Illinois General Assembly - Full Text of SB1167
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Full Text of SB1167  95th General Assembly

SB1167ham001 95TH GENERAL ASSEMBLY

Executive Committee

Adopted in House Comm. on Jul 19, 2007

 

 


 

 


 
09500SB1167ham001 LRB095 10973 MJR 38145 a

1
AMENDMENT TO SENATE BILL 1167

2     AMENDMENT NO. ______. Amend Senate Bill 1167 by replacing
3 everything after the enacting clause with the following:
 
4     "Section 5. The Home Equity Assurance Act is amended by
5 changing Section 11 as follows:
 
6     (65 ILCS 95/11)  (from Ch. 24, par. 1611)
7     Sec. 11. Guarantee Fund.
8     (a) Each governing commission and program created by
9 referendum under the provisions of this Act shall maintain a
10 guarantee fund for the purposes of paying the costs of
11 administering the program and extending protection to members
12 pursuant to the limitations and procedures set forth in this
13 Act.
14     (b) The guarantee fund shall be raised by means of an
15 annual tax levied on all residential property within the
16 territory of the program having at least one, but not more than

 

 

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1 6 dwelling units and classified by county ordinance as
2 residential. The rate of this tax may be changed from year to
3 year by majority vote of the governing commission but in no
4 case shall it exceed a rate of .12% of the equalized assessed
5 valuation of all property in the territory of the program
6 having at least one, but not more than 6 dwelling units and
7 classified by county ordinance as residential, or the maximum
8 tax rate approved by the voters of the territory at the
9 referendum which created the program or, in the case of a
10 merged program, the maximum tax rate approved by the voters at
11 the referendum authorizing the merger, whichever rate is lower.
12 The commissioners shall cause the amount to be raised by
13 taxation in each year to be certified to the county clerk in
14 the manner provided by law, and any tax so levied and certified
15 shall be collected and enforced in the same manner and by the
16 same officers as those taxes for the purposes of the county and
17 city within which the territory of the commission is located.
18 Any such tax, when collected, shall be paid over to the proper
19 officer of the commission who is authorized to receive and
20 receipt for such tax. The governing commission may issue tax
21 anticipation warrants against the taxes to be assessed for the
22 calendar year in which the program is created and for the first
23 full calendar year after the creation of the program.
24     (c) The moneys deposited in the guarantee fund shall, as
25 nearly as practicable, be fully and continuously invested or
26 reinvested by the governing commission in investment

 

 

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1 obligations which shall be in such amounts, and shall mature at
2 such times, that the maturity or date of redemption at the
3 option of the holder of such investment obligations shall
4 coincide, as nearly as practicable, with the times at which
5 monies will be required for the purposes of the program. For
6 the purposes of this Section investment obligation shall mean
7 direct general municipal, state, or federal obligations which
8 at the time are legal investments under the laws of this State
9 and the payment of principal of and interest on which are
10 unconditionally guaranteed by the governing body issuing them.
11     (d) Except as permitted by this subsection and subsection
12 (d-5), the guarantee fund shall be used solely and exclusively
13 for the purpose of providing guarantees to members of the
14 particular Guaranteed Home Equity Program and for reasonable
15 salaries, expenses, bills, and fees incurred in administering
16 the program, and shall be used for no other purpose.
17     A governing commission, with no less than $4,000,000 in its
18 guarantee fund, may, if authorized by referendum duly adopted
19 by a majority of the voters, establish a Low Interest Home
20 Improvement Loan Program in accordance with and subject to
21 procedures established by a financial institution, as defined
22 in the Illinois Banking Act. Whenever the question of creating
23 a Low Interest Home Improvement Loan Program is initiated by
24 resolution or ordinance of the corporate authorities of the
25 municipality or by a petition signed by not less than 10% of
26 the total number of registered voters of each precinct in the

 

 

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1 territory, the registered voters of which are eligible to sign
2 the petition, it shall be the duty of the election authority
3 having jurisdiction over the municipality to submit the
4 question of creating the program to the electors of each
5 precinct within the territory at the regular election specified
6 in the resolution, ordinance, or petition initiating the
7 question. A petition initiating a question described in this
8 subsection shall be filed with the election authority having
9 jurisdiction over the municipality. The petition shall be filed
10 and objections to the petition shall be made in the manner
11 provided in the Election Code. A resolution, ordinance, or
12 petition initiating a question described in this subsection
13 shall specify the election at which the question is to be
14 submitted. The referendum on the question shall be held in
15 accordance with the Election Code. The question shall be in
16 substantially the following form:
17         "Shall the (name of the home equity program) implement
18     a Low Interest Home Improvement Loan Program with money
19     from the guarantee fund of the established guaranteed home
20     equity program?"
21 The votes must be recorded as "Yes" or "No".
22     Whenever a majority of the voters on the public question
23 approve the creation of the program as certified by the proper
24 election authorities, the commission shall establish the
25 program and administer the program with funds collected under
26 the Guaranteed Home Equity Program, subject to the following

 

 

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1 conditions:
2         (1) At any given time, the cumulative total of all
3     loans and loan guarantees (if applicable) issued under this
4     program may not reduce the balance of the guarantee fund to
5     less than $3,000,000.
6         (2) Only eligible applicants may apply for a loan.
7         (3) The loan must be used for the repair, maintenance,
8     remodeling, alteration, or improvement of a guaranteed
9     residence. This condition is not intended to exclude the
10     repair, maintenance, remodeling, alteration, or
11     improvement of a guaranteed residence's landscape. This
12     condition is intended to exclude the demolition of a
13     current residence. This condition is also intended to
14     exclude the construction of a new residence.
15         (4) An eligible applicant may not borrow more than the
16     amount of equity value in his or her residence.
17         (5) A commission must ensure that loans issued are
18     secured with collateral that is at least equal to the
19     amount of the loan or loan guarantee.
20         (6) A commission shall charge an interest rate which it
21     determines to be below the market rate of interest
22     generally available to the applicant.
23         (7) A commission may, by resolution, establish other
24     administrative rules and procedures as are necessary to
25     implement this program including, but not limited to, loan
26     dollar amounts and terms. A commission may also impose on

 

 

