religious use tax exemption in 2007and was denied. The denial eventually brought this matter before the appellate court. 

The court found that while the retirement home certainly had a religious component, advancing religion was not the home's fundamental goal.  Evidence showed that the retirement home engaged in marketing activities to induce more seniors to move in at market rates, thereby increasing revenues.  The court affirmed that the Lake County Board of Review, the Illinois Department of Revenue, and the administrative law judge who heard the appeal were all correct in denying the religious use tax exemption, and that only the portion of the property actually used for religious purposes -- in this case, the chapel -- could benefit from the exemption.

Due Inquiry Necessary Prior to Serving Notice of Foreclosure via Publication

A recent case, Citimortgage, Inc. v. Cotton, 2012 IL App (1st) 102438 (August 28, 2012), highlights the important of proper service on the defendant mortgagor in a foreclosure case.  Mr. Cotton was a City of Chicago fireman who had a loan with CitiMortgage on a five-unit residential building in Chicago.  The building went into foreclosure, and the process server hired by the lender attempted service on Mr. Cotton ten times at the building.  He later filed an affidavit that he had attempted service ten times and was unable to serve Mr. Cotton.  The bank had an alternate address for Mr. Cotton as well, also at an apartment building.  Another process server eventually filed an affidavit that he had attempted to serve Mr. Cotton nine times at the alternate address, and was unable to serve him there either.  Citimortgage then obtained permission from the court to serve the defendant via publication, and published in the Chicago Daily Law Bulletin.  Some time thereafter, the building was foreclosed.

Subsequently, Mr. Cotton filed a motion to vacate the judgment, but the trial court denied it.  Mr. Cotton then appealed.  Among other things, he claimed that service by publication should be quashed because prior to notice by publication, the plaintiff must conduct due inquiry.  Mr. Cotton claimed that while the bank may have been diligent (assuming that they did in fact attempt to serve him 19 times), they did not conduct due inquiry and did not even use the information they had readily available to them when attempting to serve him.  For example, they knew where he was employed, but they did not try to serve him there.  They knew who his attorney was, but they did not attempt to contact his attorney either.  Mr. Cotton also presented affidavits from his neighbors, as well as visual evidence, contradicting the process servers' affidavits that they had visited Mr. Cotton's two known addresses.

Based on the evidence presented by Mr. Cotton, the appellate court stated that the trial court should have allowed a hearing on whether service by publication was proper, and remanded the case.

The moral of the story depends on who you are:  If you're a lender, make sure you conduct "due inquiry" prior to serving a mortgagor via publication.  If you're a homeowner who is being or has been foreclosed, you may have some rights if service was not proper.

Legal Assistance Funding for Cook County Homeowners

In February, the federal goverment and state attorney generals announced a $25 billion settlement with five large national banks for "robosigning" foreclosure paperwork.  Illinois is receiving a portion of that money, somewhere betwen $1 - $1.5 billion.  Our state attorney general announced her intention to distribute $20 million of the settlement funds for legal aid, and the first funds are finally filtering through.

 

The Legal Assistance Foundation will receive about $4.7 million of the settlement funds.  This money is intended to expand legal services to distressed tenants and homeowners in Cook County.  Specifically, the Legal Assistance Foundation hopes to have twenty attorneys and paralegals working on cases involving distressed homeowners and tenants.  They also plan to conduct seminars designed to provide legal traning in foreclosure defense and bankruptcy.  Lastly, they hope to work with teh courts to improve the Cook County Foreclosure Mediation Program.

 

 

July Housing Market Roundup

According to the Illinois Association of Realtors, in July 2012, home sales in the general Chicago area (comprising of Cook County and eight other counties) increased by 29 percent over July of 2011.  Overall, 8,551 homes sold.  The median sales price was the highest it's been this year.

While movement in the market is good news, it must be noted that the price of homes sold in July 2012 decreased nearly 6% overall in the nine counties comprising the study since July 2011.  The city of Chicago fared better: prices dropped only 2.4 percent in the city when compared to last summer, and condominium prices only dropped .8 percent, while condominium sales increased by 25 percent.  Dupage County prices fared the best -- there was an increase of a little over 1 percent since last summer.

Regardless of price fluctuations, there is a great deal of inventory out there.  A larger volume of sales , even at a lower price, should help to cut down inventory and increase prices in the long run.

New Illinois Mortgage Law Aimed to Protect Consumers

A couple of weeks ago, the governor signed some new laws into effect  affecting mortgage brokers.  The Residential Mortgage License Act of 1987 was amended with the intention of protecting consumers from fraudulent lending practices.  The gist of the amendments is this:

1)  Mortgage companies will pay higher licensing fees.  Previously, the annual licensing fee was $2,042.  Now it will be $2,700.

2) Applicants may have to undergo more extensive background checks.

3)  The penalties for mortgage fraud have tripled, from $25,000 to $75,000.

4)  There is some added protection in place for mortgage licensee whistleblowers who report fraudulent activity.

