Public Act 096-1216
 
SB3781 EnrolledLRB096 20356 MJR 35992 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 1-4 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
Commissioner in accordance with the licensing procedure
provided in this Article I and such regulations as may be
promulgated by the 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 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.
    (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 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 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 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 Commissioner may issue orders against any person
if the 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 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
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
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.)
 
    (205 ILCS 635/1-4)
    Sec. 1-4. Definitions.
    (a) "Residential real property" or "residential real
estate" shall mean any real property located in Illinois, upon
which is constructed or intended to be constructed a dwelling.
    (b) "Making a residential mortgage loan" or "funding a
residential mortgage loan" shall mean for compensation or gain,
either directly or indirectly, advancing funds or making a
commitment to advance funds to a loan applicant for a
residential mortgage loan.
    (c) "Soliciting, processing, placing, or negotiating a
residential mortgage loan" shall mean for compensation or gain,
either directly or indirectly, accepting or offering to accept
an application for a residential mortgage loan, assisting or
offering to assist in the processing of an application for a
residential mortgage loan on behalf of a borrower, or
negotiating or offering to negotiate the terms or conditions of
a residential mortgage loan with a lender on behalf of a
borrower including, but not limited to, the submission of
credit packages for the approval of lenders, the preparation of
residential mortgage loan closing documents, including a
closing in the name of a broker.
    (d) "Exempt person or entity" shall mean the following:
        (1) (i) Any banking organization or foreign banking
    corporation licensed by the Illinois Commissioner of Banks
    and Real Estate or the United States Comptroller of the
    Currency to transact business in this State; (ii) any
    national bank, federally chartered savings and loan
    association, federal savings bank, federal credit union;
    (iii) any pension trust, bank trust, or bank trust company;
    (iv) any bank, savings and loan association, savings bank,
    or credit union organized under the laws of this or any
    other state; (v) any Illinois Consumer Installment Loan Act
    licensee; (vi) any insurance company authorized to
    transact business in this State; (vii) any entity engaged
    solely in commercial mortgage lending; (viii) any service
    corporation of a savings and loan association or savings
    bank organized under the laws of this State or the service
    corporation of a federally chartered savings and loan
    association or savings bank having its principal place of
    business in this State, other than a service corporation
    licensed or entitled to reciprocity under the Real Estate
    License Act of 2000; or (ix) any first tier subsidiary of a
    bank, the charter of which is issued under the Illinois
    Banking Act by the Illinois Commissioner of Banks and Real
    Estate, or the first tier subsidiary of a bank chartered by
    the United States Comptroller of the Currency and that has
    its principal place of business in this State, provided
    that the first tier subsidiary is regularly examined by the
    Illinois Commissioner of Banks and Real Estate or the
    Comptroller of the Currency, or a consumer compliance
    examination is regularly conducted by the Federal Reserve
    Board.
        (1.5) Any employee of a person or entity mentioned in
    item (1) of this subsection, when acting for such person or
    entity, or any registered mortgage loan originator when
    acting for an entity described in subsection (tt) of this
    Section.
        (2) (Blank) Any person or entity that does not
    originate mortgage loans in the ordinary course of business
    making or acquiring residential mortgage loans with his or
    her or its own funds for his or her or its own investment
    without intent to make, acquire, or resell more than 2
    residential mortgage loans in any one calendar year.
        (3) Any person employed by a licensee to assist in the
    performance of the residential mortgage licensee's
    activities regulated by this Act who is compensated in any
    manner by only one licensee.
        (4) (Blank).
        (5) Any individual, corporation, partnership, or other
    entity that originates, services, or brokers residential
    mortgage loans, as these activities are defined in this
    Act, and who or which receives no compensation for those
    activities, subject to the Commissioner's regulations and
    the federal Secure and Fair Enforcement for Mortgage
    Licensing Act of 2008 and the rules promulgated under that
    Act with regard to the nature and amount of compensation.
        (6) (Blank).
    (e) "Licensee" or "residential mortgage licensee" shall
mean a person, partnership, association, corporation, or any
other entity who or which is licensed pursuant to this Act to
engage in the activities regulated by this Act.
    (f) "Mortgage loan" "residential mortgage loan" or "home
mortgage loan" shall mean any loan primarily for personal,
family, or household use that is secured by a mortgage, deed of
trust, or other equivalent consensual security interest on a
dwelling as defined in Section 103(v) of the federal Truth in
Lending Act, or residential real estate upon which is
constructed or intended to be constructed a dwelling.