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1     loan applicants a one-time application fee for the purpose
2     of defraying the costs of administering the program.
3     (d-5) A governing commission, with no less than $4,000,000
4 in its guarantee fund, may, if authorized by referendum duly
5 adopted by a majority of the voters, establish a Foreclosure
6 Prevention Loan Fund to provide low interest emergency loans to
7 eligible applicants that may be forced into foreclosure
8 proceedings.
9     Whenever the question of creating a Foreclosure Prevention
10 Loan Fund is initiated by resolution or ordinance of the
11 corporate authorities of the municipality or by a petition
12 signed by not less than 10% of the total number of registered
13 voters of each precinct in the territory, the registered voters
14 of which are eligible to sign the petition, it shall be the
15 duty of the election authority having jurisdiction over the
16 municipality to submit the question of creating the program to
17 the electors of each precinct within the territory at the
18 regular election specified in the resolution, ordinance, or
19 petition initiating the question. A petition initiating a
20 question described in this subsection shall be filed with the
21 election authority having jurisdiction over the municipality.
22 The petition shall be filed and objections to the petition
23 shall be made in the manner provided in the Election Code. A
24 resolution, ordinance, or petition initiating a question
25 described in this subsection shall specify the election at
26 which the question is to be submitted. The referendum on the

 

 

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1 question shall be held in accordance with the Election Code.
2 The question shall be in substantially the following form:
3     "Shall the (name of the home equity program) implement a
4 Foreclosure Prevention Loan Fund with money from the guarantee
5 fund of the established guaranteed home equity program?"
6     The votes must be recorded as "Yes" or "No".
7     Whenever a majority of the voters on the public question
8 approve the creation of a Foreclosure Prevention Loan Fund as
9 certified by the proper election authorities, the commission
10 shall establish the program and administer the program with
11 funds collected under the Guaranteed Home Equity Program,
12 subject to the following conditions:
13         (1) At any given time, the cumulative total of all
14     loans and loan guarantees (if applicable) issued under this
15     program may not exceed $3,000,000.
16         (2) Only eligible applicants may apply for a loan. The
17     Commission may establish, by resolution, additional
18     criteria for eligibility.
19         (3) The loan must be used to assist with preventing
20     foreclosure proceedings.
21         (4) An eligible applicant may not borrow more than the
22     amount of equity value in his or her residence.
23         (5) A commission must ensure that loans issued are
24     secured as a second lien on the property.
25         (6) A commission shall charge an interest rate which it
26     determines to be below the market rate of interest

 

 

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1     generally available to the applicant.
2         (7) A commission may, by resolution, establish other
3     administrative rules and procedures as are necessary to
4     implement this program including, but not limited to,
5     eligibility requirements for eligible applicants, loan
6     dollar amounts, and loan terms.
7         (8) A commission may also impose on loan applicants a
8     one-time application fee for the purpose of defraying the
9     costs of administering the program.
10     (e) The guarantee fund shall be maintained, invested, and
11 expended exclusively by the governing commission of the program
12 for whose purposes it was created. Under no circumstance shall
13 the guarantee fund be used by any person or persons,
14 governmental body, or public or private agency or concern other
15 than the governing commission of the program for whose purposes
16 it was created. Under no circumstances shall the guarantee fund
17 be commingled with other funds or investments.
18     (e-1) No commissioner or family member of a commissioner,
19 or employee or family member of an employee, may receive any
20 financial benefit, either directly or indirectly, from the
21 guarantee fund. Nothing in this subsection (e-1) shall be
22 construed to prohibit payment of expenses to a commissioner in
23 accordance with Section 4 or payment of salaries or expenses to
24 an employee in accordance with this Section.
25     As used in this subsection (e-1), "family member" means a
26 spouse, child, stepchild, parent, brother, or sister of a

 

 

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1 commissioner or a child, stepchild, parent, brother, or sister
2 of a commissioner's spouse.
3     (f) An independent audit of the guarantee fund and the
4 management of the program shall be conducted annually and made
5 available to the public through any office of the governing
6 commission or a public facility such as a local public library
7 located within the territory of the program.
8 (Source: P.A. 91-492, eff. 1-1-00.)
 
9     Section 10. The Residential Mortgage License Act of 1987 is
10 amended by changing Section 4-10 and by adding Sections 4-15,
11 4-16, 5-6, 5-7, 5-8, 5-9, 5-10, 5-11, 5-12, 5-14, 5-15, 5-16,
12 and 5-17 as follows:
 
13     (205 ILCS 635/4-10)  (from Ch. 17, par. 2324-10)
14     Sec. 4-10. Rules and Regulations of the Commissioner.
15     (a) In addition to such powers as may be prescribed by this
16 Act, the Commissioner is hereby authorized and empowered to
17 promulgate regulations consistent with the purposes of this
18 Act, including but not limited to:
19         (1) Such rules and regulations in connection with the
20     activities of licensees as may be necessary and appropriate
21     for the protection of consumers in this State;
22         (2) Such rules and regulations as may be necessary and
23     appropriate to define improper or fraudulent business
24     practices in connection with the activities of licensees in

 

 

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1     making mortgage loans;
2         (3) Such rules and regulations as may define the terms
3     used in this Act and as may be necessary and appropriate to
4     interpret and implement the provisions of this Act; and
5         (4) Such rules and regulations as may be necessary for
6     the enforcement of this Act.
7     (b) The Commissioner is hereby authorized and empowered to
8 make such specific rulings, demands and findings as he or she
9 may deem necessary for the proper conduct of the mortgage
10 lending industry.
11     (c) A person or entity may make a written application to
12 the Department for a written interpretation of this Act. The
13 Department may then, in its sole discretion, choose to issue a
14 written interpretation. To be valid, a written interpretation
15 must be signed by the Secretary, or his or her designated
16 Director of Financial and Professional Regulation, and the
17 Department's General Counsel. A written interpretation expires
18 2 years after the date that it was issued.
19     (d) No provision in this Act that imposes liability or
20 establishes violations shall apply to any act taken by a person
21 or entity in conformity with a written interpretation of this
22 Act that is in effect at the time the act is taken,
23 notwithstanding whether the written interpretation is later
24 amended, rescinded, or determined by judicial or other
25 authority to by invalid for any reason.
26 (Source: P.A. 85-735.)
 

 

 

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1     (205 ILCS 635/4-15 new)
2     Sec. 4-15. Enforcement and reporting provisions. The
3 Attorney General may enforce any violation of Section 5-6, 5-7,
4 5-8, 5-9, 5-10, 5-11, 5-12, 5-14, or 5-15 of this Act as an
5 unlawful practice under the Consumer Fraud and Deceptive
6 Business Practices Act.
 