Loan Processing Fees Do Not Violate RESPA

In a case that made it all the way to the U.S. Supreme Court, plaintiffs alleged that their lender, Quicken Loans, violated the Real Estate Settlement Procedures Act (RESPA) by charging loan processing and loan discount fees.  The plaintiffs claimed that the fees Quicken charged them were not tied to specific services, nor did they lead to a reduction in the plaintiffs' loan costs.  Therefore, the plaintiffs alleged that the loan processing and discount fees violated Section 8(b) of RESPA, which prohibits unearned fees.

The Supreme Court, however, sided with Quicken Loans, affirming the defendant's argument that Section 8(b) of RESPA applies only to fees that are split with another settlement service provider.  Since the fees in question were not split with any other party, and since the plaintiffs had never alleged that the fees were split with another party, the case was decided in Quicken Loans favor. 

New Source of Funding for Foreclosure Mediation

Tax exempt organizations who qualify and who are willing provide foreclosure mediation services may receive a portion of the funds obtained through a $25 billion settlement earlier this year with five large banks accused of "robo-signing" foreclosure documents.  $3 million have been allocated to fund foreclosure mediation programs in Illinois, specifically for counties that do not currently have such programs.

Increased and better foreclosure mediation may help homeowners avoid foreclosure, and instead work out a loan modification, short sale, or other acceptable solution.

Interested tax-exempt organizations may apply for a multi-year grant by August 15.  The Illinois Attorney General's office can provide details to interested organizations. 

Wells Fargo Settles Charges of Discriminatory Lending

As a result of discriminatory lending allegations, last week Wells Fargo entered into a $175 million settlement agreement with the government.  The U.S. Attorney General's office states that Wells Fargo discriminated against 34,000 homeowners of Hispanic and African American origin nationwide.  According to some estimates, at least 3300 of these homeowners were in Illinois.

Illinois victims are expected to receive $15 million in aid.  Of the $15 million, $8 million will be in the form of cash payments.  Homeowners who were steered into subprime loans can expect to get approximately $15,000 each. Homeowners who were charged higher fees for their loans can expect approximately $2000 each.  Of course, each homeowner's case will have to be individually assessed to determine the exact relief.

The balance of the Illinois settlement, $7 million, will be used for down payment assistance for Illinois borrowers. 

After Judgment, Lack of Standing Not a Valid Foreclosure Defense

In a recent appeal of a foreclosure, National Advantage Mortgage Company v. Ortiz, 2012 IL App (1st) 112755 (June 29, 2012) Cook Co., 6th Div., the foreclosed property owner lost despite his assertion that the the plaintiff bank lacked standing to foreclose him when it filed the foreclosure suit.

In October of 2009, the bank filed a foreclosure action against Mr. Ortiz, the mortgagor.  In March of the following year, the bank was granted judgment of foreclosure.  After the judgment, Mr. Ortiz tried to dismiss the bank's complaint on the grounds that when the bank filed the foreclosure suit in October, it did not own the note.  The note was, in fact, not assigned to the bank until November 4, 2009.  The trial court granted Mr. Ortiz's motion to dismiss, and allowed the bank 30 days to file a motion to reconsider.

In the interim period, the appellate court rendered its decision in Mortgage Electronic Registration Systems, Inc. v. Barnes, 406 Ill.App. 3d 1, 6-7 (2010).  In that case, the court stated that a person who was foreclosed could not raise a lack of standing defense after judgment of foreclosure was entered.  Armed with this new bit of case law, the court granted the bank's motion to reconsider.

As a result, Mr. Ortiz appealed.  But again, he was out of luck.  The appellate court affirmed the trial court's decision.

So what does this mean for you?  Well, if you are a property owner facing foreclosure, and if you want to claim that the bank lacked standing to file suit against you, don't dawdle.  If the court enters a judgment of foreclosure, it's too late to claim lack of standing even if the bank didn't own the loan when they sued you!

Cook County Second Installment Tax Bills Arrived on Time!

I haven't seen any pigs flying yet.  And it was 102 degrees when I arrived at work this morning, so I'm guessing hell has not frozen over either.  BUT the unimaginable HAS happened, at least in the world of real estate.  Cook County second installment tax bills arrived in the mail on Monday, July 2, 2012.  Back in April, there was a rumor this might happen -- that our tax bills might arrive on time for the first time in over 40 years.

And now it has happened.  The tax bills have arrived, and are due, as per statute, on August 1, 2012.  The statutory deadline for second installment taxes has been ignored for years in Cook County, because the bills are never out by the deadline.  But this year they are, so taxpayers, get out your checkbooks.

What next?  Will the Cubs win the World Series this year?

Cook County Senior Citizens Real Estate Exemptions: Explained

Do you qualify for a Cook County senior exemption on your real estate tax bill?  You may, if you meet the criteria outlined below.  If you do, make sure you apply for the exemption on an annual basis (unlike past years, you have to apply annually now to preserve your senior exemption).

1.   You have to be at least 65 years old (in the tax year for which you are applying for the exemption).
2.   The property you are applying for must be your primary residence.
3.   You must be the owner of the property.  If you are not the owner, then you must have a lease for the property which states you are responsible for the payment of real estate taxes.

