Full Text of HB1478 95th General Assembly
HB1478ham002 95TH GENERAL ASSEMBLY
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Rep. Daniel J. Burke
Filed: 4/26/2007
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| AMENDMENT TO HOUSE BILL 1478
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| AMENDMENT NO. ______. Amend House Bill 1478 by replacing | 3 |
| everything after the enacting clause with the following:
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| "Section 5. The Residential Mortgage License Act of 1987 is | 5 |
| amended by adding Sections 4-15, 4-16, 5-6, 5-7, 5-8, 5-9, | 6 |
| 5-10, 5-11, 5-12, 5-14, 5-15, 5-16, and 5-17 as follows: | 7 |
| (205 ILCS 635/4-15 new) | 8 |
| Sec. 4-15. Enforcement and reporting provisions. | 9 |
| (a) The Attorney General may enforce any violation of | 10 |
| Section 5-6, 5-7, 5-8, 5-9, 5-10, 5-11, 5-12, 5-14, or 5-15 of | 11 |
| this Act as an unlawful practice under the Consumer Fraud and | 12 |
| Deceptive Business Practices Act. | 13 |
| (b) The Department of Financial and Professional | 14 |
| Regulation and the Department of Financial Institutions must | 15 |
| report to the Attorney General all violations of this | 16 |
| amendatory Act of which they become aware. |
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| (205 ILCS 635/4-16 new) | 2 |
| Sec. 4-16. Private right of action. A borrower injured by a | 3 |
| violation of the standards, duties, prohibitions, or | 4 |
| requirements of Sections 5-6, 5-7, 5-8, 5-9, 5-10, 5-11, 5-12, | 5 |
| 5-13, 5-14, 5-15, and 5-16 of this Act shall have a private | 6 |
| right of action. | 7 |
| (a) A licensee is not liable for a violation of this Act | 8 |
| if: | 9 |
| (1) within 30 days of the loan closing and prior to | 10 |
| receiving any notice from the borrower of the violation, | 11 |
| the licensee has made appropriate restitution to the | 12 |
| borrower and appropriate adjustments are made to the loan; | 13 |
| or | 14 |
| (2) the violation was not intentional and resulted from | 15 |
| a bona fide error in fact, notwithstanding the maintenance | 16 |
| of procedures reasonably adopted to avoid such errors, and | 17 |
| within 60 days of the discovery of the violation and prior | 18 |
| to receiving any notice from the borrower of the violation, | 19 |
| the borrower is notified of the violation, appropriate | 20 |
| restitution is made to the borrower, and appropriate | 21 |
| adjustments are made to the loan. | 22 |
| (b) The remedies and rights provided for in this Act are | 23 |
| not exclusive, but cumulative, and all other applicable claims | 24 |
| are specifically preserved.
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| (205 ILCS 635/5-6 new) | 2 |
| Sec. 5-6. Verification of borrower's ability to repay. | 3 |
| (a) No licensee may make, provide, or arrange for a | 4 |
| residential mortgage loan without verifying the borrower's | 5 |
| reasonable ability to pay the principal and interest on the | 6 |
| loan, real estate taxes, homeowner's insurance, assessments, | 7 |
| and mortgage insurance premiums, if applicable. | 8 |
| For residential mortgage loans in which the interest rate | 9 |
| may vary, the reasonable ability to pay the principal and | 10 |
| interest on the loan shall be determined based on a fully | 11 |
| indexed rate, which rate shall be calculated by using the index | 12 |
| rate prevailing at the time of origination of the loan plus the | 13 |
| margin that will apply when calculating the adjustable rate | 14 |
| under the terms of the loan, assuming a fully amortizing | 15 |
| repayment schedule based on the term of the loan. | 16 |
| For loans that allow for negative amortization, the | 17 |
| principal amount of the loan shall be calculated by including | 18 |
| the maximum amount the principal balance may increase due to | 19 |
| negative amortization under the terms of the loan. | 20 |
| (b) For all residential mortgage loans, the borrower's | 21 |
| income and financial resources must be verified by tax returns, | 22 |
| payroll receipts, bank records, or other similarly reliable | 23 |
| documents. Nothing in this Section shall be construed to limit | 24 |
| a licensee's ability to rely on criteria other than the | 25 |
| borrower's income and financial resources to establish the | 26 |
| borrower's reasonable ability to repay a residential mortgage |
