SB2677 EngrossedLRB099 16934 EGJ 41281 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Residential Real Property Disclosure Act is
5amended by changing Section 70 as follows:
 
6    (765 ILCS 77/70)
7    Sec. 70. Predatory lending database program.
8    (a) As used in this Article:
9    "Adjustable rate mortgage" or "ARM" means a closed-end
10mortgage transaction that allows adjustments of the loan
11interest rate during the first 3 years of the loan term.
12    "Borrower" means a person seeking a mortgage loan.
13    "Broker" means a "broker" or "loan broker", as defined in
14subsection (p) of Section 1-4 of the Residential Mortgage
15License Act of 1987.
16    "Closing agent" means an individual assigned by a title
17insurance company or a broker or originator to ensure that the
18execution of documents related to the closing of a real estate
19sale or the refinancing of a real estate loan and the
20disbursement of closing funds are in conformity with the
21instructions of the entity financing the transaction.
22    "Counseling" means in-person counseling provided by a
23counselor employed by a HUD-approved counseling agency to all

 

 

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1borrowers, or documented telephone counseling where a hardship
2would be imposed on one or more borrowers. A hardship shall
3exist in instances in which the borrower is confined to his or
4her home due to medical conditions, as verified in writing by a
5physician, or the borrower resides 50 miles or more from the
6nearest participating HUD-approved housing counseling agency.
7In instances of telephone counseling, the borrower must supply
8all necessary documents to the counselor at least 72 hours
9prior to the scheduled telephone counseling session.
10    "Counselor" means a counselor employed by a HUD-approved
11housing counseling agency.
12    "Credit score" means a credit risk score as defined by the
13Fair Isaac Corporation, or its successor, and reported under
14such names as "BEACON", "EMPIRICA", and "FAIR ISAAC RISK SCORE"
15by one or more of the following credit reporting agencies or
16their successors: Equifax, Inc., Experian Information
17Solutions, Inc., and TransUnion LLC. If the borrower's credit
18report contains credit scores from 2 reporting agencies, then
19the broker or loan originator shall report the lower score. If
20the borrower's credit report contains credit scores from 3
21reporting agencies, then the broker or loan originator shall
22report the middle score.
23    "Department" means the Department of Financial and
24Professional Regulation.
25    "Exempt person or entity" means that term as it is defined
26in subsections (d)(1), (d)(1.5), and (d)(1.8) of Section 1-4 of

 

 

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1the Residential Mortgage License Act of 1987.
2    "First-time homebuyer" means a borrower who has not held an
3ownership interest in residential property.
4    "HUD-approved counseling" or "counseling" means counseling
5given to a borrower by a counselor employed by a HUD-approved
6housing counseling agency.
7    "Interest only" means a closed-end loan that permits one or
8more payments of interest without any reduction of the
9principal balance of the loan, other than the first payment on
10the loan.
11    "Lender" means that term as it is defined in subsection (g)
12of Section 1-4 of the Residential Mortgage License Act of 1987.
13    "Licensee" means that term as it is defined in subsection
14(e) of Section 1-4 of the Residential Mortgage License Act of
151987.
16    "Mortgage loan" means that term as it is defined in
17subsection (f) of Section 1-4 of the Residential Mortgage
18License Act of 1987.
19    "Negative amortization" means an amortization method under
20which the outstanding balance may increase at any time over the
21course of the loan because the regular periodic payment does
22not cover the full amount of interest due.
23    "Originator" means a "loan originator" as defined in
24subsection (hh) of Section 1-4 of the Residential Mortgage
25License Act of 1987, except an exempt person, and means a
26"mortgage loan originator" as defined in subsection (jj) of

 

 

