Full Text of HB0537 96th General Assembly
HB0537 96TH GENERAL ASSEMBLY
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96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010 HB0537
Introduced 2/4/2009, by Rep. Charles E. Jefferson - Keith Farnham - Fred Crespo SYNOPSIS AS INTRODUCED: |
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205 ILCS 635/5-8 |
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815 ILCS 137/30 |
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815 ILCS 205/4.1a |
from Ch. 17, par. 6406 |
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Amends the Residential Mortgage License Act of 1987. Provides that no licensee may make, provide, or arrange a mortgage loan with a prepayment penalty (rather than permitting prepayment penalties under specified conditions). Provides that prepayment penalties are prohibited in connection with the sale or destruction of a dwelling secured by a residential mortgage loan. Amends the High Risk Home Loan Act to provide that for any loan that is subject to the
provisions of the Act and is not subject to the provisions of the Home
Ownership and Equity Protection Act of 1994, no lender shall make a high risk
home loan
that includes a penalty provision (rather than permitting prepayment penalties under specified conditions). Amends the Interest Act. Deletes a provision providing that notwithstanding specified provisions, the lender, in the case of any nonexempt residential mortgage loan, shall have the right to include a prepayment penalty that meets specified criteria.
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A BILL FOR
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HB0537 |
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| AN ACT concerning financial regulation.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Residential Mortgage License Act of 1987 is | 5 |
| amended by changing Section 5-8 as follows: | 6 |
| (205 ILCS 635/5-8) | 7 |
| Sec. 5-8. Prepayment penalties prohibited . | 8 |
| (a) No licensee may make, provide, or arrange a mortgage | 9 |
| loan with a prepayment
penalty unless the licensee offers the | 10 |
| borrower a loan without a prepayment penalty, the
offer is in | 11 |
| writing, and the borrower initials the offer to indicate that | 12 |
| the borrower has
declined the offer. In addition, the licensee | 13 |
| must disclose the discount in rate received in
consideration | 14 |
| for a mortgage loan with the prepayment penalty . | 15 |
| (b) (Blank). If a borrower declines an offer required under | 16 |
| subsection (a) of this Section, the licensee may include a | 17 |
| prepayment penalty that extends no longer than three years or | 18 |
| the first change date or rate adjustment of a variable rate | 19 |
| mortgage, whichever comes earlier, provided that, if a | 20 |
| prepayment is made during the fixed rate period, the licensee | 21 |
| shall receive an amount that is no more than: | 22 |
| (1) 3% of the total loan amount if the prepayment is | 23 |
| made within the first 12-month period following the date |
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| the loan was made; | 2 |
| (2) 2% of the total loan amount if the prepayment is | 3 |
| made within the second
12-month period following the date | 4 |
| the loan was made; or | 5 |
| (3) 1% of the total loan amount if the prepayment is | 6 |
| made within the third 12-month period following the date | 7 |
| the loan was made, if the fixed rate period
extends 3 | 8 |
| years. | 9 |
| (c) Prepayment Notwithstanding any provision in this | 10 |
| Section, prepayment penalties are prohibited in connection | 11 |
| with the sale or destruction of a dwelling secured by a | 12 |
| residential mortgage loan.
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| (d) This Section applies to loans made, refinanced, | 14 |
| renewed, extended, or modified on or after the effective date | 15 |
| of this amendatory Act of the 95th General Assembly.
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| (Source: P.A. 95-691, eff. 6-1-08 .) | 17 |
| Section 10. The High Risk Home Loan Act is amended by | 18 |
| changing Section 30 as follows:
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| (815 ILCS 137/30)
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| Sec. 30. Prepayment penalty. For any loan that is subject | 21 |
| to the
provisions of this Act and is not subject to the | 22 |
| provisions of the Home
Ownership and Equity Protection Act of | 23 |
| 1994, no lender shall make a high risk
home loan
that includes | 24 |
| a penalty provision for payment made: (i) after the expiration |
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| of
the 36-month period following the date the loan was made; or | 2 |
| (ii) that is more
than:
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| (1) 3% of the total loan amount if the prepayment is | 4 |
| made within the first
12-month period following the date | 5 |
| the loan was made;
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| (2) 2% of the total loan amount if the prepayment is | 7 |
| made within the
second 12-month period following the date | 8 |
| the loan was made; or
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| (3) 1% of the total loan amount if the prepayment is | 10 |
| made within the third
12-month period following the date | 11 |
| the loan was made .
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| (Source: P.A. 93-561, eff. 1-1-04.)