7     (205 ILCS 635/4-16 new)
8     Sec. 4-16. Private right of action. A borrower injured by a
9 violation of the standards, duties, prohibitions, or
10 requirements of Sections 5-6, 5-7, 5-8, 5-9, 5-10, 5-11, 5-12,
11 5-14, 5-15, and 5-16 of this Act shall have a private right of
12 action.
13     (a) A licensee is not liable for a violation of this Act
14 if:
15         (1) within 30 days of the loan closing and prior to
16     receiving any notice from the borrower of the violation,
17     the licensee has made appropriate restitution to the
18     borrower and appropriate adjustments are made to the loan;
19     or
20         (2) the violation was not intentional and resulted from
21     a bona fide error in fact, notwithstanding the maintenance
22     of procedures reasonably adopted to avoid such errors, and
23     within 60 days of the discovery of the violation and prior
24     to receiving any notice from the borrower of the violation,

 

 

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1     the borrower is notified of the violation, appropriate
2     restitution is made to the borrower, and appropriate
3     adjustments are made to the loan.
4     (b) The remedies and rights provided for in this Act are
5 not exclusive, but cumulative, and all other applicable claims
6 are specifically preserved.
 
7     (205 ILCS 635/5-6 new)
8     Sec. 5-6. Verification of borrower's ability to repay.
9     (a) No licensee may make, provide, or arrange for a
10 residential mortgage loan without verifying the borrower's
11 reasonable ability to pay the principal and interest on the
12 loan, real estate taxes, homeowner's insurance, assessments,
13 and mortgage insurance premiums, if applicable.
14     For residential mortgage loans in which the interest rate
15 may vary, the reasonable ability to pay the principal and
16 interest on the loan shall be determined based on a fully
17 indexed rate, which rate shall be calculated by using the index
18 rate prevailing at the time of origination of the loan plus the
19 margin that will apply when calculating the adjustable rate
20 under the terms of the loan, assuming a fully amortizing
21 repayment schedule based on the term of the loan.
22     For loans that allow for negative amortization, the
23 principal amount of the loan shall be calculated by including
24 the maximum amount the principal balance may increase due to
25 negative amortization under the terms of the loan.

 

 

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1     (b) For all residential mortgage loans made by a licensee,
2 the borrower's income and financial resources must be verified
3 by tax returns, payroll receipts, bank records, or other
4 reasonably reliable methods, based upon the circumstances of
5 the proposed loan. Nothing in this Section shall be construed
6 to limit a licensee's ability to rely on criteria other than
7 the borrower's income and financial resources to establish the
8 borrower's reasonable ability to repay a residential mortgage
9 loan; however, such other criteria must be verified through
10 reasonably reliable methods and documentation. A statement by
11 the borrower to the licensee of the borrower's income and
12 resources is not sufficient to establish the existence of the
13 income or resources when verifying the reasonable ability to
14 pay. Stated income should be accepted only if there are
15 mitigating factors that clearly minimize the need for direct
16 verification of ability to repay.
 
17     (205 ILCS 635/5-7 new)
18     Sec. 5-7. Broker agency relationship.
19     (a) A mortgage broker shall be considered to have created
20 an agency relationship with the borrower in all cases and shall
21 comply with the following duties:
22         (1) A mortgage broker shall act in the borrower's best
23     interest and in good faith toward the borrower. A mortgage
24     broker shall not accept, give, or charge any undisclosed
25     compensation or realize any undisclosed remuneration,

 

 

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1     either through direct or indirect means, that inures to the
2     benefit of the mortgage broker on an expenditure made for
3     the borrower;
4         (2) mortgage brokers shall carry out all lawful
5     instructions given by borrowers;
6         (3) mortgage brokers shall disclose to borrowers all
7     material facts of which the mortgage broker has knowledge
8     which might reasonably affect the borrower's rights,
9     interests, or ability to receive the borrower's intended
10     benefit from the residential mortgage loan, but not facts
11     which are reasonably susceptible to the knowledge of the
12     borrower;
13         (4) mortgage brokers shall use reasonable care in
14     performing duties; and
15         (5) mortgage brokers shall account to a borrower for
16     all the borrower's money and property received as agent.
17     (b) Nothing in this Section prohibits a mortgage broker
18 from contracting for or collecting a fee for services rendered
19 and which had been disclosed to the borrower in advance of the
20 provision of those services.
21     (c) Nothing in this Section requires a mortgage broker to
22 obtain a loan containing terms or conditions not available to
23 the mortgage broker in the mortgage broker's usual course of
24 business, or to obtain a loan for the borrower from a mortgage
25 lender with whom the mortgage broker does not have a business
26 relationship.
 

 

 

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1     (205 ILCS 635/5-8 new)
2     Sec. 5-8. Prepayment penalties.
3     (a) No licensee may make, provide, or arrange a mortgage
4 loan with a prepayment penalty unless the licensee offers the
5 borrower a loan without a prepayment penalty, the offer is in
6 writing, and the borrower initials the offer to indicate that
7 the borrower has declined the offer. In addition, the licensee
8 must disclose the discount in rate received in consideration
9 for a mortgage loan with the prepayment penalty.
10     (b) If a borrower declines an offer required under
11 subsection (a) of this Section, the licensee may include a
12 prepayment penalty that extends no longer than three years or
13 the first change date or rate adjustment of a variable rate
14 mortgage, whichever comes earlier, provided that, if a
15 prepayment is made during the fixed rate period, the licensee
16 shall receive an amount that is no more than:
17         (1) 3% of the total loan amount if the prepayment is
18     made within the first 12 month period following the date
19     the loan was made;
20         (2) 2% of the total loan amount if the prepayment is
21     made within the second 12-month period following the date
22     the loan was made; or
23         (3) 1% of the total loan amount if the prepayment is
24     made within the third 12- month period following the date
25     the loan was made, if the fixed rate period extends 3

 

 

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1     years.
2     (c) Notwithstanding any provision in this Section,
3 prepayment penalties are prohibited in connection with the sale
4 or destruction of a dwelling secured by a residential mortgage
5 loan.
6     (d) This Section applies to loans made, refinanced,
7 renewed, extended, or modified on or after the effective date
8 of this amendatory Act of the 95th General Assembly.
 
