93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
HB4570

 

Introduced 02/04/04, by Angelo Saviano

 

SYNOPSIS AS INTRODUCED:
 
205 ILCS 635/1-4   from Ch. 17, par. 2321-4

    Amends the Residential Mortgage License Act of 1987. Makes a technical change in a Section concerning the definitions.


LRB093 19923 SAS 45667 b

 

 

A BILL FOR

 

HB4570 LRB093 19923 SAS 45667 b

1     AN ACT concerning financial regulation.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Residential Mortgage License Act of 1987 is
5 amended by changing Section 1-4 as follows:
 
6     (205 ILCS 635/1-4)  (from Ch. 17, par. 2321-4)
7     Sec. 1-4. Definitions.
8     (a) "Residential real property" or "residential real
9 estate" means shall mean real property located in this State
10 improved by a one-to-four family dwelling used or occupied,
11 wholly or partly, as the home or residence of one or more
12 persons and may refer, subject to regulations of the
13 Commissioner, to unimproved real property upon which those
14 kinds dwellings are to be constructed.
15     (b) "Making a residential mortgage loan" or "funding a
16 residential mortgage loan" shall mean for compensation or gain,
17 either directly or indirectly, advancing funds or making a
18 commitment to advance funds to a loan applicant for a
19 residential mortgage loan.
20     (c) "Soliciting, processing, placing, or negotiating a
21 residential mortgage loan" shall mean for compensation or gain,
22 either directly or indirectly, accepting or offering to accept
23 an application for a residential mortgage loan, assisting or
24 offering to assist in the processing of an application for a
25 residential mortgage loan on behalf of a borrower, or
26 negotiating or offering to negotiate the terms or conditions of
27 a residential mortgage loan with a lender on behalf of a
28 borrower including, but not limited to, the submission of
29 credit packages for the approval of lenders, the preparation of
30 residential mortgage loan closing documents, including a
31 closing in the name of a broker.
32     (d) "Exempt person or entity" shall mean the following:

 

 

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1         (1) (i) Any banking organization or foreign banking
2     corporation licensed by the Illinois Commissioner of Banks
3     and Real Estate or the United States Comptroller of the
4     Currency to transact business in this State; (ii) any
5     national bank, federally chartered savings and loan
6     association, federal savings bank, federal credit union;
7     (iii) any pension trust, bank trust, or bank trust company;
8     (iv) any savings and loan association, savings bank, or
9     credit union organized under the laws of this or any other
10     state; (v) any Illinois Consumer Installment Loan Act
11     licensee; (vi) any insurance company authorized to
12     transact business in this State; (vii) any entity engaged
13     solely in commercial mortgage lending; (viii) any service
14     corporation of a savings and loan association or savings
15     bank organized under the laws of this State or the service
16     corporation of a federally chartered savings and loan
17     association or savings bank having its principal place of
18     business in this State, other than a service corporation
19     licensed or entitled to reciprocity under the Real Estate
20     License Act of 2000; or (ix) any first tier subsidiary of a
21     bank, the charter of which is issued under the Illinois
22     Banking Act by the Illinois Commissioner of Banks and Real
23     Estate, or the first tier subsidiary of a bank chartered by
24     the United States Comptroller of the Currency and that has
25     its principal place of business in this State, provided
26     that the first tier subsidiary is regularly examined by the
27     Illinois Commissioner of Banks and Real Estate or the
28     Comptroller of the Currency, or a consumer compliance
29     examination is regularly conducted by the Federal Reserve
30     Board.
31         (1.5) Any employee of a person or entity mentioned in
32     item (1) of this subsection.
33         (2) Any person or entity that does not originate
34     mortgage loans in the ordinary course of business making or
35     acquiring residential mortgage loans with his or her or its
36     own funds for his or her or its own investment without

 

 