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| loan; however, such other criteria must be verified through | 2 |
| reasonably reliable methods and documentation. A statement by | 3 |
| the borrower to the licensee of the borrower's income and | 4 |
| resources is not sufficient to establish the existence of the | 5 |
| income or resources when verifying the reasonable ability to | 6 |
| pay. | 7 |
| (205 ILCS 635/5-7 new) | 8 |
| Sec. 5-7. Broker agency relationship. | 9 |
| (a) A mortgage broker shall be considered to have created | 10 |
| an agency relationship with the borrower in all cases and shall | 11 |
| comply with the following duties: | 12 |
| (1) mortgage brokers shall act in the borrower's best | 13 |
| interest and in the utmost good faith toward borrowers, and | 14 |
| shall not compromise a borrower's right or interest in | 15 |
| favor of another's right or interest, including a right or | 16 |
| interest of the mortgage broker. A mortgage broker shall | 17 |
| not accept, give, or charge any undisclosed compensation or | 18 |
| realize any undisclosed remuneration, either through | 19 |
| direct or indirect means, that inures to the benefit of the | 20 |
| mortgage broker on an expenditure made for the borrower; | 21 |
| (2) mortgage brokers shall carry out all lawful | 22 |
| instructions given by borrowers; | 23 |
| (3) mortgage brokers shall disclose to borrowers all | 24 |
| material facts of which the mortgage broker has knowledge | 25 |
| which might reasonably affect the borrower's rights, |
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| interests, or ability, or both, to receive the borrower's | 2 |
| intended benefit from the residential mortgage loan, but | 3 |
| not facts which are reasonably susceptible to the knowledge | 4 |
| of the borrower; | 5 |
| (4) mortgage brokers shall use reasonable care in | 6 |
| performing duties; and | 7 |
| (5) mortgage brokers shall account to a borrower for | 8 |
| all the borrower's money and
property received as agent. | 9 |
| (b) Nothing in this Section prohibits a mortgage broker | 10 |
| from contracting for or collecting a fee for services rendered | 11 |
| and which had been disclosed to the borrower in advance of the | 12 |
| provision of those services. | 13 |
| (c) Nothing in this Section requires a mortgage broker to | 14 |
| obtain a loan containing terms or conditions not available to | 15 |
| the mortgage broker in the mortgage broker's usual course of | 16 |
| business, or to obtain a loan for the borrower from a mortgage | 17 |
| lender with whom the mortgage broker does not have a business | 18 |
| relationship. | 19 |
| (205 ILCS 635/5-8 new) | 20 |
| Sec. 5-8. Prepayment penalties. | 21 |
| (a) No licensee may make, provide, or arrange a mortgage | 22 |
| loan with a prepayment
penalty unless the licensee offers the | 23 |
| borrower a loan without a prepayment penalty, the
offer is in | 24 |
| writing, and the borrower initials the offer to indicate that | 25 |
| the borrower has
declined the offer. In addition, the licensee |
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| must disclose the discount in rate received in
consideration | 2 |
| for a mortgage loan with the prepayment penalty. | 3 |
| (b) If a borrower declines an offer required under | 4 |
| subsection (a) of this Section, the licensee may include a | 5 |
| prepayment penalty that extends no longer than three years or | 6 |
| the first change date or rate adjustment of a variable rate | 7 |
| mortgage, whichever comes earlier, provided that, if a | 8 |
| prepayment is made during the fixed rate period, the licensee | 9 |
| shall receive an amount that is no more than: | 10 |
| (1) 3% of the total loan amount if the prepayment is | 11 |
| made within the first 12
month period following the date | 12 |
| the loan was made; | 13 |
| (2) 2% of the total loan amount if the prepayment is | 14 |
| made within the second
12-month period following the date | 15 |
| the loan was made; or | 16 |
| (3) 1% of the total loan amount if the prepayment is | 17 |
| made within the third 12-
month period following the date | 18 |
| the loan was made, if the fixed rate period
extends 3 | 19 |
| years. | 20 |
| (c) Notwithstanding any provision in this Section, | 21 |
| prepayment penalties are prohibited in connection with the sale | 22 |
| or destruction of a dwelling secured by a residential mortgage | 23 |
| loan.
