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Public Act 098-0492


 

Public Act 0492 98TH GENERAL ASSEMBLY

  
  
  

 


 
Public Act 098-0492
 
SB1667 EnrolledLRB098 09990 MGM 40148 b

    AN ACT concerning regulation.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Residential Mortgage License Act of 1987 is
amended by changing Sections 1-3 and 4-2 and adding Section
7-15 as follows:
 
    (205 ILCS 635/1-3)  (from Ch. 17, par. 2321-3)
    Sec. 1-3. Necessity for License; Scope of Act.
    (a) No person, partnership, association, corporation or
other entity shall engage in the business of brokering,
funding, originating, servicing or purchasing of residential
mortgage loans without first obtaining a license from the
Secretary Commissioner in accordance with the licensing
procedure provided in this Article I and such regulations as
may be promulgated by the Secretary Commissioner. The licensing
provisions of this Section shall not apply to any entity
engaged solely in commercial mortgage lending or to any person,
partnership association, corporation or other entity exempted
pursuant to Section 1-4, subsection (d), of this Act or in
accordance with regulations promulgated by the Secretary
Commissioner hereunder. No provision of this Act shall apply to
an exempt person or entity as defined in items (1) and (1.5) of
subsection (d) of Section 1-4 of this Act. Notwithstanding
anything to the contrary in the preceding sentence, an
individual acting as a mortgage loan originator who is not
employed by and acting for an entity described in item (1) of
subsection (tt) of Section 1-4 of this Act shall be subject to
the mortgage loan originator licensing requirements of Article
VII of this Act.
    Effective January 1, 2011, no provision of this Act shall
apply to an exempt person or entity as defined in item (1.8) of
subsection (d) of Section 1-4 of this Act. Notwithstanding
anything to the contrary in the preceding sentence, an
individual acting as a mortgage loan originator who is not
employed by and acting for an entity described in item (1) of
subsection (tt) of Section 1-4 of this Act shall be subject to
the mortgage loan originator licensing requirements of Article
VII of this Act, and provided that an individual acting as a
mortgage loan originator under item (1.8) of subsection (d) of
Section 1-4 of this Act shall be further subject to a
determination by the U.S. Department of Housing and Urban
Development through final rulemaking or other authorized
agency determination under the federal Secure and Fair
Enforcement for Mortgage Licensing Act of 2008.
    (a-1) A person who is exempt from licensure pursuant to
paragraph (ii) of item (1) of subsection (d) of Section 1-4 of
this Act as a federally chartered savings bank that is
registered with the Nationwide Mortgage Licensing System and
Registry may apply to the Secretary for an exempt company
registration for the purpose of sponsoring one or more
individuals subject to the mortgage loan originator licensing
requirements of Article VII of this Act. Registration with the
Division of Banking of the Department shall not affect the
exempt status of the applicant.
        (1) A mortgage loan originator eligible for licensure
    under this subsection shall (A) be covered under an
    exclusive written contract with, and originate residential
    mortgage loans solely on behalf of, that exempt person; and
    (B) hold a current, valid insurance producer license under
    Article XXXI of the Illinois Insurance Code.
        (2) An exempt person shall: (A) fulfill any reporting
    requirements required by the Nationwide Mortgage Licensing
    System and Registry or the Secretary; (B) provide a blanket
    surety bond pursuant to Section 7-12 of this Act covering
    the activities of all its sponsored mortgage loan
    originators; (C) reasonably supervise the activities of
    all its sponsored mortgage loan originators; (D) comply
    with all rules and orders (including the averments
    contained in Section 2-4 of this Act as applicable to a
    non-licensed exempt entity provided for in this Section)
    that the Secretary deems necessary to ensure compliance
    with the federal SAFE Act; and (E) pay an annual
    registration fee established by the Director.
        (3) The Secretary may deny an exempt company
    registration to an exempt person or fine, suspend, or
    revoke an exempt company registration if the Secretary
    finds one of the following:
            (A) that the exempt person is not a person of
        honesty, truthfulness, or good character;
            (B) that the exempt person violated any applicable