HB4570 - 3 - LRB093 19923 SAS 45667 b

1     intent to make, acquire, or resell more than 10 residential
2     mortgage loans in any one calendar year.
3         (3) Any person employed by a licensee to assist in the
4     performance of the activities regulated by this Act who is
5     compensated in any manner by only one licensee.
6         (4) Any person licensed pursuant to the Real Estate
7     License Act of 2000, who engages only in the taking of
8     applications and credit and appraisal information to
9     forward to a licensee or an exempt entity under this Act
10     and who is compensated by either a licensee or an exempt
11     entity under this Act, but is not compensated by either the
12     buyer (applicant) or the seller.
13         (5) Any individual, corporation, partnership, or other
14     entity that originates, services, or brokers residential
15     mortgage loans, as these activities are defined in this
16     Act, and who or which receives no compensation for those
17     activities, subject to the Commissioner's regulations with
18     regard to the nature and amount of compensation.
19         (6) A person who prepares supporting documentation for
20     a residential mortgage loan application taken by a licensee
21     and performs ministerial functions pursuant to specific
22     instructions of the licensee who neither requires nor
23     permits the preparer to exercise his or her discretion or
24     judgment; provided that this activity is engaged in
25     pursuant to a binding, written agreement between the
26     licensee and the preparer that:
27             (A) holds the licensee fully accountable for the
28         preparer's action; and
29             (B) otherwise meets the requirements of this
30         Section and this Act, does not undermine the purposes
31         of this Act, and is approved by the Commissioner.
32     (e) "Licensee" or "residential mortgage licensee" shall
33 mean a person, partnership, association, corporation, or any
34 other entity who or which is licensed pursuant to this Act to
35 engage in the activities regulated by this Act.
36     (f) "Mortgage loan" "residential mortgage loan" or "home

 

 

HB4570 - 4 - LRB093 19923 SAS 45667 b

1 mortgage loan" shall mean a loan to or for the benefit of any
2 natural person made primarily for personal, family, or
3 household use, primarily secured by either a mortgage on
4 residential real property or certificates of stock or other
5 evidence of ownership interests in and proprietary leases from,
6 corporations, partnerships, or limited liability companies
7 formed for the purpose of cooperative ownership of residential
8 real property, all located in Illinois.
9     (g) "Lender" shall mean any person, partnership,
10 association, corporation, or any other entity who either lends
11 or invests money in residential mortgage loans.
12     (h) "Ultimate equitable owner" shall mean a person who,
13 directly or indirectly, owns or controls an ownership interest
14 in a corporation, foreign corporation, alien business
15 organization, trust, or any other form of business organization
16 regardless of whether the person owns or controls the ownership
17 interest through one or more persons or one or more proxies,
18 powers of attorney, nominees, corporations, associations,
19 partnerships, trusts, joint stock companies, or other entities
20 or devices, or any combination thereof.
21     (i) "Residential mortgage financing transaction" shall
22 mean the negotiation, acquisition, sale, or arrangement for or
23 the offer to negotiate, acquire, sell, or arrange for, a
24 residential mortgage loan or residential mortgage loan
25 commitment.
26     (j) "Personal residence address" shall mean a street
27 address and shall not include a post office box number.
28     (k) "Residential mortgage loan commitment" shall mean a
29 contract for residential mortgage loan financing.
30     (l) "Party to a residential mortgage financing
31 transaction" shall mean a borrower, lender, or loan broker in a
32 residential mortgage financing transaction.
33     (m) "Payments" shall mean payment of all or any of the
34 following: principal, interest and escrow reserves for taxes,
35 insurance and other related reserves, and reimbursement for
36 lender advances.