9     (205 ILCS 635/5-9 new)
10     Sec. 5-9. Notice of change in loan terms.
11     (a) No licensee may fail to do either of the following:
12         (1) Provide timely notice to the borrower of any
13     material change in the terms of the residential mortgage
14     loan prior to the closing of the loan. For purposes of this
15     Section, a "material change means" any of the following:
16             (A) A change in the type of loan being offered,
17         such as a fixed or variable rate loan or a loan with a
18         balloon payment.
19             (B) A change in the term of the loan, as reflected
20         in the number of monthly payments due before a final
21         payment is scheduled to be made.
22             (C) An increase in the interest rate of more than
23         0.15%, or an equivalent increase in the amount of
24         discount points charged.
25             (D) An increase in the regular monthly payment of

 

 

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1         principal and interest of more than 5%.
2             (E) A change regarding the requirement or amount of
3         escrow of taxes or insurance.
4             (F) A change regarding the requirement or payment,
5         or both, of private mortgage insurance.
6         (2) Timely inform the borrower if any fees payable by
7     the borrower to the licensee increase by more than 10% or
8     $100, whichever is greater.
9     (b) The disclosures required by this Section shall be
10 deemed timely if the licensee provides the borrower with the
11 revised information not later than 3 days after learning of the
12 change or 24 hours before the residential mortgage loan is
13 closed, whichever is earlier. If the licensee discloses a
14 material change more than the 3 days after learning of the
15 change but still 24 hours before the residential mortgage loan
16 is closed, it will not be liable for penalties or forfeitures
17 if the licensee cures in time for the borrower to avoid any
18 damage.
19     (c) If an increase in the total amount of the fee to be
20 paid by the borrower to the broker is not disclosed in
21 accordance with this Section, the broker shall refund to the
22 borrower the amount by which the fee was increased. If the fee
23 is financed into the residential mortgage loan, the broker
24 shall also refund to the borrower the interest charged to
25 finance the fee.
26     (d) Licensees limited to soliciting residential mortgage

 

 

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1 loan applications as approved by the Director under Title 38,
2 Section 1050.2115(c)(1) of the Illinois Administrative Code
3 are not required to provide the disclosures under this Section
4 as long as the solicitor does not discuss the terms and
5 conditions with the potential borrower.
 
6     (205 ILCS 635/5-10 new)
7     Sec. 5-10. Comparable monthly payment quotes. When
8 comparing different loans, the licensee must not state or imply
9 that monthly loan payments, if they include amounts escrowed
10 for payment of property taxes and homeowner's insurance, are
11 comparable with monthly loan payments that do not include these
12 amounts.
 
13     (205 ILCS 635/5-11 new)
14     Sec. 5-11. Requirement to provide borrower with a copy of
15 all appraisals. Licensees must provide to the borrower a
16 complete copy of any appraisal, including any appraisal
17 generated using the Automated Valuation Model, obtained by the
18 lender for use in underwriting the residential mortgage loan
19 within 3 business days of receipt by the licensee, but in no
20 event less than 24 hours prior to the day of closing. The
21 appraisal may be sent via first class mail, commercial carrier,
22 by facsimile or by e-mail, if the borrower has supplied an
23 email address.
 

 

 

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1     (205 ILCS 635/5-12 new)
2     Sec. 5-12. Disclosure of refinancing options. If the
3 subject of a future loan is discussed by a licensee making,
4 providing, or arranging a mortgage loan, the licensee shall
5 disclose the circumstances under which a new loan could be
6 considered. Such disclosure shall clearly state that it is not
7 a contract and that the licensee is not representing or
8 promising that a new loan could or would be made at any time in
9 the future.
 
10     (205 ILCS 635/5-14 new)
11     Sec. 5-14. Prohibition on equity stripping and loan
12 flipping. No licensee may engage in equity stripping or loan
13 flipping, as those terms are defined in the Illinois Fairness
14 in Lending Act.
 
15     (205 ILCS 635/5-15 new)
16     Sec. 5-15. Prohibition on financing certain insurance
17 premiums. No licensee may make, provide, or arrange for a
18 residential mortgage loan that finances, directly or
19 indirectly, any credit life, credit disability, or credit
20 unemployment insurance; however, insurance premiums calculated
21 and paid on a monthly basis shall not be considered to be
22 financed by the lender.
 
23     (205 ILCS 635/5-16 new)

 

 

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1     Sec. 5-16. Prohibition on encouraging default. A licensee
2 may not recommend or encourage default or the failure to make
3 timely payments on an existing residential mortgage loan or
4 other debt prior to and in connection with the closing or
5 planned closing of a residential mortgage loan that refinances
6 all or any portion of the existing loan or debt.
 
7     (205 ILCS 635/5-17 new)
8     Sec. 5-17. Severability. If any provision of this Act or
9 its application to any person or circumstance is held invalid,
10 the invalidity of that provision or application does not affect
11 other provisions or applications of this Act that can be given
12 effect without the invalid provision or application.
 
13     Section 15. The Residential Real Property Disclosure Act is
14 amended by changing Sections 70, 72, and 74 and adding Sections
15 73 and 78 as follows:
 
16     (765 ILCS 77/70)
17     Sec. 70. Predatory lending database pilot program.
18     (a) As used in this Article:
19     "Adjustable rate mortgage" or "ARM" means a closed end
20 mortgage transaction that allows adjustments of the loan
21 interest rate during the first 3 years of the loan term.
22     "Borrower" means a person seeking a mortgage loan.
23     "Broker" means a "broker" or "loan broker", as defined in

 

 

09500SB1167ham001 - 21 - LRB095 10973 MJR 38145 a

1 subsection (p) of Section 1-4 of the Residential Mortgage
2 License Act of 1987.
3     "Closing agent" means an individual assigned by a title
4 insurance company or a broker or originator to ensure that the
5 execution of documents related to the closing of a real estate
6 sale or the refinancing of a real estate loan and the
7 disbursement of closing funds are in conformity with the
8 instructions of the entity financing the transaction.
9     "Counseling" means in-person counseling provided by a
10 counselor employed by a HUD-certified counseling agency to all
11 borrowers, or documented telephone counseling where a hardship
12 would be imposed on one or more borrowers. A hardship shall
13 exist in instances in which the borrower is confined to his or
14 her home due to medical conditions, as verified in writing by a
15 physician, or the borrower resides 50 miles or more from the
16 nearest participating HUD-certified housing counseling agency.
17 In instances of telephone counseling, the borrower must supply
18 all necessary documents to the counselor at least 72 hours
19 prior to the scheduled telephone counseling session.
20     "Counselor" means a counselor employed by a HUD-certified
21 housing counseling agency.
22     "Credit score" means a credit risk score as defined by the
23 Fair Isaac Corporation, or its successor, and reported under
24 such names as "BEACON", "EMPIRICA", and "FAIR ISAAC RISK SCORE"
25 by one or more of the following credit reporting agencies or
26 their successors: Equifax, Inc., Experian Information

