Similar to what's been said before, keep in mind a few things though - -VA Loans are intended for Veteran Owner Occupied properties and have several regulations.

In Chicago, landlords are governed by the Residential Landlord Tenant Ordinance if it's a 6 unit or above.  

I don't see any obvious reason for a lower assessment.My experience with many government websites is that they are constantly changing without trying to provide any history.

Best up call that state's real estate governing body & double check. 

As a result, the government will apply penalties and taxes when the funds are distributed.

I understand the regulations for REfinancing, but i am slightly confused about the lender's time constraints on free and clear properties. 

The HECM is FHA insured, thus the regulation.  

I know city government is not the most efficient entity in the world, but it has to be more efficient than spending $1300 per year (about a quarter of our dues) on liability insurance.

It sucks, but your wanting to do business as a legal entity and so, must abide by those state's tax laws governing business. 

Also outside of some government supported programs (e.g, FHA, VA) most lenders want to see a substantial down payment, which is a huge barrier for people who live paycheck to paycheck.2) There are lots of reasons one might need a place to live immediately (e.g., new job, divorce, starting school).