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1Section 1-4 of the Residential Mortgage License Act of 1987,
2except an exempt person.
3    "Points and fees" has the meaning ascribed to that term in
4Section 10 of the High Risk Home Loan Act.
5    "Prepayment penalty" means a charge imposed by a lender
6under a mortgage note or rider when the loan is paid before the
7expiration of the term of the loan.
8    "Refinancing" means a loan secured by the borrower's or
9borrowers' primary residence where the proceeds are not used as
10purchase money for the residence.
11    "Title insurance company" means any domestic company
12organized under the laws of this State for the purpose of
13conducting the business of guaranteeing or insuring titles to
14real estate and any title insurance company organized under the
15laws of another State, the District of Columbia, or a foreign
16government and authorized to transact the business of
17guaranteeing or insuring titles to real estate in this State.
18    (a-5) A predatory lending database program shall be
19established within Cook County. The program shall be
20administered in accordance with this Article. The inception
21date of the program shall be July 1, 2008. A predatory lending
22database program shall be expanded to include Kane, Peoria, and
23Will counties. The inception date of the expansion of the
24program as it applies to Kane, Peoria, and Will counties shall
25be July 1, 2010. Until the inception date, none of the duties,
26obligations, contingencies, or consequences of or from the

 

 

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1program shall be imposed. The program shall apply to all
2mortgage applications that are governed by this Article and
3that are made or taken on or after the inception of the
4program.
5    (b) The database created under this program shall be
6maintained and administered by the Department. The database
7shall be designed to allow brokers, originators, counselors,
8title insurance companies, and closing agents to submit
9information to the database online. The database shall not be
10designed to allow those entities to retrieve information from
11the database, except as otherwise provided in this Article.
12Information submitted by the broker or originator to the
13Department may be used to populate the online form submitted by
14a counselor, title insurance company, or closing agent.
15    (c) Within 10 business days after taking a mortgage
16application, the broker or originator for any mortgage on
17residential property within the program area must submit to the
18predatory lending database all of the information required
19under Section 72 and any other information required by the
20Department by rule. Within 7 business days after receipt of the
21information, the Department shall compare that information to
22the housing counseling standards in Section 73 and issue to the
23borrower and the broker or originator a determination of
24whether counseling is recommended for the borrower. The
25borrower may not waive counseling. If at any time after
26submitting the information required under Section 72 the broker

 

 

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1or originator (i) changes the terms of the loan or (ii) issues
2a new commitment to the borrower, then, within 5 business days
3thereafter, the broker or originator shall re-submit all of the
4information required under Section 72 and, within 4 business
5days after receipt of the information re-submitted by the
6broker or originator, the Department shall compare that
7information to the housing counseling standards in Section 73
8and shall issue to the borrower and the broker or originator a
9new determination of whether re-counseling is recommended for
10the borrower based on the information re-submitted by the
11broker or originator. The Department shall require
12re-counseling if the loan terms have been modified to meet
13another counseling standard in Section 73, or if the broker has
14increased the interest rate by more than 200 basis points.
15    (d) If the Department recommends counseling for the
16borrower under subsection (c), then the Department shall notify
17the borrower of all participating HUD-approved counseling
18agencies located within the State and direct the borrower to
19interview with a counselor associated with one of those
20agencies. Within 10 business days after receipt of the notice
21of HUD-approved counseling agencies, it is the borrower's
22responsibility to select one of those agencies and shall engage
23in an interview with a counselor associated with that agency.
24The selection must take place and the appointment for the
25interview must be set within 10 business days, although the
26interview may take place beyond the 10 business day period.

 

 

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1Within 7 business days after interviewing the borrower, the
2counselor must submit to the predatory lending database all of
3the information required under Section 74 and any other
4information required by the Department by rule. Reasonable and
5customary costs not to exceed $300 associated with counseling
6provided under the program shall be paid by the broker or
7originator and shall not be charged back to, or recovered from,
8the borrower. The Department shall annually calculate to the
9nearest dollar an adjusted rate for inflation. A counselor
10shall not recommend or suggest that a borrower contact any
11specific mortgage origination company, financial institution,
12or entity that deals in mortgage finance to obtain a loan,
13another quote, or for any other reason related to the specific
14mortgage transaction; however, a counselor may suggest that the
15borrower seek an opinion or a quote from another mortgage
16origination company, financial institution, or entity that
17deals in mortgage finance. A counselor or housing counseling
18agency that in good faith provides counseling shall not be
19liable to a broker or originator or borrower for civil damages,
20except for willful or wanton misconduct on the part of the
21counselor in providing the counseling.
22    (e) The broker or originator and the borrower may not take
23any legally binding action concerning the loan transaction
24until the later of the following:
25        (1) the Department issues a determination not to
26    recommend HUD-approved counseling for the borrower in

