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90_SB0497enr
205 ILCS 635/1-3 from Ch. 17, par. 2321-3
205 ILCS 635/1-4 from Ch. 17, par. 2321-4
205 ILCS 635/4-1 from Ch. 17, par. 2324-1
205 ILCS 635/4-2 from Ch. 17, par. 2324-2
205 ILCS 635/4-8 from Ch. 17, par. 2324-8
205 ILCS 635/4-10 from Ch. 17, par. 2324-10
Amends the Residential Mortgage License Act of 1987.
Provides that examinations of licensees shall be conducted
for cause rather than merely on a periodic basis. Abolishes
the exemption for licensees under the Real Estate License Act
of 1983. Requires an entity to either have a physical
presence in Illinois or not originate mortgage loans in its
ordinary course of business to qualify for exemption related
to volume of business. Provides that default rate provisions
apply only to licensees that service, fund, or make credit
decisions regarding mortgage loans. Prohibits the limitation
of fees. Requires the Commissioner of Banks and Real Estate
to maintain a registry of employees of licensees.
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1 AN ACT to amend the Residential Mortgage License Act of
2 1987 by changing Sections 1-4, 3-2, 3-4, and 6-2 and
3 repealing Section 3-10.
4 Be it enacted by the People of the State of Illinois,
5 represented in the General Assembly:
6 Section 5. The Residential Mortgage License Act of 1987
7 is amended by changing Sections 1-4, 3-2, 3-4, and 6-2 as
8 follows:
9 (205 ILCS 635/1-4) (from Ch. 17, par. 2321-4)
10 Sec. 1-4. Definitions.
11 (a) "Residential real property" or "residential real
12 estate" shall mean real property located in this State
13 improved by a one-to-four family dwelling used or occupied,
14 wholly or partly, as the home or residence of one or more
15 persons and may refer, subject to regulations of the
16 Commissioner, to unimproved real property upon which those
17 kinds dwellings are to be constructed.
18 (b) "Making a residential mortgage loan" or "funding a
19 residential mortgage loan" shall mean for compensation or
20 gain, either directly or indirectly, advancing funds or
21 making a commitment to advance funds to a loan applicant for
22 a residential mortgage loan.
23 (c) "Soliciting, processing, placing, or negotiating a
24 residential mortgage loan" shall mean for compensation or
25 gain, either directly or indirectly, accepting or offering to
26 accept an application for a residential mortgage loan,
27 assisting or offering to assist in the processing of an
28 application for a residential mortgage loan on behalf of a
29 borrower, or negotiating or offering to negotiate the terms
30 or conditions of a residential mortgage loan with a lender on
31 behalf of a borrower including, but not limited to, the
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1 submission of credit packages for the approval of lenders,
2 the preparation of residential mortgage loan closing
3 documents, including a closing in the name of a broker.
4 (d) "Exempt entity" shall mean the following:
5 (1) (i) Any banking organization or foreign banking
6 corporation licensed by the Illinois Commissioner of
7 Banks and Real Estate or the United States Comptroller of
8 the Currency to transact business in this State; (ii) any
9 national bank, federally chartered savings and loan
10 association, federal savings bank, federal credit union;
11 (iii) any pension trust, bank trust, or bank trust
12 company; (iv) any savings and loan association, savings
13 bank, or credit union organized under the laws of this or
14 any other state; (v) any Illinois Consumer Installment
15 Loan Act licensee; (vi) any insurance company authorized
16 to transact business in this State; (vii) any entity
17 engaged solely in commercial mortgage lending; (viii) any
18 service corporation of a savings and loan association or
19 savings bank organized under the laws of this State or
20 the service corporation of a federally chartered savings
21 and loan association or savings bank having its principal
22 place of business in this State, other than a service
23 corporation licensed or entitled to reciprocity under the
24 Real Estate License Act of 1983; or (ix) any first tier
25 subsidiary of a bank, the charter of which is issued
26 under the Illinois Banking Act by the Illinois
27 Commissioner of Banks and Real Estate, or the first tier
28 subsidiary of a bank chartered by the United States
29 Comptroller of the Currency and that has its principal
30 place of business in this State, provided that the first
31 tier subsidiary is regularly examined by the Illinois
32 Commissioner of Banks and Real Estate or the Comptroller
33 of the Currency, or a consumer compliance examination is
34 regularly conducted by the Federal Reserve Board.
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1 (2) Any person or entity that either (i) has a
2 physical presence in Illinois or (ii) does not originate
3 mortgage loans in the ordinary course of business making
4 or acquiring residential mortgage loans with his or her
5 or its own funds for his or her or its own investment
6 without intent to make, acquire, or resell more than 10
7 residential mortgage loans in any one calendar year.