    (g) "Lender" shall mean any person, partnership,
association, corporation, or any other entity who either lends
or invests money in residential mortgage loans.
    (h) "Ultimate equitable owner" shall mean a person who,
directly or indirectly, owns or controls an ownership interest
in a corporation, foreign corporation, alien business
organization, trust, or any other form of business organization
regardless of whether the person owns or controls the ownership
interest through one or more persons or one or more proxies,
powers of attorney, nominees, corporations, associations,
partnerships, trusts, joint stock companies, or other entities
or devices, or any combination thereof.
    (i) "Residential mortgage financing transaction" shall
mean the negotiation, acquisition, sale, or arrangement for or
the offer to negotiate, acquire, sell, or arrange for, a
residential mortgage loan or residential mortgage loan
commitment.
    (j) "Personal residence address" shall mean a street
address and shall not include a post office box number.
    (k) "Residential mortgage loan commitment" shall mean a
contract for residential mortgage loan financing.
    (l) "Party to a residential mortgage financing
transaction" shall mean a borrower, lender, or loan broker in a
residential mortgage financing transaction.
    (m) "Payments" shall mean payment of all or any of the
following: principal, interest and escrow reserves for taxes,
insurance and other related reserves, and reimbursement for
lender advances.
    (n) "Commissioner" shall mean the Commissioner of Banks and
Real Estate, except that, beginning on April 6, 2009 (the
effective date of Public Act 95-1047) this amendatory Act of the
95th General Assembly, all references in this Act to the
Commissioner of Banks and Real Estate are deemed, in
appropriate contexts, to be references to the Secretary of
Financial and Professional Regulation, or his or her designee,
including the Director of the Division of Banking of the
Department of Financial and Professional Regulation.
    (n-1) "Director" shall mean the Director of the Division of
Banking of the Department of Financial and Professional
Regulation, except that, beginning on July 31, 2009 (the
effective date of Public Act 96-112) this amendatory Act of the
96th General Assembly, all references in this Act to the
Director are deemed, in appropriate contexts, to be the
Secretary of Financial and Professional Regulation, or his or
her designee, including the Director of the Division of Banking
of the Department of Financial and Professional Regulation.
    (o) "Loan brokering", "brokering", or "brokerage service"
shall mean the act of helping to obtain from another entity,
for a borrower, a loan secured by residential real estate
situated in Illinois or assisting a borrower in obtaining a
loan secured by residential real estate situated in Illinois in
return for consideration to be paid by either the borrower or
the lender including, but not limited to, contracting for the
delivery of residential mortgage loans to a third party lender
and soliciting, processing, placing, or negotiating
residential mortgage loans.
    (p) "Loan broker" or "broker" shall mean a person,
partnership, association, corporation, or limited liability
company, other than those persons, partnerships, associations,
corporations, or limited liability companies exempted from
licensing pursuant to Section 1-4, subsection (d), of this Act,
who performs the activities described in subsections (c) and
(o) of this Section.
    (q) "Servicing" shall mean the collection or remittance for
or the right or obligation to collect or remit for any lender,
noteowner, noteholder, or for a licensee's own account, of
payments, interests, principal, and trust items such as hazard
insurance and taxes on a residential mortgage loan in
accordance with the terms of the residential mortgage loan; and
includes loan payment follow-up, delinquency loan follow-up,
loan analysis and any notifications to the borrower that are
necessary to enable the borrower to keep the loan current and
in good standing.
    (r) "Full service office" shall mean an office, provided by
the licensee and not subleased from the licensee's employees,
and staff in Illinois reasonably adequate to handle efficiently
communications, questions, and other matters relating to any
application for, or an existing home mortgage secured by
residential real estate situated in Illinois with respect to
which the licensee is brokering, funding originating,
purchasing, or servicing. The management and operation of each
full service office must include observance of good business
practices such as proper signage; adequate, organized, and
accurate books and records; ample phone lines, hours of
business, staff training and supervision, and provision for a
mechanism to resolve consumer inquiries, complaints, and
problems. The Commissioner shall issue regulations with regard
to these requirements and shall include an evaluation of
compliance with this Section in his or her periodic examination
of each licensee.
    (s) "Purchasing" shall mean the purchase of conventional or
government-insured mortgage loans secured by residential real
estate situated in Illinois from either the lender or from the
secondary market.
    (t) "Borrower" shall mean the person or persons who seek
the services of a loan broker, originator, or lender.
    (u) "Originating" shall mean the issuing of commitments for
and funding of residential mortgage loans.