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| Section 15. The Interest Act is amended by changing Section | 14 |
| 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 | 17 |
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incurred by any lender in connection with any loan shall not | 18 |
| be deemed
to be charges for or in connection with any loan of | 19 |
| money referred to in
Section 6 of this Act, or charges by the | 20 |
| lender as a consideration for
the loan referred to in this | 21 |
| Section:
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| (a) hazard, mortgage or life insurance premiums, | 23 |
| survey, credit
report, title insurance, abstract and | 24 |
| attorneys' fees, recording
charges, escrow and appraisal |
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| fees, and similar charges.
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| (b) in the case of construction loans, in addition to | 3 |
| the matters
referred to in clause (a) above, the actual | 4 |
| cost incurred by the lender
for services for making | 5 |
| physical inspections, processing payouts,
examining and | 6 |
| 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 | 9 |
| provisions of the
Emergency Home Purchase Assistance Act of | 10 |
| 1974 (Section 313 of the
National Housing Act, Chapter B of | 11 |
| Title 12 of the United States Code),
in addition to the | 12 |
| matters referred to in paragraphs (a) and (b) of this
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| Section all charges required or allowed by the Government | 14 |
| National
Mortgage Association, whether designated as | 15 |
| processing fees, commitment
fees, loss reserve and | 16 |
| marketing fees, discounts, origination fees or
otherwise | 17 |
| designated.
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| (d) in the case of a single payment loan, made for a | 19 |
| period of 6 months
or less, a regulated financial | 20 |
| institution or licensed lender may contract
for and receive | 21 |
| 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 | 23 |
| charge may be
contracted for, received, or collected for | 24 |
| any such loan, including any
extension or renewal thereof.
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| (e) if the agreement governing the loan so provides, a | 26 |
| charge not to
exceed the rate permitted under Section 3-806 |
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| of the Uniform Commercial
Code-Commercial Paper for any | 2 |
| check, draft or order for the payment of
money submitted in | 3 |
| 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, | 6 |
| for each loan
installment in default for a period of not | 7 |
| less than 10 days, a charge in
an amount not in excess of | 8 |
| 5% of such loan installment. Only one
delinquency charge | 9 |
| may be collected on any such loan installment regardless
of | 10 |
| the period during which it remains in default. Payments | 11 |
| timely received
by the lender under a written extension or | 12 |
| deferral agreement shall not be
subject to any delinquency | 13 |
| charge.
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| Notwithstanding items (k) and (l) of subsection (1) of | 15 |
| Section 4 of this Act, the lender, in the case of any nonexempt | 16 |
| residential mortgage loan, as defined in Section 1-4 of the | 17 |
| Residential Mortgage License Act of 1987, shall have the right | 18 |
| to include a prepayment penalty that extends no longer than the | 19 |
| fixed rate period of a variable rate mortgage provided that, if | 20 |
| a prepayment is made during the fixed rate period and not in | 21 |
| connection with the sale or destruction of the dwelling | 22 |
| securing the loan, the lender shall receive an amount that is | 23 |
| no more than: | 24 |
| (1) 3% of the total loan amount if the prepayment is | 25 |
| made within the first 12-month period following the date | 26 |
| the loan was made; |
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| (2) 2% of the total loan amount if the prepayment is | 2 |
| made within the second
12-month period following the date | 3 |
| the loan was made; or | 4 |
| (3) 1% of the total loan amount if the prepayment is | 5 |
| made within the third 12-month period following the date | 6 |
| the loan was made, if the fixed rate period
extends 3 | 7 |
| years.
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| This Section applies to loans made, refinanced, renewed, | 9 |
| extended, or modified on or after the effective date of this | 10 |
| amendatory Act of the 95th General Assembly.
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| Where there is a charge in addition to the stated rate of | 12 |
| interest
payable directly or indirectly by the borrower and | 13 |
| imposed directly or
indirectly by the lender as a consideration | 14 |
| for the loan, or for or in
connection with the loan of money, | 15 |
| whether paid or payable by the
borrower, the seller, or any | 16 |
| other person on behalf of the borrower to
the lender or to a | 17 |
| third party, or for or in connection with the loan of
money, | 18 |
| other than as hereinabove in this Section provided, whether
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| denominated "points," "service charge," "discount," | 20 |
| "commission," or
otherwise, and without regard to declining | 21 |
| balances of principal which
would result from any required or | 22 |
| optional amortization of the principal
of the loan, the rate of | 23 |
| interest shall be calculated in the following
manner:
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| The percentage of the principal amount of the loan | 25 |
| represented by all
of such charges shall first be computed, | 26 |
| which in the case of a loan
with an interest rate in excess of |
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| 8% per annum secured by residential
real estate, other than | 2 |
| loans described in paragraphs (e) and (f) of
Section 4, shall | 3 |
| not exceed 3% of such principal amount. Said
percentage shall | 4 |
| then be divided by the number of years and fractions
thereof of | 5 |
| 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 | 7 |
| of the
stated annual rate of interest.
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| (Source: P.A. 95-691, eff. 6-1-08 .)
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