8 (3) Any person employed by a licensee to assist in
9 the performance of the activities regulated by this Act
10 who is compensated in any manner by only one licensee.
11 (4) Any person licensed pursuant to the Real Estate
12 License Act of 1983, who engages only in the taking of
13 applications and credit and appraisal information to
14 forward to a licensee or an exempt entity under this Act
15 and who is compensated by either a licensee or an exempt
16 entity under this Act, but is not compensated by either
17 the buyer (applicant) or the seller.
18 (5) Any individual, corporation, partnership, or
19 other entity that originates, services, or brokers
20 residential mortgage loans, as these activities are
21 defined in this Act, and who or which receives no
22 compensation for those activities, subject to the
23 Commissioner's regulations with regard to the nature and
24 amount of compensation.
25 (6) A person who prepares supporting documentation
26 for a residential mortgage loan application taken by a
27 licensee and performs ministerial functions pursuant to
28 specific instructions of the licensee who neither
29 requires nor permits the preparer to exercise his or her
30 discretion or judgment; provided that this activity is
31 engaged in pursuant to a binding, written agreement
32 between the licensee and the preparer that:
33 (A) holds the licensee fully accountable for
34 the preparer's action; and
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1 (B) otherwise meets the requirements of this
2 Section and this Act, does not undermine the
3 purposes of this Act, and is approved by the
4 Commissioner.
5 (e) "Licensee" or "residential mortgage licensee" shall
6 mean a person, partnership, association, corporation, or any
7 other entity who or which is licensed pursuant to this Act to
8 engage in the activities regulated by this Act.
9 (f) "Mortgage loan" "residential mortgage loan" or "home
10 mortgage loan" shall mean a loan to or for the benefit of any
11 natural person made primarily for personal, family, or
12 household use, primarily secured by either a mortgage on
13 residential real property or certificates of stock or other
14 evidence of ownership interests in and proprietary leases
15 from, corporations, partnerships, or limited liability
16 companies formed for the purpose of cooperative ownership of
17 residential real property, all located in Illinois.
18 (g) "Lender" shall mean any person, partnership,
19 association, corporation, or any other entity who either
20 lends or invests money in residential mortgage loans.
21 (h) "Ultimate equitable owner" shall mean a person who,
22 directly or indirectly, owns or controls an ownership
23 interest in a corporation, foreign corporation, alien
24 business organization, trust, or any other form of business
25 organization regardless of whether the person owns or
26 controls the ownership interest through one or more persons
27 or one or more proxies, powers of attorney, nominees,
28 corporations, associations, partnerships, trusts, joint stock
29 companies, or other entities or devices, or any combination
30 thereof.
31 (i) "Residential mortgage financing transaction" shall
32 mean the negotiation, acquisition, sale, or arrangement for
33 or the offer to negotiate, acquire, sell, or arrange for, a
34 residential mortgage loan or residential mortgage loan
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1 commitment.
2 (j) "Personal residence address" shall mean a street
3 address and shall not include a post office box number.
4 (k) "Residential mortgage loan commitment" shall mean a
5 contract for residential mortgage loan financing.
6 (l) "Party to a residential mortgage financing
7 transaction" shall mean a borrower, lender, or loan broker in
8 a residential mortgage financing transaction.
9 (m) "Payments" shall mean payment of all or any of the
10 following: principal, interest and escrow reserves for taxes,
11 insurance and other related reserves, and reimbursement for
12 lender advances.
13 (n) "Commissioner" shall mean the Commissioner of Banks
14 and Real Estate or a person authorized by the Commissioner,
15 the Office of Banks and Real Estate Act, or this Act to act
16 in the Commissioner's stead .
17 (o) "Loan brokering", "brokering", or "brokerage
18 service" shall mean the act of helping to obtain from another
19 entity, for a borrower, a loan secured by residential real
20 estate situated in Illinois or assisting a borrower in
21 obtaining a loan secured by residential real estate situated
22 in Illinois in return for consideration to be paid by either
23 the borrower or the lender including, but not limited to,
24 contracting for the delivery of residential mortgage loans to
25 a third party lender and soliciting, processing, placing, or
26 negotiating residential mortgage loans.
27 (p) "Loan broker" or "broker" shall mean a person,
28 partnership, association, corporation, or limited liability
29 company, other than those persons, partnerships,
30 associations, corporations, or limited liability companies
31 exempted from licensing pursuant to Section 1-4, subsection
32 (d), of this Act, who performs the activities described in
33 subsections (c) and (o) of this Section.