If you submit your application, and you qualify for the senior exemption, you will receive a deduction on your second installment tax bill.  Also, if you apply for the senior exemption, you do not need to submit a separate application for a homeowner's exemption.

If you feel you qualify, you should certainly apply.  A senior exemption will reduce your tax bill by more than just the homeowner's exemption, keeping valuable dollars in your pocket. 

The Mortgage Foreclosure Debt Relief Act

The Mortgage Foreclosure Debt Relief Act (the MFDRA) has provided relief to countless homeowners, or former homeowners, since it was enacted in 2007.  Under the MFDRA, homeowners who received debt relief on their principal residence between 2007 and 2012 do not have to pay income tax on the forgiven debt (normally this debt is taxable).  It doesn't matter whether the debt is forgiven as a result of foreclosure, short sale, or mortgage modification.  Debt relief under the MFDRA is quite generous -- up to $2,000,000 if married filing jointly, or $1,000,000 if single or filing separately.  Forgiven debt is still reported on the tax return, but is exempted from income tax if all qualifications are met.

Unfortunately, the MFDRA is set to expire at the end of this year, on December 31, 2012.  While both Democrats and Republicans are supporting an extension, each party has their own version of what that extension should be.  There is no agreement to extend the MFDRA just yet, and there may not be until the very end of the year, if at all!

What is Shadow Inventory?

What is Shadow Inventory?  And what can it tell us about the housing market, and maybe even the economy?

Well, simply put, Shadow Inventory is a fancy way of saying Pending Supply.  When analysts talk about the shadow inventory of homes, all they are talking about is how many homes are out there on the market.  In other words, they are discussing the pending supply of homes on the market.

How can the shadow inventory help us determine what's going on in the housing market?  Well, unless you've had your head in the sand for the past five years, you've noticed that the country is in a recession, caused, at least in part, by the housing bust.  As homes were coming on the market, and buyers were disappearing, the Shadow Inventory grew.  According to CoreLogic, in October of 2008, there was a 6-month supply of homes out there.  And when a few sold, they were offset by the other homes that came on the market.

Just a little over a year ago, in April 2011, the shadow inventory was still at a 6-month supply.  But now we're finally seeing some progress.  According to CoreLogic, in April 2012, the shadow inventory decreased 14.8% from the previous year.  That means that we only have a 4-month supply of homes on the market.  Since we know homes are still coming on the market right and left, through distressed situations or otherwise, this probably means that some buyers are coming out too. 

That, of course, is good for the economy. 

Foreclosures Increase in May 2012

According to RealtyTrac, last month banks filed 16,318 foreclosure filings in Illinois.  That's a whopping 29% increase in just one month.  It's also a 54% increase over May 2011, a year ago.  As RealtyTrac puts it, that's one house out of every 325 homes in Illinois.  In Chicago, that's one out of every 252 homes.  That's a LOT of foreclosure filings, especially when the real estate market is allegedly improving.

For the first time in 17 months, the foreclosure rate increased over the same month the previous year.  Are banks catching up on their backlog?  Will this large injection of foreclosures create a more favorable market for short sales?  It all remains to be seen.

Banks could certainly use all the help they can get unloading homes that they are in no position to take care.  Last month alone, banks took possession of 54,844 properties nationwide.  And the filing rate for foreclosures has been slowly increasing all year long.  In May 2012, banks filed 205,990 foreclosures nationwide.  Banks certainly are not in the business of property management, or at least, they shoudln't be. 

With all of the new liability they face, with any luck the banks will ease up on short sales!

Short Sale Pitfalls for Buyers

You've found the home of your dreams, but it's a short sale.  What are your risks?  I've listed them below for you.  Don't freak out though.  Some (or even most) of these may not apply to your transaction.  On the other hand, they may.  Try to do as much diligence as you can to find out how serious the seller and his bank really are.

1)   The seller's lender is slow to process the transaction.   Wait, let me rephrase that.  The seller's lender is sloooooooooow to process the transaction.  This happens a LOT.  Do not expect a quick turnaround time.  If you need to move quick, a short sale is probably not the way to go.

2)   The seller is not diligent in following up with his lender.   The seller's lender will want a lot of paperwork -- the seller's whole financial history, and sometimes even more.  Whoever is negotiating with the bank needs to follow up with the bank constantly.  Additionally, when the bank wants something from the seller, the seller has to get it to them quick.  I can't tell you the number of times that I've had a file stall because I called my client for signatures or some other paperwork that the bank requested, and my client did not provide it in a timely manner.

3)  The seller doesn't really want to sell.  This is unfortunate, but it happens.  Some sellers are only using a short sale as a stall tactic to stay in the home as long as possible without making a mortgage payment.  Oftentimes, their real estate agent and/or their attorney is not even aware of this.