    (v) "Loan brokerage agreement" shall mean a written
agreement in which a broker or loan broker agrees to do either
of the following:
        (1) obtain a residential mortgage loan for the borrower
    or assist the borrower in obtaining a residential mortgage
    loan; or
        (2) consider making a residential mortgage loan to the
    borrower.
    (w) "Advertisement" shall mean the attempt by publication,
dissemination, or circulation to induce, directly or
indirectly, any person to enter into a residential mortgage
loan agreement or residential mortgage loan brokerage
agreement relative to a mortgage secured by residential real
estate situated in Illinois.
    (x) "Residential Mortgage Board" shall mean the
Residential Mortgage Board created in Section 1-5 of this Act.
    (y) "Government-insured mortgage loan" shall mean any
mortgage loan made on the security of residential real estate
insured by the Department of Housing and Urban Development or
Farmers Home Loan Administration, or guaranteed by the Veterans
Administration.
    (z) "Annual audit" shall mean a certified audit of the
licensee's books and records and systems of internal control
performed by a certified public accountant in accordance with
generally accepted accounting principles and generally
accepted auditing standards.
    (aa) "Financial institution" shall mean a savings and loan
association, savings bank, credit union, or a bank organized
under the laws of Illinois or a savings and loan association,
savings bank, credit union or a bank organized under the laws
of the United States and headquartered in Illinois.
    (bb) "Escrow agent" shall mean a third party, individual or
entity charged with the fiduciary obligation for holding escrow
funds on a residential mortgage loan pending final payout of
those funds in accordance with the terms of the residential
mortgage loan.
    (cc) "Net worth" shall have the meaning ascribed thereto in
Section 3-5 of this Act.
    (dd) "Affiliate" shall mean:
        (1) any entity that directly controls or is controlled
    by the licensee and any other company that is directly
    affecting activities regulated by this Act that is
    controlled by the company that controls the licensee;
        (2) any entity:
            (A) that is controlled, directly or indirectly, by
        a trust or otherwise, by or for the benefit of
        shareholders who beneficially or otherwise control,
        directly or indirectly, by trust or otherwise, the
        licensee or any company that controls the licensee; or
            (B) a majority of the directors or trustees of
        which constitute a majority of the persons holding any
        such office with the licensee or any company that
        controls the licensee;
        (3) any company, including a real estate investment
    trust, that is sponsored and advised on a contractual basis
    by the licensee or any subsidiary or affiliate of the
    licensee.
    The Commissioner may define by rule and regulation any
terms used in this Act for the efficient and clear
administration of this Act.
    (ee) "First tier subsidiary" shall be defined by regulation
incorporating the comparable definitions used by the Office of
the Comptroller of the Currency and the Illinois Commissioner
of Banks and Real Estate.
    (ff) "Gross delinquency rate" means the quotient
determined by dividing (1) the sum of (i) the number of
government-insured residential mortgage loans funded or
purchased by a licensee in the preceding calendar year that are
delinquent and (ii) the number of conventional residential
mortgage loans funded or purchased by the licensee in the
preceding calendar year that are delinquent by (2) the sum of
(i) the number of government-insured residential mortgage
loans funded or purchased by the licensee in the preceding
calendar year and (ii) the number of conventional residential
mortgage loans funded or purchased by the licensee in the
preceding calendar year.
    (gg) "Delinquency rate factor" means the factor set by rule
of the Commissioner that is multiplied by the average gross
delinquency rate of licensees, determined annually for the
immediately preceding calendar year, for the purpose of
determining which licensees shall be examined by the
Commissioner pursuant to subsection (b) of Section 4-8 of this
Act.
    (hh) "Loan originator" means any natural person who, for
compensation or in the expectation of compensation, either
directly or indirectly makes, offers to make, solicits, places,
or negotiates a residential mortgage loan. This definition
applies only to Section 7-1 of this Act.
    (ii) "Confidential supervisory information" means any
report of examination, visitation, or investigation prepared
by the Commissioner under this Act, any report of examination
visitation, or investigation prepared by the state regulatory
authority of another state that examines a licensee, any
document or record prepared or obtained in connection with or
relating to any examination, visitation, or investigation, and
any record prepared or obtained by the Commissioner to the
extent that the record summarizes or contains information
derived from any report, document, or record described in this
subsection. "Confidential supervisory information" does not
include any information or record routinely prepared by a
licensee and maintained in the ordinary course of business or
any information or record that is required to be made publicly
available pursuant to State or federal law or rule.