34 (q) "Servicing" shall mean the collection or remittance
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1 for or the right or obligation to collect or remit for any
2 lender, noteowner, noteholder, or for a licensee's own
3 account, of payments, interests, principal, and trust items
4 such as hazard insurance and taxes on a residential mortgage
5 loan in accordance with the terms of the residential mortgage
6 loan; and includes loan payment follow-up, delinquency loan
7 follow-up, loan analysis and any notifications to the
8 borrower that are necessary to enable the borrower to keep
9 the loan current and in good standing.
10 (r) "Full service office" shall mean office and staff in
11 Illinois reasonably adequate to handle efficiently
12 communications, questions, and other matters relating to any
13 application for, or an existing home mortgage secured by
14 residential real estate situated in Illinois with respect to
15 which the licensee is brokering, funding originating,
16 purchasing, or servicing. The management and operation of
17 each full service office must include observance of good
18 business practices such as adequate, organized, and accurate
19 books and records; ample phone lines, hours of business,
20 staff training and supervision, and provision for a mechanism
21 to resolve consumer inquiries, complaints, and problems. The
22 Commissioner shall issue regulations with regard to these
23 requirements and shall include an evaluation of compliance
24 with this Section in his or her periodic examination of each
25 licensee.
26 (s) "Purchasing" shall mean the purchase of conventional
27 or government-insured mortgage loans secured by residential
28 real estate situated in Illinois from either the lender or
29 from the secondary market.
30 (t) "Borrower" shall mean the person or persons who seek
31 the services of a loan broker, originator, or lender.
32 (u) "Originating" shall mean the issuing of commitments
33 for and funding of residential mortgage loans.
34 (v) "Loan brokerage agreement" shall mean a written
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1 agreement in which a broker or loan broker agrees to do
2 either of the following:
3 (1) obtain a residential mortgage loan for the
4 borrower or assist the borrower in obtaining a
5 residential mortgage loan; or
6 (2) consider making a residential mortgage loan to
7 the borrower.
8 (w) "Advertisement" shall mean the attempt by
9 publication, dissemination, or circulation to induce,
10 directly or indirectly, any person to enter into a
11 residential mortgage loan agreement or residential mortgage
12 loan brokerage agreement relative to a mortgage secured by
13 residential real estate situated in Illinois.
14 (x) "Residential Mortgage Board" shall mean the
15 Residential Mortgage Board created in Section 1-5 of this
16 Act.
17 (y) "Government-insured mortgage loan" shall mean any
18 mortgage loan made on the security of residential real estate
19 insured by the Department of Housing and Urban Development or
20 Farmers Home Loan Administration, or guaranteed by the
21 Veterans Administration.
22 (z) "Annual audit" shall mean a certified audit of the
23 licensee's books and records and systems of internal control
24 performed by a certified public accountant in accordance with
25 generally accepted accounting principles and generally
26 accepted auditing standards.
27 (aa) "Financial institution" shall mean a savings and
28 loan association, savings bank, credit union, or a bank
29 organized under the laws of Illinois or a savings and loan
30 association, savings bank, credit union or a bank organized
31 under the laws of the United States and headquartered in
32 Illinois.
33 (bb) "Escrow agent" shall mean a third party, individual
34 or entity charged with the fiduciary obligation for holding
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1 escrow funds on a residential mortgage loan pending final
2 payout of those funds in accordance with the terms of the
3 residential mortgage loan.
4 (cc) "Net worth" shall have the meaning ascribed thereto
5 in Section 3-5 of this Act.
6 (dd) "Affiliate" shall mean:
7 (1) any entity that directly controls or is
8 controlled by the licensee and any other company that is
9 directly affecting activities regulated by this Act that
10 is controlled by the company that controls the licensee;
11 (2) any entity:
12 (A) that is controlled, directly or
13 indirectly, by a trust or otherwise, by or for the
14 benefit of shareholders who beneficially or
15 otherwise control, directly or indirectly, by trust
16 or otherwise, the licensee or any company that
17 controls the licensee; or
18 (B) a majority of the directors or trustees of
19 which constitute a majority of the persons holding
20 any such office with the licensee or any company
21 that controls the licensee;
22 (3) any company, including a real estate investment
23 trust, that is sponsored and advised on a contractual
24 basis by the licensee or any subsidiary or affiliate of
25 the licensee.
26 The Commissioner may define by rule and regulation any
27 terms used in this Act for the efficient and clear
28 administration of this Act.