4)   The seller may be using the short sale as a method to commit fraud.  Some sellers really don't want to move, and they find creative ways to avoid having to leave -- such as having a friend or relative purchase the home at a low price through a short sale.  This is fraud.  Unfortunately you, a true "third party", may never have a shot because the seller already knows which offer he is sending to the bank.

5)  The seller is uncooperative.  You may want to measure for blinds, or measure for furniture.  The seller, on the other hand, probably still occupies your dream home and may not want to let you in.  Homes going through a short sale are often owner-occupied, and the owners a) are not usually paying their mortgage, and b) don't have a lot to lose if the short sale falls through.

Despite all of this, many short sales are a success.  I'm not trying to deter you from short sales, but I think you, as a buyer, should have reasonable expectations and be aware of the pitfalls!

April 2012 Housing Market Roundup

Overall, April was a good month for Illinois home sales.  Based on data from the Multiple Listing Service (MLS), 9,961 homes sold statewide in April.  This a 15.7% increase from April 2011.  The median sales price was $135,000, an increase of $5,000 from March 2012.

The U.S. Census Bureau defines the nine-county Chicago Primary Metropolitan Statistical Area (the CPMSA) to include the following counties:  Cook, Lake, DuPage, McHenry, Will, Kane, Kendall, DeKalb, and Grundy.  In those counties, 6,814 homes were sold in April 2012.  That's nearly a 20% increase from last April.  However, the median sales price went down to $160,000, which is a 1.5% decrease from last April.  That's not to say everyone of the counties in the CPMSA saw a price drop.  From April 2011, sales prices in DuPage, Kane and Kendall Counties increased around 10%. 

Sales prices in Chicago also increased close to 10% when compared to April of 2011.  Moreover, 1,750 home sales were reported in Chicago in April 2012, a whopping 20% increase over April 2011.

Moreover, sales where MLS services were not utilized (such as for sale by owner homes) are not even included in these numbers.  There's a possibility that the numbers would look even better if private sales figures were available.

So April looked good overall when compared to last year.  Here's looking to more increases this summer!

How are Short Sales Faring?

Despite all the short sales that seem to sit around forever while lenders ignore them, short sales are faring surprisingly well overall when compared to the last few years.  Are lenders finally figuring out it makes more sense to sell a property short than to foreclose it, worry about it, deal with it, and end up selling it for less than they would have gotten in a short sale situation?  Possibly.

According to Realty Trac, short sales outnumbered foreclosure sales nationally for the first time in January 2012.  23.9% of homes sold in January were short sales.  Only 19.7% of sales in the same month were foreclosed homes.  Overall, short sales increased 33% in the last year.

The greatest increase in short sales was in the western part of the country, with California leading the pack.  In fact, nearly 30% of homes sold in California in January 2012 were short sales.  Over 27% of homes sold in Nevada in January were short sales, and over a fifth of homes sold in Arizona and Colorado were short sales. 

In the Midwest, Michigan, Wisconsin and Indiana had short sales in excess of 10%.  In the south, in Georgia short sales exceeded 20% of sales in January.  In Florida, short sales exceeded 13% of sales closed in January.

Psychologically, a short sale can be a lot easier to digest for a distressed homeowner than a foreclosure.  With any luck, banks will come around to short sales more and more!

Should I buy a foreclosure or a short sale?

You have no idea how many people ask me this question.  And of course, there is no right answer.  The reality is, no one is forcing you to buy either a foreclosure or a short sale.  There are houses on the market that are neither foreclosures nor short sales.  One of those just might be the right home for you.

But regardless, many people have it in their heads that in order to get a great deal, the property must be foreclosed or selling short.  If you have absolutely decided that you must buy a foreclosure or a short sale, that brings us back to the title of this post.  Which should you buy?

While there's no right answer, foreclosures are typically much faster to process.  They are often cheaper than short sales, and while you can't expect much help or any information from the bank, if you need to close quickly, it's safer to stick to a foreclosed property.

On the other hand, if you have time to wait, and the home of your dreams happens to be a short sale, go ahead and place an offer.  With any luck, the short sale home you're buying may be a "pre-approved short sale"; this means that the lender has issued a bottom line number to the seller, and if the offer is at least that amount, the short sale can be processed fairly quickly.  Most homes, however, are not pre-approved.

Another advantage of buying a short sale is that the home may not be vacant, and therefore less prone to damage or vandalism.  Foreclosed homes are usually vacant, and if they are damaged (i.e. water or storm damage), often no one knows for a while.
 
Banks are supposedly streamlining their short sale processes, and sure, they've sped up a little, but I haven't seen results yet.    Last month, the Federal Housing Finance Agency stated that the short sale process will change for Fannie Mae and Freddie Mac-backed properties starting in June.  Among other changes, the mortgage servicers will only have 30 days to respond to an offer.  If they don't respond in 30 days, they have to provide an update every week.  And after 60 days, they must give a final decision, no matter what.

Most banks, however, still seem to be acting on their own whims.  Most files languish and sellers and buyers get frustrated.  Many times buyers back out of the contract to pursue other options.  And of course, at the end of the day, not every short sale gets approved.