 

 

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1 Solutions, Inc., and TransUnion LLC. If the borrower's credit
2 report contains credit scores from 2 reporting agencies, then
3 the broker or loan originator shall report the lower score. If
4 the borrower's credit report contains credit scores from 3
5 reporting agencies, then the broker or loan originator shall
6 report the middle score.
7     "Department" means the Department of Financial and
8 Professional Regulation.
9     "Exempt person" means that term as it is defined in
10 subsections (d)(1) and (d)(1.5) of Section 1-4 of the
11 Residential Mortgage License Act of 1987.
12     "First-time homebuyer" means a borrower who has not held an
13 ownership interest in residential property.
14     "HUD-certified counseling" or "counseling" means
15 counseling given to a borrower by a counselor employed by a
16 HUD-certified housing counseling agency.
17     "Interest only" means a closed-end loan that permits one or
18 more payments of interest without any reduction of the
19 principal balance of the loan, other than the first payment on
20 the loan.
21     "Lender" means that term as it is defined in subsection (g)
22 of Section 1-4 of the Residential Mortgage License Act.
23     "Licensee" means that term as it is defined in subsection
24 (e) of Section 1-4 of the Residential Mortgage License Act of
25 1987.
26     "Mortgage loan" means that term as it is defined in

 

 

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1 subsection (f) of Section 1-4 of the Residential Mortgage
2 License Act of 1987.
3     "Negative amortization" means an amortization method under
4 which the outstanding balance may increase at any time over the
5 course of the loan because the regular periodic payment does
6 not cover the full amount of interest due.
7     "Originator" means a "loan originator" as defined in
8 subsection (hh) of Section 1-4 of the Residential Mortgage
9 License Act of 1987, except an exempt person.
10     "Pilot program area" means all areas within Cook County
11 designated as such by the Department due to the high rate of
12 foreclosure on residential home mortgages that is primarily the
13 result of predatory lending practices. The Department shall
14 designate the pilot program area within 30 days after the
15 effective date of this amendatory Act of the 94th General
16 Assembly.
17     "Points and fees" has the meaning ascribed to that term in
18 Section 10 of the High Risk Home Loan Act.
19     "Prepayment penalty" means a charge imposed by a lender
20 under a mortgage note or rider when the loan is paid before the
21 expiration of the term of the loan.
22     "Refinancing" means a loan secured by the borrower's or
23 borrowers' primary residence where the proceeds are not used as
24 purchase money for the residence.
25     "Title insurance company" means any domestic company
26 organized under the laws of this State for the purpose of

 

 

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1 conducting the business of guaranteeing or insuring titles to
2 real estate and any title insurance company organized under the
3 laws of another State, the District of Columbia, or a foreign
4 government and authorized to transact the business of
5 guaranteeing or insuring titles to real estate in this State.
6     (a-5) A predatory lending database program shall be
7 established within Cook County. The program shall be
8 administered in accordance with this Article. The inception
9 date of the program shall be July 1, 2008. Inception date. The
10 Secretary of Financial and Professional Regulation shall
11 declare in writing the date of inception of the pilot program.
12 The inception date shall be no later than September 1, 2006,
13 and shall be at least 30 days after the date the Secretary
14 issues a declaration establishing that date. The Secretary's
15 declaration shall be posted on the Department's website, and
16 the Department shall communicate the declaration to affected
17 licensees of the Department. Until the inception date, none of
18 the duties, obligations, contingencies, or consequences of or
19 from the pilot program shall be imposed. The pilot program
20 shall apply to all mortgage applications that are governed by
21 this Article and that are made or taken on or after the
22 inception of the pilot program.
23     (b) A predatory lending database pilot program is
24 established within the pilot program area, effective upon the
25 inception date established by the Secretary of the Department.
26 The pilot program shall be in effect and operational for a

 

 

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

 

 

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1 within 5 days thereafter, the broker or originator shall
2 re-submit all of the information required under Section 72 and,
3 within 4 days after receipt of the information re-submitted by
4 the broker or originator, the Department shall compare that
5 information to the housing credit counseling standards in
6 Section 73 developed by the Department by rule and shall issue
7 to the borrower and the broker or originator a new
8 determination of whether re-counseling credit counseling is
9 recommended for the borrower based on the information
10 re-submitted by the broker or originator. The Department shall
11 require re-counseling if the loan terms have been modified to
12 meet another counseling standard in Section 73, or if the
13 broker has increased the interest rate by more than 200 basis
14 points.
15     (d) If the Department recommends credit counseling for the
16 borrower under subsection (c), then the Department shall notify
17 the borrower of all participating HUD-certified counseling
18 agencies located within the State and direct the borrower to
19 interview with a counselor associated with one of those
20 agencies. Within 10 days after receipt of the notice of
21 HUD-certified counseling agencies, the borrower shall select
22 one of those agencies and shall engage in an interview with a
23 counselor associated with that agency. Within 7 days after
24 interviewing the borrower, the credit counselor must submit to
25 the predatory lending database all of the information required
26 under Section 74 and any other information required by the

 

 

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

 

 

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1     borrower and the credit counselor submits all required
2     information to the database in accordance with subsection
3     (d).
4     (f) Within 10 days after closing, the title insurance
5 company or closing agent must submit to the predatory lending
6 database all of the information required under Section 76 and
7 any other information required by the Department by rule.
8     (g) The title insurance company or closing agent shall
9 attach to the mortgage a certificate of compliance with the
10 requirements of this Article, as generated by the database. If
11 the title insurance company or closing agent fails to attach
12 the certificate of compliance, then the mortgage is not
13 recordable. In addition, if any lis pendens for a residential
14 mortgage foreclosure is recorded on the property within the
15 pilot program area, a certificate of service must be
16 simultaneously recorded that affirms that a copy of the lis
17 pendens was filed with the Department. If the certificate of
18 service is not recorded, then the lis pendens pertaining to the
19 residential mortgage foreclosure in question is not recordable
20 and is of no force and effect.
21     (h) All information provided to the predatory lending
22 database under the program is confidential and is not subject
23 to disclosure under the Freedom of Information Act, except as
24 otherwise provided in this Article. Information or documents
25 obtained by employees of the Department in the course of
26 maintaining and administering the predatory lending database

