Another layer of administrative hassle has been added to the real estate world. On July 1, 2008, all of Cook County will be subject to the Predatory Lending Database Program. The purpose of this mess of a program is to stop lenders from forcing bad loans on people. (After many years of doing closings, my view is that most people know what they are getting in a bad loan, but sign up for it anyway!)
It works like this: A mortgage document cannot be recorded in Cook County unless a “certificate of compliance” or a “certificate of exemption” is attached to the mortgage. It only applies to owner-occupied, 1-4 unit homes.
This applies to all refinances and all purchases by first-time buyers where any of the following loans are being used: Interest only, negative amortization, more than 5 points being charged, a prepayment penalty or an adjustable of 3 years or less.
If the buyer/refinancer fits this profile, he has to go to counseling (scream therapy may be needed by those sitting through the session) and if it’s determined he really, really still wants the mortgage, the certificate of compliance is issued and then the closing will occur.
The problem is that it’s too much hassle, an extra expense ($100-$200 just for the certificate) and it’s about 2 years too late. Most of the mortgage programs that are targeted here are gone, wiped out by the sub-prime cleansing.