If you find a foreclosed home you love, go for it.  If you find a short sale you love, go for that.  Just keep in mind the pros and cons of each, and hopefully you make the right choice!

Could it be a first in 40 years?

Unlike DuPage County, Lake County, and the other collar counties, Cook County tax bills are usually up in the air until late in the year.  Technically, real estate taxes are supposed to be paid by August 1, but in the last 10 years, I've never even seen the second installment tax bill out by August 1.  There have been years the bill wasn't out until November!  I thought 10 years was a long time, until I found out that the tax bills have not been out by the deadline even once in the last 40 years.

This year, however, rumor has it that the bills will be out on time -- in July -- and will be due on August 1, which is the statutory deadline. 

If the bills are paid by August 1, all of the various entities that expect money from the county -- schools, fire departments, libraries, etc. -- should get their money on time.  This could benefit tax payers in the long run because these entities don't have to borrow money and pay interest -- a cost which is usually passed on to the tax payers later. 

If real estate owners know when their bills are coming out, they can prepare for them.  Also, the various taxing bodies will know when they receive their share.  This cuts down on a lot of uncertainty. 

Regardless, for now it's just talk.  Wouldn't it be great if those tax bills came out at a fixed time every year?  I'll believe it when I see it.

Is your real estate agent licensed?

If you are going to be buying or selling a home or other real estate soon, you may be meeting with prospective real estate agents.  Because of regulatory changes, you should ask your proposed real estate agent a new question:  Are you still licensed?

In 2009, the state revamped how real estate agents are categorized.  Before, we had salespersons, brokers and managing brokers.  Now the state has eliminated the salesperson category.  To be a licensed real estate agent, you must be a broker now.  Moreover, if you are running your own office, you must be a managing broker. 

The state also increased the minimal education and continuing education requirements.  For example, an entry-level real estate salesperson must now take 120 hours of classes, instead of 45. 

The deadline is looming near -- April 30, 2012 -- and as of the end of March, only 35% of salespersons have completed the educational requirements and transitioned to a broker's license.  Moreover, only 26% of brokers have complied with the new requirements.  With only a few weeks to go, a lot of real estate agents have a lot of catching up to do.  If they miss the deadline, they have to start from scratch, even if they have been in the real estate profession for years.

So if you're in the market for a real estate agent, make sure you confirm that he or she is licensed!

Illinois Foreclosure Prevention Workshops Available Soon!

The Illinois Foreclosure Prevention Network (IFPN) has plans to hold five additional foreclosure prevention workshops, entitled "Keep Your Home, Illinois" in the next few months.  The first workshop was held a couple weeks ago in Berwyn, and drew nearly 800 homeowners.

The workshops aim to assist homeowners in danger of losing their homes in a number of ways, such as: 1) Teaching homeowners about the variety of assistance programs available; 2) Having lenders on-site to answer homeowner queries; 3) Providing counseling services to homeowners; 4) Providing access to representatives from the Illinois Department of Employment Security to assist with unemployment issues; 5)  Providing access to representatives from the Illinois Department of Financial and Professional Regulation to assist with mortgage fraud issues; and 6) Assisting homeowners to file for relief through certain state programs, such as the Illinois Hardest Hit Program.

More than 103,000 homes in Illinois went into foreclosure last year.  Any homeowners needing assistance should keep their eyes open for the next workshop!

New McLean County Foreclosure Mediation Program

Last month, McLean County launched a new foreclosure mediation program aimed at facilitating communication between homeowners and lenders.  Homeowners everywhere complain that they are unable to get through to a person at their lender's office who will actually listen to them.  While the program is voluntary for homeowners, its goal is to allow the homeowner and the lender to speak to each other face-to-face, and hopefully iron out some of their issues.

Starting last month, every foreclosure in McLean County became subject to an additional $25 filing fee.  Lenders are also required to serve a special summons to the homeowner, which states that they have a right to participate in the voluntary mediation program.

McLean County is small -- you can see that just in the number of foreclosures that were filed in 2010.  Only 574 foreclosures were filed there, as compared to thousands in Cook and some of the other collar counties.  Local officials hope that many homeowners will sign up for the voluntary mediation program, and that many cases will be resolved to the mutual satisfaction of the parties involved.

February 2012 Housing Market Roundup

The National Association of Realtors (NAR) released some interesting information about last month (February 2012).  If you're wondering where the housing market is now, here are some little tidbits for you:

1)   33% of contracts to purchase real estate were canceled last month (for any reason).
2)   A third of homes that closed last month were bought by first-time homebuyers.
3)   23% of homes bought last month were bought by investors. 
4)   Home sales were up in the midwestern and in the southern regions of the country.
5)   The Northeast and West did not fare so well.  Home sales were down there. 
6)   The backlog of unsold homes went up another 4.3% last month.
7)   Foreclosures, short sales, and other distressed properties accounted for a third of properties sold last month. 

Let's hope that the spring and summer months bring better news!