    (jj) "Mortgage loan originator" means an individual who for
compensation or gain or in the expectation of compensation or
gain:
        (i) takes a residential mortgage loan application; or
        (ii) offers or negotiates terms of a residential
    mortgage loan.
    "Mortgage loan originator" does not include an individual
engaged solely as a loan processor or underwriter except as
otherwise provided in subsection (d) of Section 7-1A of this
Act.
    "Mortgage loan originator" does not include a person or
entity that only performs real estate brokerage activities and
is licensed in accordance with the Real Estate License Act of
2000, unless the person or entity is compensated by a lender, a
mortgage broker, or other mortgage loan originator, or by any
agent of that lender, mortgage broker, or other mortgage loan
originator.
    "Mortgage loan originator" does not include a person or
entity solely involved in extensions of credit relating to
timeshare plans, as that term is defined in Section 101(53D) of
Title 11, United States Code.
    (kk) "Depository institution" has the same meaning as in
Section 3 of the Federal Deposit Insurance Act, and includes
any credit union.
    (ll) "Dwelling" means a residential structure or mobile
home which contains one to 4 family housing units, or
individual units of condominiums or cooperatives.
    (mm) "Immediate family member" means a spouse, child,
sibling, parent, grandparent, or grandchild, and includes
step-parents, step-children, step-siblings, or adoptive
relationships.
    (nn) "Individual" means a natural person.
    (oo) "Loan processor or underwriter" means an individual
who performs clerical or support duties as an employee at the
direction of and subject to the supervision and instruction of
a person licensed, or exempt from licensing, under this Act.
"Clerical or support duties" includes subsequent to the receipt
of an application:
        (i) the receipt, collection, distribution, and
    analysis of information common for the processing or
    underwriting of a residential mortgage loan; and
        (ii) communicating with a consumer to obtain the
    information necessary for the processing or underwriting
    of a loan, to the extent that the communication does not
    include offering or negotiating loan rates or terms, or
    counseling consumers about residential mortgage loan rates
    or terms. An individual engaging solely in loan processor
    or underwriter activities shall not represent to the
    public, through advertising or other means of
    communicating or providing information, including the use
    of business cards, stationery, brochures, signs, rate
    lists, or other promotional items, that the individual can
    or will perform any of the activities of a mortgage loan
    originator.
    (pp) "Nationwide Mortgage Licensing System and Registry"
means a mortgage licensing system developed and maintained by
the Conference of State Bank Supervisors and the American
Association of Residential Mortgage Regulators for the
licensing and registration of licensed mortgage loan
originators.
    (qq) "Nontraditional mortgage product" means any mortgage
product other than a 30-year fixed rate mortgage.
    (rr) "Person" means a natural person, corporation,
company, limited liability company, partnership, or
association.
    (ss) "Real estate brokerage activity" means any activity
that involves offering or providing real estate brokerage
services to the public, including:
        (1) acting as a real estate agent or real estate broker
    for a buyer, seller, lessor, or lessee of real property;
        (2) bringing together parties interested in the sale,
    purchase, lease, rental, or exchange of real property;
        (3) negotiating, on behalf of any party, any portion of
    a contract relating to the sale, purchase, lease, rental,
    or exchange of real property, other than in connection with
    providing financing with respect to any such transaction;
        (4) engaging in any activity for which a person engaged
    in the activity is required to be registered or licensed as
    a real estate agent or real estate broker under any
    applicable law; or
        (5) offering to engage in any activity, or act in any
    capacity, described in this subsection (ss).
    (tt) "Registered mortgage loan originator" means any
individual that:
        (1) meets the definition of mortgage loan originator
    and is an employee of:
            (A) a depository institution;
            (B) a subsidiary that is:
                (i) owned and controlled by a depository
            institution; and
                (ii) regulated by a federal banking agency; or
            (C) an institution regulated by the Farm Credit
        Administration; and
        (2) is registered with, and maintains a unique
    identifier through, the Nationwide Mortgage Licensing
    System and Registry.
    (uu) "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
    (vv) "Residential mortgage license" means a license issued
pursuant to Section 1-3, 2-2, or 2-6 of this Act.
    (ww) "Mortgage loan originator license" means a license
issued pursuant to Section 7-1A, 7-3, or 7-6 of this Act.
    (xx) (jj) "Secretary" means the Secretary of the Department
of Financial and Professional Regulation, or a person
authorized by the Secretary or by this Act to act in the
Secretary's stead.
(Source: P.A. 95-1047, eff. 4-6-09; 96-112, eff. 7-31-09;
revised 8-20-09.)