29 (ee) "First tier subsidiary" shall be defined by
30 regulation incorporating the comparable definitions used by
31 the Office of the Comptroller of the Currency and the
32 Illinois Commissioner of Banks and Real Estate.
33 (ff) "Gross delinquency rate" means the quotient
34 determined by dividing (1) the sum of (i) the number of
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1 government-insured residential mortgage loans funded or
2 purchased by a licensee in the preceding calendar year that
3 are delinquent and (ii) the number of conventional
4 residential mortgage loans funded or purchased by the
5 licensee in the preceding calendar year that are delinquent
6 by (2) the sum of (i) the number of government-insured
7 residential mortgage loans funded or purchased by the
8 licensee in the preceding calendar year and (ii) the number
9 of conventional residential mortgage loans funded or
10 purchased by the licensee in the preceding calendar year.
11 (gg) "Delinquency rate factor" means the factor set by
12 rule of the Commissioner that is multiplied by the average
13 gross delinquency rate of licensees, determined annually for
14 the immediately preceding calendar year, for the purpose of
15 determining which licensees shall be examined by the
16 Commissioner pursuant to subsection (b) of Section 4-8 of
17 this Act.
18 (Source: P.A. 89-355, eff. 8-17-95; 89-508, eff. 7-3-96.)
19 (205 ILCS 635/3-2) (from Ch. 17, par. 2323-2)
20 Sec. 3-2. Annual audit.
21 (a) At the licensee's fiscal year-end, but in no case
22 more than 12 months after the last audit conducted pursuant
23 to this Section, except as otherwise provided in this
24 Section, it shall be mandatory for each residential mortgage
25 licensee to cause its books and accounts to be audited by a
26 certified public accountant not connected with such licensee.
27 The books and records of all licensees under this Act shall
28 be maintained on an accrual basis. The audit must be
29 sufficiently comprehensive in scope to permit the expression
30 of an opinion on the financial statements, which must be
31 prepared in accordance with generally accepted accounting
32 principles, and must be performed in accordance with
33 generally accepted auditing standards. Notwithstanding the
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1 requirements of this subsection, a licensee that is a first
2 tier subsidiary may submit audited consolidated financial
3 statements of its parent as long as the consolidated
4 statements are supported by consolidating statements. The
5 licensee's chief financial officer shall attest to the
6 licensee's financial statements disclosed in the
7 consolidating statements.
8 (b) As used herein, the term "expression of opinion"
9 includes either (1) an unqualified opinion, (2) a qualified
10 opinion, (3) a disclaimer of opinion, or (4) an adverse
11 opinion.
12 (c) If a qualified or adverse opinion is expressed or if
13 an opinion is disclaimed, the reasons therefore must be fully
14 explained. An opinion, qualified as to a scope limitation,
15 shall not be acceptable.
16 (d) The most recent audit report shall be filed with the
17 Commissioner at the time of the annual license renewal
18 payment within 90 days of the audit date. The report filed
19 with the Commissioner shall be certified by the certified
20 public accountant conducting the audit. The Commissioner may
21 promulgate rules regarding late audit reports.
22 (e) If any licensee required to make an audit shall fail
23 to cause an audit to be made, the Commissioner shall cause
24 the same to be made by a certified public accountant at the
25 licensee's expense. The Commissioner shall select such
26 certified public accountant by advertising for bids or by
27 such other fair and impartial means as he or she establishes
28 by regulation.
29 (f) In lieu of the audit required by this Section, the
30 Commissioner may accept any audit made in conformance with
31 the audit requirements of the U.S. Department of Housing and
32 Urban Development.
33 (g) With respect to licensees who solely broker
34 residential mortgage loans, instead of the audit required by
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1 this Section, the Commissioner may accept compilation
2 financial statements prepared at least every 12 months, and
3 the compilation financial statement shall be submitted at the
4 time of the annual license renewal payment no later than 90
5 days after the compilation date. If a licensee under this
6 Section fails to file a compilation as required, the
7 Commissioner shall cause an audit of the licensee's books and
8 accounts to be made by a certified public accountant at the
9 licensee's expense. The Commissioner shall select the
10 certified public accountant by advertising for bids or by
11 such other fair and impartial means as he or she establishes
12 by rule. A licensee who files false or misleading
13 compilation financial statements is guilty of a business
14 offense and shall be fined not less than $5,000.