Banks Can Collect Deficiency Judgments Without "Personal" Service on Mortgagors

In a recent case, Metrobank v. Cannatello, 2012 IL App (1st) 110529 (January 9, 2012) Cook Co., 1st Div., the court determined that a bank can collect a deficiency judgment from a mortgagor even if that mortgagor was not "personally" served. 

In this case, Metrobank's predecessor-in-interest lent Frank Cannatello approximately $190,000 in 2004.  At some point thereafter, Cannatello defaulted on his mortgage payments.  The bank filed a foreclosure suit and served Cannatello through abode service.  This means that when the sheriff went to serve Mr. Cannatello, Mr. Cannatello was not home.  However, another adult was at home, and the sheriff left the summons with that adult.  Cannatello never appeared in court, and a judgment of foreclosure was entered against him.  After the property was auctioned, the bank determined that there was a shortage of approximately $52,000.  The bank went to court to obtain a deficiency judgment against Mr. Cannatello, which the loan documentation allowed them to do. 

The trial court approved the sale at auction, but denied the deficiency judgment based on the Foreclosure Law(735 ILCS 5/15-1508(e) (West 2010)), which states that a deficiency judgment "may be entered, or enforcement had, only in cases where personal service has been had upon the persons personally liable for the mortgage indebtedness, unless they have entered their appearance in the foreclosure action."  Metrobank appealed.

On appeal, the court determined that in this case or in any similar situation, abode service could be considered appropriate personal service for a number of reasons.  For example, if abode service was not appropriate personal service, the result would be unjust,.  Moreover, such a result would not be consistent with legislative intent, and would therefore be inconsistent with the Foreclosure Law.  Additionally, legal definitions of personal service written prior to the Foreclosure Law encompassed abode service.

Metrobank therefore won on appeal and was entitled to collect the deficiency judgment from Mr. Cannatello.  It is interesting to note that Mr. Cannatello did not appear in this case at all, whether at trial or on appeal!

Protect Yourself From Mortgage Relief Scams

If you are a homeowner in financial distress, you may have received mailings and phone calls from companies purporting to help you negotiate a settlement or modification with your lender.  I have clients that have shown me letters that actually appear to come from the government, or from their lender, upon first inspection.  BE CAREFUL.  There are a lot of mortgage relief scams out there, and you don't want to be their prey.  The scams became so prevalent, in fact, that the FTC enacted a rule -- called the Mortgage Assistance Relief Services Rule (the "MARS Rule") in 2010.

Under the MARS Rule, you should be particularly careful when dealing with a NON-ATTORNEY for mortgage relief services, especially if:

1)  They request payment up front.
2)  They request payment from you before you have accepted the lender's offer.
3)  They do not provide a written explanation of how the lender's offer will change your current mortgage.
4)  They do not advise you that you may reject the offer WITHOUT incurring any charge from their company.
5)  They imply that they are affiliated with the government or with your lender, or that their services have been approved by your lender.
6)  They tell you that your loan modification is a "done deal", or that you are guaranteed to get approved.
7)  They advise you to stop making payments on your mortgage without advising you of a) the consequences to your credit; and b) that you may lose your home as a result.
8)  They tell you to stop communicating with your lender directly. 

Remember, you as a consumer have a right to stop doing business with any mortgage relief company at any time, without charge.

State and Cook County Partner to Buy and Sell Foreclosures

Last month the Governor announced that the state will be partnering with Cook County in a trial program aimed at stabilizing some of the neighborhoods that have been hardest hit by the recent rise in foreclosures and vacant properties.  The program, which is being funded by $40 million from the state and $10 million from Cook County, is intended to facilitate the purchase of vacant foreclosed homes.  The homes will then be renovated and sold at low interest rates.

If you qualify as a buyer under the program, you may get a $10,000 grant to be used toward your down payment and closing costs.  You will also receive financial counseling.  Any profits that are generated by the sale of the home to you will go back into the program to buy more vacant foreclosed property.

Currently six Cook County suburbs are participating -- Berwyn, Chicago Heights, Maywood, Park Forest, Riverdale, and South Holland.  These suburbs hope to diminish the number of vacant foreclosures on their tax rolls, thereby not only increasing the tax base, but making their communities more safe through the elimination of abandoned real estate.  Currently, the state estimates that 500 homes will be sold through this program.

Settlement with Mortgage Lenders to Benefit Illinois Homeowners

A few weeks ago, the federal goverment, alongside state attorney generals, announced a $25 billion settlement with five large mortgage lenders -- Bank of America, Chase, Wells Fargo, Citibank, and Ally Financial (GMAC).    Among other things, the lenders were accused of "robosigning" -- that is, signing documents that caused foreclosure without a thorough investigation of the facts, and failing to negotiate with homeowners in good faith, ultimately leading to default and foreclosure.  The majority of the settlement funds -- $17 billion specifically -- is earmarked towards providing relief to approximately one million homeowners nationwide.  Most of this relief will probably come in the form of principal reductions on the homeowners' mortgages. 