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| (d) This subsection (d) applies to loans made, refinanced, | 25 |
| renewed, extended, or modified on or after the effective date | 26 |
| of this amendatory Act of the 95th General Assembly. |
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| (205 ILCS 635/5-9 new) | 2 |
| Sec. 5-9. Notice of change in loan terms. | 3 |
| (a) No licensee may fail to do either of the following: | 4 |
| (1) Provide timely notice to the borrower of any | 5 |
| material change in the terms of the residential mortgage | 6 |
| loan prior to the closing of the loan. For purposes of this | 7 |
| Section, a "material change means" any of the following: | 8 |
| (A) A change in the type of loan being offered, | 9 |
| such as a fixed or variable rate loan or a loan with a | 10 |
| balloon payment. | 11 |
| (B) A change in the term of the loan, as reflected | 12 |
| in the number of monthly payments due before a final | 13 |
| payment is scheduled to be made. | 14 |
| (C) An increase in the interest rate of more than | 15 |
| 0.15%, or an equivalent
increase in the amount of | 16 |
| discount points charged. | 17 |
| (D) An increase in the regular monthly payment of | 18 |
| principal and interest of more than 5%. | 19 |
| (E) A change regarding the requirement or amount of | 20 |
| escrow of taxes or insurance. | 21 |
| (F) A change regarding the requirement or payment, | 22 |
| or both, of private mortgage insurance. | 23 |
| (2) Timely inform the borrower if any fees payable by | 24 |
| the borrower to the licensee increase by more than 10% or | 25 |
| $100, whichever is greater. |
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| (b) The disclosures required by this Section shall be | 2 |
| deemed timely if the licensee provides the borrower with the | 3 |
| revised information not later than 3 days after learning of the | 4 |
| change or 24 hours before the residential mortgage loan is | 5 |
| closed, whichever is earlier. If the licensee discloses a | 6 |
| material change more than the 3 days after learning of the | 7 |
| change but still 24 hours before the residential mortgage loan | 8 |
| is closed, it will not be liable for penalties or forfeitures | 9 |
| if the licensee cures in time for the borrower to avoid any | 10 |
| damage. | 11 |
| (c) If an increase in the total amount of the fee to be | 12 |
| paid by the borrower to the lender or broker is not disclosed | 13 |
| in accordance with this Section, the lender or broker, whoever | 14 |
| received the increased fee, shall refund to the borrower the | 15 |
| amount by which the fee was increased. If the fee is financed | 16 |
| into the residential mortgage loan, the lender or broker shall | 17 |
| also refund to the borrower the interest charged to finance the | 18 |
| fee.