        law, rule, or order;
            (C) that the exempt person refused or failed to
        furnish, within a reasonable time, any information or
        make any report that may be required by the Secretary;
            (D) that the exempt person had a final judgment
        entered against him or her in a civil action on grounds
        of fraud, deceit, or misrepresentation, and the
        conduct on which the judgment is based indicates that
        it would be contrary to the interest of the public to
        permit the exempt person to manage a loan originator;
            (E) that the exempt person had an order entered
        against him or her involving fraud, deceit, or
        misrepresentation by an administrative agency of this
        State, the federal government, or any other state or
        territory of the United States, and the facts relating
        to the order indicate that it would be contrary to the
        interest of the public to permit the exempt person to
        manage a loan originator;
            (F) that the exempt person made a material
        misstatement or suppressed or withheld information on
        the application for an exempt company registration or
        any document required to be filed with the Secretary;
        or
            (G) that the exempt person violated Section 4-5 of
        this Act.
    (b) No person, partnership, association, corporation, or
other entity except a licensee under this Act or an entity
exempt from licensing pursuant to Section 1-4, subsection (d),
of this Act shall do any business under any name or title, or
circulate or use any advertising or make any representation or
give any information to any person, which indicates or
reasonably implies activity within the scope of this Act.
    (c) The Secretary Commissioner may, through the Attorney
General, request the circuit court of either Cook or Sangamon
County to issue an injunction to restrain any person from
violating or continuing to violate any of the foregoing
provisions of this Section.
    (d) When the Secretary Commissioner has reasonable cause to
believe that any entity which has not submitted an application
for licensure is conducting any of the activities described in
subsection (a) hereof, the Secretary Commissioner shall have
the power to examine all books and records of the entity and
any additional documentation necessary in order to determine
whether such entity should become licensed under this Act.
    (d-1) The Secretary Commissioner may issue orders against
any person if the Secretary Commissioner has reasonable cause
to believe that an unsafe, unsound, or unlawful practice has
occurred, is occurring, or is about to occur, if any person has
violated, is violating, or is about to violate any law, rule,
or written agreement with the Secretary Commissioner, or for
the purposes of administering the provisions of this Act and
any rule adopted in accordance with this Act.
    (e) Any person, partnership, association, corporation or
other entity who violates any provision of this Section commits
a business offense and shall be fined an amount not to exceed
$25,000.
    (f) Each person, partnership, association, corporation or
other entity conducting activities regulated by this Act shall
be issued one license. Each office, place of business or
location at which a residential mortgage licensee conducts any
part of his or her business must be recorded with the Secretary
Commissioner pursuant to Section 2-8 of this Act.
    (g) Licensees under this Act shall solicit, broker, fund,
originate, service and purchase residential mortgage loans
only in conformity with the provisions of this Act and such
rules and regulations as may be promulgated by the Secretary
Commissioner.
    (h) This Act applies to all entities doing business in
Illinois as residential mortgage bankers, as defined by "An Act
to provide for the regulation of mortgage bankers", approved
September 15, 1977, as amended, regardless of whether licensed
under that or any prior Act. Any existing residential mortgage
lender or residential mortgage broker in Illinois whether or
not previously licensed, must operate in accordance with this
Act.
    (i) This Act is a successor Act to and a continuance of the
regulation of residential mortgage bankers provided in, "An Act
to provide for the regulation of mortgage bankers", approved
September 15, 1977, as amended.
    Entities and persons subject to the predecessor Act shall
be subject to this Act from and after its effective date.
(Source: P.A. 96-112, eff. 7-31-09; 96-1216, eff. 1-1-11;
97-143, eff. 7-14-11.)
 