Illinois is expected to receive between $1 and $1.5 billion.  As an Illinois homeowner, if you meet one or more of the following criteria, you may benefit from this settlement agreement:

1)  If you were foreclosed between 2008 and 2011, and one of the five banks involved in this settlement was servicing your loan.
2)  You owe more than your home is worth to one of the five banks involved.
3)  You are more than thirty days behind on your mortgage payments to one of the five banks involved.
4)  You are at risk of falling behind on your mortgage payments to one of the five banks involved.

Based on your individual situation, you may qualify for having your mortgage refinanced, or for a settlement check (estimated between $1500 and $2000). 

Overall, the settlement aims to assist nearly two million families affected by the foreclosure crisis nationwide.  The federal government and the state attorney generals are still trying to get another 9 mortgage lenders to sign on to the settlement, which could increase the settlement funds by up to another $5 billion.

Homestead Exemptions and Rental Property in Illinois

Currently, homeowners can claim a homestead exemption, lowering their taxes on their primary residence.  Many times, tenants renting a single-family home can also qualify for a homestead exemption if they are responsible for paying the real estate taxes on the home; in most counties, the tenant's lease must state that a portion of the monthly rent is used toward taxes.

Unfortunately, there are people claiming homestead exemptions on homes they don't live in and other investment properties.  As a result, proposed legislation is pending which would allow the county to eliminate the homestead exemption on a home that previously qualified for the exemption, if that home was not, in fact, owner-occupied.  Counties could also insist that the owners of such properties refund exemptions that they previously received.  Counties could even assess fines against such property-owners.  Moreover, there is a move towards eliminating the loophole for single-family residences that are rented.

Understandably, landlords are up in arms.  Their primary argument is that the various county assessors will not implement and enforce any new laws uniformly.  Some landlords may face heavy fines, while others may get away with a slap on the wrist.  Moreover, the new laws could make real estate ownership even less affordable for many landlords, especially those who are barely making it right now.

Supporters of the legislation, on the other hand, state that landlords are essentially cheating and are improperly benefiting from the homestead exemption on properties in addition to their primary residence.  They feel that this defeats the purpose of the homestead exemption, and that it's just not fair.

It remains to be seen if the legislation gets passed, but landlords should be aware that things may change very soon!

2011 Foreclosure Verdict

In the last few years, there have been an unprecedented number of foreclosures.  So are we finding our way out of this mess?  How did 2011 fare compared to recent years?  RealtyTrac recently released some figures that can help us see where we stand.

Well, overall 2011 was better than 2008, 2009, and 2010.  In Cook County, there was a 30% drop in foreclosure filings from 2010.  56,648 homes in Cook County went into foreclosure in 2011, and that was 30% less than 2010.  Wow.  Nationally, the drop was larger -- 34%.  Despite this reduction, the average foreclosure case took over 550 days in court to resolve.

Does this large 30% reduction mean that the end is in sight?  Well, maybe it's in sight, but it's still very far away.  While there was a large reduction in foreclosure filings last year, most of the reductions were attributed to the banks slowing down their filings in the second and third quarter while they tried to catch up on their backlog.

During the fourth and last quarter of 2011, on the other hand, foreclosure activity increased.  In Chicago and its suburbs, there was a 62% increase in court-ordered auctions in the last three months of 2011.  Lenders also reposessed 11% more homes in the last quarter of 2011 than in the last quarter of 2010.

So for now, foreclosures are still out there, and supposedly as lenders catch up, more will be coming on the market for sale as well. 

IFF Program to Assist Disabled Illinois Residents

A local organization, IFF, will be assisting Illinois residents with disabilities find a new home.  The program has a $19,000,000 budget, and the funds will be used to find and purchase condominiums, mostly in Chicago and its suburbs.  In order to be selected for the IFF program, the condominiums must be in an elevator building with easy access to neighborhood amenities and public transportation.  The association must be financially healthy as well.  IFF does not anticipate spending more than $150,000 on any one condominium; additionally, IFF will be paying assessments and property taxes. 

Once a condominium is purchased, IFF will modify the unit to make is accessible for people with disabilities.  They will then rent the units to disabled tenants at discounted rates.  Potential tenants must understand that they will not be living in a building where all the other residents are disabled.  The goal of this program is to accommodate disabled persons in existing housing.  The program does not aim to create group housing for the disabled. 

The program has just started, and so far has only received $5,000,000 of the anticipated $19,000,000 budget.  The program plans to use these funds to purchase condominiums in Chicago.

Payroll Tax Cut Increases Mortgage Costs

Most people were happy to hear that Congress passed the payroll tax cut extension, extending the tax break for two more months.  But Congress still has a budget to meet, and if taxes are reduced in one place, costs have to increase somewhere else.

So where did they get the money to fund the payroll tax cut?  The answer is simple -- mortgages.  Effective April 1, 2012, Fannie Mae and Freddie Mac will raise the guarantee fees charged to lenders.  The new fees will be in effect until October 21, 2021.   How much will the fees increase?  It's difficult to say how much the fees will go up on any given loan, but overall the increase should average out to about .1% (that is, one-tenth of a percentage point). 