 

 

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1    accordance with subsection (c); or
2        (2) the Department issues a determination that
3    HUD-approved counseling is recommended for the borrower
4    and the counselor submits all required information to the
5    database in accordance with subsection (d).
6    (f) Within 10 business days after closing, the title
7insurance company or closing agent must submit to the predatory
8lending database all of the information required under Section
976 and any other information required by the Department by
10rule.
11    (g) The title insurance company or closing agent shall
12attach to the mortgage a certificate of compliance with the
13requirements of this Article, as generated by the database. If
14the transaction is exempt, the title insurance company or
15closing agent shall attach to the mortgage a certificate of
16exemption, as generated by the database. If the title insurance
17company or closing agent fails to attach the certificate of
18compliance or exemption, whichever is required, then the
19mortgage is not recordable. In addition, if any lis pendens for
20a residential mortgage foreclosure is recorded on the property
21within the program area, a certificate of service must be
22simultaneously recorded that affirms that a copy of the lis
23pendens was filed with the Department. A lis pendens filed
24after July 1, 2016 shall be filed with the Department
25electronically. The lis pendens may be filed with the
26Department either electronically or by filing a hard copy. If

 

 

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1the certificate of service is not recorded, then the lis
2pendens pertaining to the residential mortgage foreclosure in
3question is not recordable and is of no force and effect.
4    (h) All information provided to the predatory lending
5database under the program is confidential and is not subject
6to disclosure under the Freedom of Information Act, except as
7otherwise provided in this Article. Information or documents
8obtained by employees of the Department in the course of
9maintaining and administering the predatory lending database
10are deemed confidential. Employees are prohibited from making
11disclosure of such confidential information or documents. Any
12request for production of information from the predatory
13lending database, whether by subpoena, notice, or any other
14source, shall be referred to the Department of Financial and
15Professional Regulation. Any borrower may authorize in writing
16the release of database information. The Department may use the
17information in the database without the consent of the
18borrower: (i) for the purposes of administering and enforcing
19the program; (ii) to provide relevant information to a
20counselor providing counseling to a borrower under the program;
21or (iii) to the appropriate law enforcement agency or the
22applicable administrative agency if the database information
23demonstrates criminal, fraudulent, or otherwise illegal
24activity.
25    (i) Nothing in this Article is intended to prevent a
26borrower from making his or her own decision as to whether to

 

 

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1proceed with a transaction.
2    (j) Any person who violates any provision of this Article
3commits an unlawful practice within the meaning of the Consumer
4Fraud and Deceptive Business Practices Act.
5    (j-1) A violation of any provision of this Article by a
6mortgage banking licensee or licensed mortgage loan originator
7shall constitute a violation of the Residential Mortgage
8License Act of 1987.
9    (j-2) A violation of any provision of this Article by a
10title insurance company, title agent, or escrow agent shall
11constitute a violation of the Title Insurance Act.
12    (j-3) A violation of any provision of this Article by a
13housing counselor shall be referred to the Department of
14Housing and Urban Development.
15    (k) During the existence of the program, the Department
16shall submit semi-annual reports to the Governor and to the
17General Assembly by May 1 and November 1 of each year detailing
18its findings regarding the program. The report shall include,
19by county, at least the following information for each
20reporting period:
21        (1) the number of loans registered with the program;
22        (2) the number of borrowers receiving counseling;
23        (3) the number of loans closed;
24        (4) the number of loans requiring counseling for each
25    of the standards set forth in Section 73;
26        (5) the number of loans requiring counseling where the

 

 

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1    mortgage originator changed the loan terms subsequent to
2    counseling;
3        (6) the number of licensed mortgage brokers and loan
4    originators entering information into the database;
5        (7) the number of investigations based on information
6    obtained from the database, including the number of
7    licensees fined, the number of licenses suspended, and the
8    number of licenses revoked;
9        (8) a summary of the types of non-traditional mortgage
10    products being offered; and
11        (9) a summary of how the Department is actively
12    utilizing the program to combat mortgage fraud.
13(Source: P.A. 97-891, eff. 1-1-13; 98-1081, eff. 1-1-15.)
 
14    Section 99. Effective date. This Act takes effect upon
15becoming law.