    (205 ILCS 635/4-2)  (from Ch. 17, par. 2324-2)
    Sec. 4-2. Examination; prohibited activities.
    (a) The business affairs of a licensee under this Act shall
be examined for compliance with this Act as often as the
Secretary Commissioner deems necessary and proper. The
Secretary Commissioner shall promulgate rules with respect to
the frequency and manner of examination. The Secretary
Commissioner shall appoint a suitable person to perform such
examination. The Secretary Commissioner and his appointees may
examine the entire books, records, documents, and operations of
each licensee and its subsidiary, affiliate, or agent, and may
examine any of the licensee's or its subsidiary's, affiliate's,
or agent's officers, directors, employees and agents under
oath. For purposes of this Section, "agent" includes service
providers such as accountants, closing services providers,
providers of outsourced services such as call centers,
marketing consultants, and loan processors, even if exempt from
licensure under this Act. This Section does not apply to an
attorney's privileged work product or communications.
    (b) The Secretary Commissioner shall prepare a
sufficiently detailed report of each licensee's examination,
shall issue a copy of such report to each licensee's
principals, officers, or directors and shall take appropriate
steps to ensure correction of violations of this Act.
    (c) Affiliates of a licensee shall be subject to
examination by the Secretary Commissioner on the same terms as
the licensee, but only when reports from, or examination of a
licensee provides for documented evidence of unlawful activity
between a licensee and affiliate benefiting, affecting or
deriving from the activities regulated by this Act.
    (d) The expenses of any examination of the licensee and
affiliates shall be borne by the licensee and assessed by the
Secretary Commissioner as established by regulation.
    (e) Upon completion of the examination, the Secretary
Commissioner shall issue a report to the licensee. All
confidential supervisory information, including the
examination report and the work papers of the report, shall
belong to the Secretary's Commissioner's office and may not be
disclosed to anyone other than the licensee, law enforcement
officials or other regulatory agencies that have an appropriate
regulatory interest as determined by the Secretary
Commissioner, or to a party presenting a lawful subpoena to the
Office of the Secretary Commissioner. The Secretary
Commissioner may immediately appeal to the court of
jurisdiction the disclosure of such confidential supervisory
information and seek a stay of the subpoena pending the outcome
of the appeal. Reports required of licensees by the Secretary
Commissioner under this Act and results of examinations
performed by the Secretary Commissioner under this Act shall be
the property of only the Secretary Commissioner, but may be
shared with the licensee. Access under this Act to the books
and records of each licensee shall be limited to the Secretary
Commissioner and his agents as provided in this Act and to the
licensee and its authorized agents and designees. No other
person shall have access to the books and records of a licensee
under this Act. Any person upon whom a demand for production of
confidential supervisory information is made, whether by
subpoena, order, or other judicial or administrative process,
must withhold production of the confidential supervisory
information and must notify the Secretary Commissioner of the
demand, at which time the Secretary Commissioner is authorized
to intervene for the purpose of enforcing the limitations of
this Section or seeking the withdrawal or termination of the
attempt to compel production of the confidential supervisory
information. The Secretary Commissioner may impose any
conditions and limitations on the disclosure of confidential
supervisory information that are necessary to protect the
confidentiality of such information. Except as authorized by
the Secretary Commissioner, no person obtaining access to
confidential supervisory information may make a copy of the
confidential supervisory information. The Secretary
Commissioner may condition a decision to disclose confidential
supervisory information on entry of a protective order by the
court or administrative tribunal presiding in the particular
case or on a written agreement of confidentiality. In a case in
which a protective order or agreement has already been entered
between parties other than the Secretary Commissioner, the
Secretary Commissioner may nevertheless condition approval for
release of confidential supervisory information upon the
inclusion of additional or amended provisions in the protective
order. The Secretary Commissioner may authorize a party who
obtained the records for use in one case to provide them to
another party in another case, subject to any conditions that
the Secretary Commissioner may impose on either or both
parties. The requestor shall promptly notify other parties to a
case of the release of confidential supervisory information
obtained and, upon entry of a protective order, shall provide
copies of confidential supervisory information to the other
parties.
    (f) The Secretary Commissioner, deputy commissioners, and
employees of the Office of Banks and Real Estate shall be
subject to the restrictions provided in Section 2.5 of the
Division of Banking Act including, without limitation, the
restrictions on (i) owning shares of stock or holding any other
equity interest in an entity regulated under this Act or in any
corporation or company that owns or controls an entity
regulated under this Act; (ii) being an officer, director,
employee, or agent of an entity regulated under this Act; and
(iii) obtaining a loan or accepting a gratuity from an entity
regulated under this Act.
    (g) After the initial examination for those licensees whose
only mortgage activity is servicing fewer than 1,000 Illinois
residential loans, the examination required in subsection (a)
may be waived upon submission of a letter from the licensee's
independent certified auditor that the licensee serviced fewer
than 1,000 Illinois residential loans during the year in which
the audit was performed.
    (h) An exempt entity under subsection (a-1) of Section 1-3
of this Act shall cooperate with the Secretary in the
examination and investigation of its sponsored and licensed
mortgage loan originators at a frequency determined by the
Secretary. The exempt entity under subsection (a-1) of Section
1-3 of this Act shall cooperate with the Secretary in providing
mortgage loan originator documents and access to mortgage loan
originator offices for the purposes of examination and
investigation. The activities of the exempt entity shall not
relieve a mortgage loan originator of his or her individual
requirements under Section 7-15 of this Act. An exempt entity
under subsection (a-1) of Section 1-3 of this Act shall pay to
the Department any examination fees invoiced by the Secretary
for examination of its sponsored mortgage loan originators. The
Secretary shall have the authority to make oral or written
inquiries regarding the management of an exempt entity under
subsection (a-1) of Section 1-3 of this Act and it shall be the
duty of the exempt entity to promptly reply by telephone, in
writing, or other means to the inquiry.
(Source: P.A. 96-112, eff. 7-31-09; 96-1365, eff. 7-28-10.)
 
    (205 ILCS 635/7-15 new)
    Sec. 7-15. Examination and investigation of certain
mortgage loan originators. The activities requiring a licensee
of a mortgage loan originator that are sponsored by an exempt
entity under subsection (a-1) of Section 1-3 of this Act are
subject to examination and investigation by the Secretary.
Mortgage loan originators sponsored by an exempt entity shall
keep and maintain records of his or her loan activities for a
period of 36 months and shall produce records on demand by the
Secretary. The records shall include a loan log or loan
production log as approved by the Secretary and any loan
application entered, prepared, or created through or from the
mortgage loan originator's activities. Mortgage loan
originators sponsored by an exempt entity shall provide access,
upon the Secretary's demand, to his or her offices for the
purposes of the Department's examination and investigation.
The Secretary shall determine the manner and frequency at which
the Department shall conduct examinations of the mortgage loan
originators. Mortgage loan originators sponsored by an exempt
entity shall cooperate at all times with the Department
pursuant to requirements of this Section and shall be subject
to penalties under Section 7-11 of this Act for failure to
comply.
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 8/16/2013