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| (205 ILCS 635/5-10 new) | 20 |
| Sec. 5-10. Comparable monthly payment quotes. When | 21 |
| comparing different loans, the licensee must not state or imply | 22 |
| that monthly loan payments, if they include amounts escrowed | 23 |
| for payment of property taxes and homeowner's insurance, are | 24 |
| comparable with monthly loan payments that do not include these | 25 |
| amounts. |
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| (205 ILCS 635/5-11 new) | 2 |
| Sec. 5-11. Requirement to provide borrower with a copy of | 3 |
| all appraisals. Lenders must provide to the borrower a complete | 4 |
| copy of any appraisal, including any appraisal generated using | 5 |
| the Automated Valuation Model, obtained by the lender for use | 6 |
| in underwriting the residential mortgage loan within 3 business | 7 |
| days of receipt by the licensee, but in no event less than 24 | 8 |
| hours prior to the day of closing. The appraisal may be sent | 9 |
| via first class mail, commercial carrier, by facsimile or by | 10 |
| e-mail, if the borrower has supplied an email address. | 11 |
| (205 ILCS 635/5-12 new) | 12 |
| Sec. 5-12. Disclosure of refinancing options. If the | 13 |
| subject of a future loan is discussed by a licensee making, | 14 |
| providing, or arranging a mortgage loan, the licensee shall | 15 |
| disclose the circumstances under which a new loan could be | 16 |
| considered. Such disclosure shall clearly state that it is not | 17 |
| a contract and that the licensee is not representing or | 18 |
| promising that a new loan could or would be made at any time in | 19 |
| the future. | 20 |
| (205 ILCS 635/5-14 new) | 21 |
| Sec. 5-14. Prohibition on equity stripping and loan | 22 |
| flipping. No licensee may engage in equity stripping or loan | 23 |
| flipping, as those terms are defined in the Illinois Fairness |
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| in Lending Act. | 2 |
| (205 ILCS 635/5-15 new) | 3 |
| Sec. 5-15. Prohibition on financing certain insurance | 4 |
| premiums. No licensee may make, provide, or arrange for a | 5 |
| residential mortgage loan that finances, directly or | 6 |
| indirectly, any credit life, credit disability, or credit | 7 |
| unemployment insurance; however, insurance premiums calculated | 8 |
| and paid on a monthly basis shall not be considered to be | 9 |
| financed by the lender. | 10 |
| (205 ILCS 635/5-16 new) | 11 |
| Sec. 5-16. Prohibition on encouraging default. A licensee | 12 |
| may not recommend or encourage default or the failure to make | 13 |
| timely payments on an existing residential mortgage loan or | 14 |
| other debt prior to and in connection with the closing or | 15 |
| planned closing of a residential mortgage loan that refinances | 16 |
| all or any portion of the existing loan or debt. | 17 |
| (205 ILCS 635/5-17 new) | 18 |
| Sec. 5-17. Severability. If any provision of this Act or | 19 |
| its application to any person or circumstance is held invalid, | 20 |
| the invalidity of that provision or application does not affect | 21 |
| other provisions or applications of this Act that can be given | 22 |
| effect without the invalid provision or application. |
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| Section 10. The Interest Act is amended by changing Section | 2 |
| 4.1a as follows:
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| (815 ILCS 205/4.1a) (from Ch. 17, par. 6406)
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| Sec. 4.1a. Charges for and cost of the following items paid | 5 |
| or
incurred by any lender in connection with any loan shall not | 6 |
| be deemed
to be charges for or in connection with any loan of | 7 |
| money referred to in
Section 6 of this Act, or charges by the | 8 |
| lender as a consideration for
the loan referred to in this | 9 |
| Section:
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| (a) hazard, mortgage or life insurance premiums, | 11 |
| survey, credit
report, title insurance, abstract and | 12 |
| attorneys' fees, recording
charges, escrow and appraisal | 13 |
| fees, and similar charges.
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| (b) in the case of construction loans, in addition to | 15 |
| the matters
referred to in clause (a) above, the actual | 16 |
| cost incurred by the lender
for services for making | 17 |
| physical inspections, processing payouts,
examining and | 18 |
| reviewing contractors' and subcontractors' sworn
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| statements and waivers of lien and the like.
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| (c) in the case of any loan made pursuant to the | 21 |
| provisions of the
Emergency Home Purchase Assistance Act of | 22 |
| 1974 (Section 313 of the
National Housing Act, Chapter B of | 23 |
| Title 12 of the United States Code),
in addition to the | 24 |
| matters referred to in paragraphs (a) and (b) of this
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| Section all charges required or allowed by the Government |
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| National
Mortgage Association, whether designated as | 2 |
| processing fees, commitment
fees, loss reserve and | 3 |
| marketing fees, discounts, origination fees or
otherwise | 4 |
| designated.
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| (d) in the case of a single payment loan, made for a | 6 |
| period of 6 months
or less, a regulated financial | 7 |
| institution or licensed lender may contract
for and receive | 8 |
| a maximum charge of $15 in lieu of interest. Such charge
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| may be collected when the loan is made, but only one such | 10 |
| charge may be
contracted for, received, or collected for | 11 |
| any such loan, including any
extension or renewal thereof.