That may not seem like a whole lot on a monthly basis, but your lender will pass this extra cost on to you.  And when you add up the extra money you will pay over the life of your loan, it will add up to quite a bit.  Of course, when they start collecting these fees from ALL mortgages, well, they will make up what income they lost as a result of the two-month payroll tax cut extension.

So the two month payroll tax cut extension translated into a nine and a half year mortgage cost increase.  A little delayed gratification can sometimes go a long way.

Beware of Association Finances Before Buying!

When buying a condominium, or a home that is part of any association with regular monthly assessments, buyers have a lot to worry about these days.  It's not uncommon for a buyer to find a condo or home in an association for an amazing deal.  But as a buyer, you can't just look at the unit you're buying.

Sure, it's an amazing deal.  Sure it's in great shape, and just needs a little bit of touch up.  Sure, the monthly assessment is low and there is no special assessment pending; or, there is a special assessment, but the seller will pay it off.  And hey, it's so cheap you can buy it in cash, you don't even want to get a loan.  But beware, are you buying someone else's headache?

During the course of your transaction, your attorney should obtain a Section 22.1 Disclosure for you.  She should also get you the assocation's budget.  Look at these documents carefully.  Is the association in the red?  Does it appear that a lot of units aren't paying assessments?  Even though your unit may be paid in full by the time you close, how many other units are not paying assessments?  Are there many units in foreclosure?  Has the association spent down their reserves, or do they still have enough money left for a rainy day?

This last year, many a real estate transaction has gone south because the buyer decided that the association was a risky proposition, even though the home they were purchasing was perfect in every other way.  Sad stories abound -- about the association who had to keep the lights off in the hallways during the day because they could barely pay the electric bill, or the associations that had to keep amenities such as pools and clubhouses closed because they could no longer afford the maintenance.  In some instances, associations have had to issue special assessments just to keep up with regular monthly bills. 

If you are financing the purchase, your lender should look into the association's financial health for you.  Loan are often (but not always) turned down because the bank doesn't want to lend money to buy a condominium in a risky association.  Whether or not you are getting a loan, but especially if you are buying all cash, do your research!  You don't want to buy yourself a new problem.

Chicago Condo Conversion Developers May Have to Provide Relocation Assistance

Do you qualify for relocation assistance from your landlord?  You may, if you meet the following criteria established by Section 13-72-060(F) of a new ordinance governing Chicago developers:

1)   Your landlord is converting the property to condominium and recording the condominium declaration on or after July 30, 2012.
2)   You have a lease or other rental agreement to occupy your unit.
3)   The unit is your primary residence.
4)   Your household income is not greater than 120% of median income for the "Chicago-Naperville-Joliet, Illinois Metropolitan Fair Market Rental Area", and you can provide written evidence of your household income. 
5)   You are not buying your unit, or any unit, in the condominium conversion.
6)   Your landlord has not obtained an order of possession for your unit against you. 

If you meet these criteria, you may qualify for a flat relocation fee of $1,500.  If your rent exceeds $1,500, your relocation fee will be higher (up to your highest monthly rent amount), but not exceeding $2,500.  A landlord may not enter into a lease with you which waives this relocation fee; if he does, that portion of the lease will be unenforceable.  Furthermore, the fee, minus unpaid rent, must be paid to you within seven days after you completely vacate your unit.

Chicago Ordinance to Protect Renters and Buyers in Condo Conversions Takes Effect

Effective January 1, 2012, a new Chicago ordinance that was passed last May finally went into effect.  The goal of the ordinance is to protect buyer of new condominium conversions, as well as tenants of buildings that are in the condominium conversion process.

Developers must obtain a license for residential real estate development from the city.  If a developer is recording the condominium declaration after January 1, 2012, the developer must provide a Condominium Disclosure Summary in a format approved by the city.  This summary shall include various details about the condominium development, such as 1) a description of the property's amenities; 2) financial information regarding assessments, budget, reserves, and operating expenses; 3) a description of applicable warranties; 4) parking information; 5) information about the building's or unit's infrastructure, such as appliances, HVAC, hot water heaters, elevators, masonry, and security systems; 6) restrictions such as limits on rentals, sales, or use limitations; 7) association-provided or other monthly service information, such as waste removal or cable; and 8) a list of all contractors who worked at the property, complete with license and registration numbers.  The city may request other pertinent information in the summary as well.  This summary must be filed with the city at least 90 days before the first unit is offered for sale, and must also be delivered to all prospective purchasers.

Before signing any lease after January 1, 2012, the landlord must notify the prospective tenant of the proposed condominium conversion in writing.  This notice should be attached to the lease.  If the developer/landlord intends on recording the condominium declaration on or after for July 30, 2012, the developer must notify all tenants in writing at least 180 days prior to the recording of the declaration.  Depending on the circumstances, the tenant may also qualify for relocation assistance from the landlord.

If a developer fails to comply with the new ordinance, the city will withhold transfer stamps, in essence stopping the developer from selling any of the condominium units, until after the developer complies and pays the fines, or posts a bond equivalent to the maximum fine.