 

 

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1 are deemed confidential. Employees are prohibited from making
2 disclosure of such confidential information or documents. Any
3 request for production of information from the predatory
4 lending database, whether by subpoena, notice, or any other
5 source, shall be referred to the Department of Financial and
6 Professional Regulation. Any borrower may authorize in writing
7 the release of database information. The Department may use the
8 information in the database without the consent of the
9 borrower: (i) for the purposes of administering and enforcing
10 the pilot program; (ii) to provide relevant information to a
11 credit counselor providing credit counseling to a borrower
12 under the pilot program; or (iii) to the appropriate law
13 enforcement agency or the applicable administrative agency if
14 the database information demonstrates criminal, fraudulent, or
15 otherwise illegal activity.
16     (i) Nothing in this Article is intended to prevent a
17 borrower from making his or her own decision as to whether to
18 proceed with a transaction.
19     (j) Any person who violates any provision of this Article
20 commits an unlawful practice within the meaning of the Consumer
21 Fraud and Deceptive Business Practices Act.
22     (k) During the existence of the program, the Department
23 shall submit semi-annual reports to the Governor and to the
24 General Assembly by May 1 and November 1 of each year detailing
25 its findings regarding the program. The report shall include at
26 least the following information for each reporting period:

 

 

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1         (1) the number of loans registered with the program;
2         (2) the number of borrowers receiving counseling;
3         (3) the number of loans closed;
4         (4) the number of loans requiring counseling for each
5     of the standards set forth in Section 73;
6         (5) the number of loans requiring counseling where the
7     mortgage originator changed the loan terms subsequent to
8     counseling.
9     Not later than one year after the Department designates the
10 pilot program area and annually thereafter during the existence
11 of the pilot program, the Department shall report to the
12 Governor and to the General Assembly concerning its
13 administration and the effectiveness of the pilot program.
14 (Source: P.A. 94-280, eff. 1-1-06; 94-1029, eff. 7-14-06.)
 
15     (765 ILCS 77/72)
16     Sec. 72. Originator; required information. As part of the
17 predatory lending database pilot program, the broker or
18 originator must submit all of the following information for
19 inclusion in the predatory lending database for each loan for
20 which the originator takes an application:
21         (1) The borrower's name, address, social security
22     number or taxpayer identification number, date of birth,
23     and income and expense information contained in the
24     mortgage application.
25         (2) The address, permanent index number, and a

 

 

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1     description of the collateral and information about the
2     loan or loans being applied for and the loan terms,
3     including the amount of the loan, the rate and whether the
4     rate is fixed or adjustable, amortization or loan period
5     terms, and any other material terms.
6         (3) The borrower's credit score at the time of
7     application.
8         (4) Information about the originator and the company
9     the originator works for, including the originator's
10     license number and address, fees being charged, whether the
11     fees are being charged as points up front, the yield spread
12     premium payable outside closing, and other charges made or
13     remuneration required by the broker or originator or its
14     affiliates or the broker's or originator's employer or its
15     affiliates for the mortgage loans.
16         (5) Information about affiliated or third party
17     service providers, including the names and addresses of
18     appraisers, title insurance companies, closing agents,
19     attorneys, and realtors who are involved with the
20     transaction and the broker or originator and any moneys
21     received from the broker or originator in connection with
22     the transaction.
23         (6) All information indicated on the Good Faith
24     Estimate and Truth in Lending statement disclosures given
25     to the borrower by the broker or originator.
26         (7) Annual real estate taxes for the property, together

 

 

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1     with any assessments payable in connection with the
2     property to be secured by the collateral and the proposed
3     monthly principal and interest charge of all loans to be
4     taken by the borrower and secured by the property of the
5     borrower.
6         (8) Information concerning how the broker or
7     originator obtained the client and the name of its referral
8     source, if any.
9         (9) Information concerning the notices provided by the
10     broker or originator to the borrower as required by law and
11     the date those notices were given.
12         (10) Information concerning whether a sale and
13     leaseback is contemplated and the names of the lessor and
14     lessee, seller, and purchaser.
15         (11) Any and all financing by the borrower for the
16     subject property within 12 months prior to the date of
17     application.
18         (12) Loan information, including interest rate, term,
19     purchase price, down payment, and closing costs.
20         (13) Whether the buyer is a first-time homebuyer or
21     refinancing a primary residence.
22         (14) Whether the loan permits interest only payments.
23         (15) Whether the loan may result in negative
24     amortization.
25         (16) Whether the total points and fees payable by the
26     borrowers at or before closing will exceed 5%.

 

 

09500SB1167ham001 - 33 - LRB095 10973 MJR 38145 a

1         (17) Whether the loan includes a prepayment penalty,
2     and, if so, the terms of the penalty.
3         (18) Whether the loan is an ARM.
4 (Source: P.A. 94-280, eff. 1-1-06.)
 
5     (765 ILCS 77/73 new)
6     Sec. 73. Standards for counseling. A borrower or borrowers
7 subject to this Article shall be recommended for counseling if,
8 after reviewing the information in the predatory lending
9 database submitted under Section 72, the Department finds the
10 borrower or borrowers are all first-time homebuyers or
11 refinancing a primary residence and the loan is a mortgage that
12 includes one or more of the following:
13         (1) the loan permits interest only payments;
14         (2) the loan may result in negative amortization;
15         (3) the total points and fees payable by the borrower
16     at or before closing will exceed 5%;
17         (4) the loan includes a prepayment penalty; or
18         (5) the loan is an ARM.
 