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| (e) if the agreement governing the loan so provides, a | 13 |
| charge not to
exceed the rate permitted under Section 3-806 | 14 |
| of the Uniform Commercial
Code-Commercial Paper for any | 15 |
| check, draft or order for the payment of
money submitted in | 16 |
| accordance with said agreement which is unpaid or not
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| honored by a bank or other depository institution.
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| (f) if the agreement governing the loan so provides, | 19 |
| for each loan
installment in default for a period of not | 20 |
| less than 10 days, a charge in
an amount not in excess of | 21 |
| 5% of such loan installment. Only one
delinquency charge | 22 |
| may be collected on any such loan installment regardless
of | 23 |
| the period during which it remains in default. Payments | 24 |
| timely received
by the lender under a written extension or | 25 |
| deferral agreement shall not be
subject to any delinquency | 26 |
| charge.
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| Notwithstanding items (k) and (l) of subsection (1) of | 2 |
| Section 4 of this Act, the lender, in the case of any nonexempt | 3 |
| residential mortgage loan, as defined in Section 1-4 of the | 4 |
| Residential Mortgage License Act of 1987, shall have the right | 5 |
| to include a prepayment penalty that extends no longer than the | 6 |
| fixed rate period of a variable rate mortgage provided that, if | 7 |
| a prepayment is made during the fixed rate period and not in | 8 |
| connection with the sale or destruction of the dwelling | 9 |
| securing the loan, the lender shall receive an amount that is | 10 |
| no more than: | 11 |
| (1) 3% of the total loan amount if the prepayment is | 12 |
| made within the first 12
month period following the date | 13 |
| the loan was made; | 14 |
| (2) 2% of the total loan amount if the prepayment is | 15 |
| made within the second
12-month period following the date | 16 |
| the loan was made; or | 17 |
| (3) 1% of the total loan amount if the prepayment is | 18 |
| made within the third 12-
month period following the date | 19 |
| the loan was made, if the fixed rate period
extends 3 | 20 |
| years.
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| This subsection applies to loans made, refinanced, | 22 |
| renewed, extended, or modified on or after the effective date | 23 |
| of this amendatory Act of the 95th General Assembly.
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| Where there is a charge in addition to the stated rate of | 25 |
| interest
payable directly or indirectly by the borrower and | 26 |
| imposed directly or
indirectly by the lender as a consideration |
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| for the loan, or for or in
connection with the loan of money, | 2 |
| whether paid or payable by the
borrower, the seller, or any | 3 |
| other person on behalf of the borrower to
the lender or to a | 4 |
| third party, or for or in connection with the loan of
money, | 5 |
| other than as hereinabove in this Section provided, whether
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| denominated "points," "service charge," "discount," | 7 |
| "commission," or
otherwise, and without regard to declining | 8 |
| balances of principal which
would result from any required or | 9 |
| optional amortization of the principal
of the loan, the rate of | 10 |
| interest shall be calculated in the following
manner:
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| The percentage of the principal amount of the loan | 12 |
| represented by all
of such charges shall first be computed, | 13 |
| which in the case of a loan
with an interest rate in excess of | 14 |
| 8% per annum secured by residential
real estate, other than | 15 |
| loans described in paragraphs (e) and (f) of
Section 4, shall | 16 |
| not exceed 3% of such principal amount. Said
percentage shall | 17 |
| then be divided by the number of years and fractions
thereof of | 18 |
| the period of the loan according to its stated maturity. The
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| percentage thus obtained shall then be added to the percentage | 20 |
| of the
stated annual rate of interest.
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| The borrower in the case of nonexempt loan shall have the | 22 |
| right to
prepay the loan in whole or in part at any time, but, | 23 |
| except as may
otherwise be provided by Section 4, the lender | 24 |
| may require payment of
not more than 6 months' advance interest | 25 |
| on that part of the aggregate
amount of all prepayments on a | 26 |
| loan in one year, which exceeds 20% of
the original principal |
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| amount of the loan.
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| (Source: P.A. 87-496 .)".
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