15 (h) The workpapers of the certified public accountants
16 employed by each licensee for purposes of this Section are to
17 be made available to the Commissioner or the Commissioner's
18 designee upon request and may be reproduced by the
19 Commissioner or the Commissioner's designee to enable to the
20 Commissioner to carry out the purposes of this Act.
21 (i) Notwithstanding any other provision of this Section,
22 if a licensee relying on subsection (g) of this Section
23 causes its books to be audited at any other time or causes
24 its financial statements to be reviewed, a complete copy of
25 the audited or reviewed financial statements shall be
26 delivered to the Commissioner at the time of the annual
27 license renewal payment following receipt by the licensee of
28 the audited or reviewed financial statements within 10 days
29 of the date on which the financial statements were delivered
30 to the licensee. All workpapers shall be made available to
31 the Commissioner upon request. The financial statements and
32 workpapers may be reproduced by the Commissioner or the
33 Commissioner's designee to carry out the purposes of this
34 Act.
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1 (Source: P.A. 89-74, eff. 6-30-95; 89-355, eff. 8-17-95.)
2 (205 ILCS 635/3-4) (from Ch. 17, par. 2323-4)
3 Sec. 3-4. Office and staff within the State.
4 (a) A licensee whose principal place of business is
5 located in the State of Illinois shall maintain, in the State
6 of Illinois, at least one full service office with staff
7 reasonably adequate to handle efficiently communications,
8 questions, and all other matters relating to any application
9 for a home mortgage or an existing home mortgage with respect
10 to which such licensee is performing services, regardless of
11 kind, for any borrower or lender, note owner or holder, or
12 for himself or herself while engaged in the residential
13 mortgage business.
14 (b) In lieu of maintaining a full service office in the
15 State of Illinois, a licensee whose principal place of
16 business is located outside the State of Illinois must submit
17 a certified audit as required in Section 3-2 of this Act
18 evidencing a minimum net worth of $100,000, which must be
19 maintained at all times, and shall submit and maintain a
20 fidelity bond in the amount of $100,000. Notwithstanding the
21 requirements of subsection (a) of this Section, upon
22 application of the licensee, the Commissioner may waive the
23 requirements of subsection (a) upon receipt of a notarized
24 affidavit stating that:
25 (1) the licensee does not solicit, with respect to
26 activity licensable under this Act, in any manner or
27 amount, Illinois consumers seeking residential mortgages;
28 (2) the licensee does not originate or broker
29 residential mortgage loans;
30 (3) the licensee has no unresolved complaints under
31 Section 4-6 of this Act;
32 (4) the licensee's principal place of business is
33 not within this State; and
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1 (5) the licensee is in compliance with this Act.
2 (c) No waiver granted under subsection (b) of this
3 Section shall run longer than the term of the license in
4 effect when the waiver was granted. Upon renewal of the
5 license, the waiver may be renewed upon application as
6 provided in subsection (b).
7 (Source: P.A. 89-355, eff. 8-17-95; 90-301, eff. 8-1-97.)
8 (205 ILCS 635/6-2) (from Ch. 17, par. 2326-2)
9 Sec. 6-2. Removal and prohibition. Upon making any one or
10 more of the following findings, the Commissioner may issue a
11 notice of intent to issue an order of removal or prohibition,
12 or an order of removal and prohibition, which order may
13 remove a named person, persons, or entity or entities from
14 participating in the affairs of one or more licensees and may
15 be permanent or for a specific shorter period of time. The
16 findings required under this Section may be any one or more
17 of the following:
18 (1) A finding that the party or entity subject to
19 the order has been convicted of a crime involving
20 material financial loss to a licensee, a federally
21 insured depository institution, a government sponsored
22 enterprise, a Federal Home Loan Bank, a Federal Reserve
23 Bank, or any other person.
24 (2) A finding that the person or entity subject to
25 the order has submitted or caused to be submitted any
26 document that contains multiple willful and material
27 misstatements of facts, and that includes the signature
28 of the person or entity specified in the Commissioner's
29 order, or that is notarized, certified, verified or is in
30 any other way attested to, as to its veracity. An
31 application for licensure or license renewal may be
32 considered such a document.
33 (3) Conviction of a business offense under
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1 subsection (e) of Section 1-3 or subsection (g) of
2 Section 3-2.
3 (4) A finding prepared by a hearing officer
4 pursuant to a hearing held under Section 4-1(n) of this
5 Act that the person subject to the order, while an
6 employee of a licensee, has knowingly submitted or caused
7 to be submitted any document that contains willful and
8 material misstatement of facts and which is used in
9 connection with any licensable activity as defined in
10 Section 1-3(a) of this Act.
11 This Section is prospective and shall apply to actions or
12 conduct performed or commenced by a person or entity on or
13 after September 15, 1992.
14 Any notice of intent or order issued under this Section
15 is subject to administrative and judicial review under
16 Section 4-12.
17 (Source: P.A. 89-355, eff. 8-17-95.)
18 (205 ILCS 635/3-10 rep.)
19 Section 10. The Residential Mortgage License Act of 1987
20 is amended by repealing Section 3-10.