19     (765 ILCS 77/74)
20     Sec. 74. Counselor Credit counselor; required information.
21 As part of the predatory lending database pilot program, a
22 credit counselor must submit all of the following information
23 for inclusion in the predatory lending database:
24         (1) The information called for in items (1), (6), (9),

 

 

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1     (11), (12), (13), (14), (15), (16), (17), and (18) Section
2     72.
3         (2) Any information from the borrower that confirms or
4     contradicts the information called for under item (1) of
5     this Section.
6         (3) The name and address of the credit counselor and
7     address of the HUD-certifed housing counseling agency that
8     employs the counselor.
9         (4) Information pertaining to the borrower's monthly
10     expenses that assists the credit counselor in determining
11     whether the borrower can afford the loans or loans for
12     which the borrower is applying.
13         (5) A list of the disclosures furnished to the
14     borrower, as seen and reviewed by the credit counselor, and
15     a comparison of that list to all disclosures required by
16     law.
17         (6) Whether the borrower provided tax returns to the
18     broker or originator or to the credit counselor, and, if
19     so, who prepared the tax returns.
20         (7) The date the loan commitment expires and whether a
21     written commitment has been given, together with the
22     proposed date of closing.
23         (7) (8) A statement of the recommendations of the
24     credit counselor that indicates the counselor's response
25     to each of the following statements:
26             (A) The loan should not be approved due to indicia

 

 

09500SB1167ham001 - 35 - LRB095 10973 MJR 38145 a

1         of fraud.
2             (B) The loan should be approved; no material
3         problems noted.
4             (C) The borrower cannot afford the loan.
5             (D) The borrower does not understand the
6         transaction.
7             (E) The borrower does not understand the costs
8         associated with the transaction.
9             (F) The borrower's monthly income and expenses
10         have been reviewed and disclosed.
11             (G) The rate of the loan is above market rate.
12             (H) The borrower should seek a competitive bid from
13         another broker or originator.
14             (I) There are discrepancies between the borrower's
15         verbal understanding and the originator's completed
16         form.
17             (J) The borrower is precipitously close to not
18         being able to afford the loan.
19             (K) The borrower understands the true cost of debt
20         consolidation and the need for credit card discipline.
21             (L) The information that the borrower provided the
22         originator has been amended by the originator.
23 (Source: P.A. 94-280, eff. 1-1-06.)
 
24     (765 ILCS 77/78 new)
25     Sec. 78. Exemption. Borrowers applying for reverse

 

 

09500SB1167ham001 - 36 - LRB095 10973 MJR 38145 a

1 mortgage financing of residential real estate including under
2 programs regulated by the Federal Housing Authority (FHA) that
3 require HUD-certified counseling are exempt from the program
4 and may submit a HUD counseling certificate to comply with the
5 program.
 
6     Section 20. The Mortgage Rescue Fraud Act is amended by
7 changing Section 5 as follows:
 
8     (765 ILCS 940/5)
9     Sec. 5. Definitions. As used in this Act:
10     "Distressed property" means residential real property
11 consisting of one to 6 family dwelling units that is in
12 foreclosure or at risk of loss due to nonpayment of taxes, or
13 whose owner is more than 90 days delinquent on any loan that is
14 secured by the property.
15     "Distressed property consultant" means any person who,
16 directly or indirectly, for compensation from the owner, makes
17 any solicitation, representation, or offer to perform or who,
18 for compensation from the owner, performs any service that the
19 person represents will in any manner do any of the following:
20         (1) stop or postpone the foreclosure sale or the loss
21     of the home due to nonpayment of taxes;
22         (2) obtain any forbearance from any beneficiary or
23     mortgagee, or relief with respect to a tax sale of the
24     property;

 

 

09500SB1167ham001 - 37 - LRB095 10973 MJR 38145 a

1         (3) assist the owner to exercise any right of
2     reinstatement or right of redemption;
3         (4) obtain any extension of the period within which the
4     owner may reinstate the owner's rights with respect to the
5     property;
6         (5) obtain any waiver of an acceleration clause
7     contained in any promissory note or contract secured by a
8     mortgage on a distressed property or contained in the
9     mortgage;
10         (6) assist the owner in foreclosure, loan default, or
11     post-tax sale redemption period to obtain a loan or advance
12     of funds;
13         (7) avoid or ameliorate the impairment of the owner's
14     credit resulting from the recording of a notice of default
15     or the conduct of a foreclosure sale or tax sale; or
16         (8) save the owner's residence from foreclosure or loss
17     of home due to nonpayment of taxes.
18     A "distressed property consultant" does not include any of
19 the following:
20         (1) a person or the person's authorized agent acting
21     under the express authority or written approval of the
22     Department of Housing and Urban Development;
23         (2) a person who holds or is owed an obligation secured
24     by a lien on any distressed property, or a person acting
25     under the express authorization or written approval of such
26     person, when the person performs services in connection

 

 

09500SB1167ham001 - 38 - LRB095 10973 MJR 38145 a

1     with the obligation or lien, if the obligation or lien did
2     not arise as the result of or as part of a proposed
3     distressed property conveyance;
4         (3) banks, savings banks, savings and loan
5     associations, credit unions, and insurance companies
6     organized, chartered, or holding a certificate of
7     authority to do business under the laws of this State or
8     any other state or under the laws of the United States;
9         (4) licensed attorneys engaged in the practice of law;
10         (5) a Department of Housing and Urban Development
11     approved mortgagee and any subsidiary or affiliate of these
12     persons or entities, and any agent or employee of these
13     persons or entities, while engaged in the business of these
14     persons or entities;
15         (6) a 501(c)(3) nonprofit agency or organization,
16     doing business for no less than 5 years, that offers
17     counseling or advice to an owner of a distressed property,
18     if they do not contract for services with for-profit
19     lenders or distressed property purchasers, or any person
20     who structures or plans such a transaction;
21         (7) licensees of the Residential Mortgage License Act
22     of 1987;
23         (8) licensees of the Consumer Installment Loan Act who
24     are authorized to make loans secured by real property; or
25         (9) licensees of the Real Estate License Act of 2000
26     when providing licensed activities.

 

 

09500SB1167ham001 - 39 - LRB095 10973 MJR 38145 a

1     "Distressed property purchaser" means any person who
2 acquires any interest in fee in a distressed property or a
3 beneficial interest in a trust holding title to a distressed
4 property while allowing the owner to possess, occupy, or retain
5 any present or future interest in fee in the property, or any
6 person who participates in a joint venture or joint enterprise
7 involving a distressed property conveyance. "Distressed
8 property purchaser" does not mean any person who acquires
9 distressed property at a short sale or any person acting in
10 participation with any person who acquires distressed property
11 at a short sale, if that person does not promise to convey an
12 interest in fee back to the owner or does not give the owner an
13 option to purchase the property at a later date.
14     "Distressed property conveyance" means a transaction in
15 which an owner of a distressed property transfers an interest
16 in fee in the distressed property or in which the holder of all
17 or some part of the beneficial interest in a trust holding
18 title to a distressed property transfers that interest; the
19 acquirer of the property allows the owner of the distressed
20 property to occupy the property; and the acquirer of the
21 property or a person acting in participation with the acquirer
22 of the property conveys or promises to convey an interest in
23 fee back to the owner or gives the owner an option to purchase
24 the property at a later date.
25     "Person" means any individual, partnership, corporation,
26 limited liability company, association, or other group or

 

 

09500SB1167ham001 - 40 - LRB095 10973 MJR 38145 a

1 entity, however organized.
2     "Service" means, without limitation, any of the following:
3         (1) debt, budget, or financial counseling of any type;
4         (2) receiving money for the purpose of distributing it
5     to creditors in payment or partial payment of any
6     obligation secured by a lien on a distressed property;
7         (3) contacting creditors on behalf of an owner of a
8     residence that is distressed property;
9         (4) arranging or attempting to arrange for an extension
10     of the period within which the owner of a distressed
11     property may cure the owner's default and reinstate his or
12     her obligation;
13         (5) arranging or attempting to arrange for any delay or
14     postponement of the time of sale of the distressed
15     property;
16         (6) advising the filing of any document or assisting in
17     any manner in the preparation of any document for filing
18     with any court; or
19         (7) giving any advice, explanation, or instruction to
20     an owner of a distressed property that in any manner
21     relates to the cure of a default or forfeiture or to the
22     postponement or avoidance of sale of the distressed
23     property.
24 (Source: P.A. 94-822, eff. 1-1-07.)
 
25     Section 25. The Interest Act is amended by changing Section

 

 

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1 4.1a as follows:
 
2     (815 ILCS 205/4.1a)  (from Ch. 17, par. 6406)
3     Sec. 4.1a. Charges for and cost of the following items paid
4 or incurred by any lender in connection with any loan shall not
5 be deemed to be charges for or in connection with any loan of
6 money referred to in Section 6 of this Act, or charges by the
7 lender as a consideration for the loan referred to in this
8 Section:
9         (a) hazard, mortgage or life insurance premiums,
10     survey, credit report, title insurance, abstract and
11     attorneys' fees, recording charges, escrow and appraisal
12     fees, and similar charges.
13         (b) in the case of construction loans, in addition to
14     the matters referred to in clause (a) above, the actual
15     cost incurred by the lender for services for making
16     physical inspections, processing payouts, examining and
17     reviewing contractors' and subcontractors' sworn
18     statements and waivers of lien and the like.
19         (c) in the case of any loan made pursuant to the
20     provisions of the Emergency Home Purchase Assistance Act of
21     1974 (Section 313 of the National Housing Act, Chapter B of
22     Title 12 of the United States Code), in addition to the
23     matters referred to in paragraphs (a) and (b) of this
24     Section all charges required or allowed by the Government
25     National Mortgage Association, whether designated as

 

 

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1     processing fees, commitment fees, loss reserve and
2     marketing fees, discounts, origination fees or otherwise
3     designated.
4         (d) in the case of a single payment loan, made for a
5     period of 6 months or less, a regulated financial
6     institution or licensed lender may contract for and receive
7     a maximum charge of $15 in lieu of interest. Such charge
8     may be collected when the loan is made, but only one such
9     charge may be contracted for, received, or collected for
10     any such loan, including any extension or renewal thereof.
11         (e) if the agreement governing the loan so provides, a
12     charge not to exceed the rate permitted under Section 3-806
13     of the Uniform Commercial Code-Commercial Paper for any
14     check, draft or order for the payment of money submitted in
15     accordance with said agreement which is unpaid or not
16     honored by a bank or other depository institution.
17         (f) if the agreement governing the loan so provides,
18     for each loan installment in default for a period of not
19     less than 10 days, a charge in an amount not in excess of
20     5% of such loan installment. Only one delinquency charge
21     may be collected on any such loan installment regardless of
22     the period during which it remains in default. Payments
23     timely received by the lender under a written extension or
24     deferral agreement shall not be subject to any delinquency
25     charge.
26     Notwithstanding items (k) and (l) of subsection (1) of

 

 

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1 Section 4 of this Act, the lender, in the case of any nonexempt
2 residential mortgage loan, as defined in Section 1-4 of the
3 Residential Mortgage License Act of 1987, shall have the right
4 to include a prepayment penalty that extends no longer than the
5 fixed rate period of a variable rate mortgage provided that, if
6 a prepayment is made during the fixed rate period and not in
7 connection with the sale or destruction of the dwelling
8 securing the loan, the lender shall receive an amount that is
9 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     This Section applies to loans made, refinanced, renewed,
21 extended, or modified on or after the effective date of this
22 amendatory Act of the 95th General Assembly.
23     Where there is a charge in addition to the stated rate of
24 interest payable directly or indirectly by the borrower and
25 imposed directly or indirectly by the lender as a consideration
26 for the loan, or for or in connection with the loan of money,

 

 

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1 whether paid or payable by the borrower, the seller, or any
2 other person on behalf of the borrower to the lender or to a
3 third party, or for or in connection with the loan of money,
4 other than as hereinabove in this Section provided, whether
5 denominated "points," "service charge," "discount,"
6 "commission," or otherwise, and without regard to declining
7 balances of principal which would result from any required or
8 optional amortization of the principal of the loan, the rate of
9 interest shall be calculated in the following manner:
10     The percentage of the principal amount of the loan
11 represented by all of such charges shall first be computed,
12 which in the case of a loan with an interest rate in excess of
13 8% per annum secured by residential real estate, other than
14 loans described in paragraphs (e) and (f) of Section 4, shall
15 not exceed 3% of such principal amount. Said percentage shall
16 then be divided by the number of years and fractions thereof of
17 the period of the loan according to its stated maturity. The
18 percentage thus obtained shall then be added to the percentage
19 of the stated annual rate of interest.
20     The borrower in the case of nonexempt loan shall have the
21 right to prepay the loan in whole or in part at any time, but,
22 except as may otherwise be provided by Section 4, the lender
23 may require payment of not more than 6 months' advance interest
24 on that part of the aggregate amount of all prepayments on a
25 loan in one year, which exceeds 20% of the original principal
26 amount of the loan.

 

 

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1 (Source: P.A. 87-496.)
 
2     Section 970. Severability. If any provision of this
3 amendatory Act of the 95th General Assembly or its application
4 to any person or circumstance is held invalid, the invalidity
5 of that provision or application does not affect other
6 provisions or applications of this amendatory Act that can be
7 given effect without the invalid provision or application.".