 

 

HB4570 - 5 - LRB093 19923 SAS 45667 b

1     (n) "Commissioner" shall mean the Commissioner of Banks and
2 Real Estate or a person authorized by the Commissioner, the
3 Office of Banks and Real Estate Act, or this Act to act in the
4 Commissioner's stead.
5     (o) "Loan brokering", "brokering", or "brokerage service"
6 shall mean the act of helping to obtain from another entity,
7 for a borrower, a loan secured by residential real estate
8 situated in Illinois or assisting a borrower in obtaining a
9 loan secured by residential real estate situated in Illinois in
10 return for consideration to be paid by either the borrower or
11 the lender including, but not limited to, contracting for the
12 delivery of residential mortgage loans to a third party lender
13 and soliciting, processing, placing, or negotiating
14 residential mortgage loans.
15     (p) "Loan broker" or "broker" shall mean a person,
16 partnership, association, corporation, or limited liability
17 company, other than those persons, partnerships, associations,
18 corporations, or limited liability companies exempted from
19 licensing pursuant to Section 1-4, subsection (d), of this Act,
20 who performs the activities described in subsections (c) and
21 (o) of this Section.
22     (q) "Servicing" shall mean the collection or remittance for
23 or the right or obligation to collect or remit for any lender,
24 noteowner, noteholder, or for a licensee's own account, of
25 payments, interests, principal, and trust items such as hazard
26 insurance and taxes on a residential mortgage loan in
27 accordance with the terms of the residential mortgage loan; and
28 includes loan payment follow-up, delinquency loan follow-up,
29 loan analysis and any notifications to the borrower that are
30 necessary to enable the borrower to keep the loan current and
31 in good standing.
32     (r) "Full service office" shall mean office and staff in
33 Illinois reasonably adequate to handle efficiently
34 communications, questions, and other matters relating to any
35 application for, or an existing home mortgage secured by
36 residential real estate situated in Illinois with respect to

 

 

HB4570 - 6 - LRB093 19923 SAS 45667 b

1 which the licensee is brokering, funding originating,
2 purchasing, or servicing. The management and operation of each
3 full service office must include observance of good business
4 practices such as adequate, organized, and accurate books and
5 records; ample phone lines, hours of business, staff training
6 and supervision, and provision for a mechanism to resolve
7 consumer inquiries, complaints, and problems. The Commissioner
8 shall issue regulations with regard to these requirements and
9 shall include an evaluation of compliance with this Section in
10 his or her periodic examination of each licensee.
11     (s) "Purchasing" shall mean the purchase of conventional or
12 government-insured mortgage loans secured by residential real
13 estate situated in Illinois from either the lender or from the
14 secondary market.
15     (t) "Borrower" shall mean the person or persons who seek
16 the services of a loan broker, originator, or lender.
17     (u) "Originating" shall mean the issuing of commitments for
18 and funding of residential mortgage loans.
19     (v) "Loan brokerage agreement" shall mean a written
20 agreement in which a broker or loan broker agrees to do either
21 of the following:
22         (1) obtain a residential mortgage loan for the borrower
23     or assist the borrower in obtaining a residential mortgage
24     loan; or
25         (2) consider making a residential mortgage loan to the
26     borrower.
27     (w) "Advertisement" shall mean the attempt by publication,
28 dissemination, or circulation to induce, directly or
29 indirectly, any person to enter into a residential mortgage
30 loan agreement or residential mortgage loan brokerage
31 agreement relative to a mortgage secured by residential real
32 estate situated in Illinois.
33     (x) "Residential Mortgage Board" shall mean the
34 Residential Mortgage Board created in Section 1-5 of this Act.
35     (y) "Government-insured mortgage loan" shall mean any
36 mortgage loan made on the security of residential real estate

 

 

HB4570 - 7 - LRB093 19923 SAS 45667 b

1 insured by the Department of Housing and Urban Development or
2 Farmers Home Loan Administration, or guaranteed by the Veterans
3 Administration.
4     (z) "Annual audit" shall mean a certified audit of the
5 licensee's books and records and systems of internal control
6 performed by a certified public accountant in accordance with
7 generally accepted accounting principles and generally
8 accepted auditing standards.
9     (aa) "Financial institution" shall mean a savings and loan
10 association, savings bank, credit union, or a bank organized
11 under the laws of Illinois or a savings and loan association,
12 savings bank, credit union or a bank organized under the laws
13 of the United States and headquartered in Illinois.
14     (bb) "Escrow agent" shall mean a third party, individual or
15 entity charged with the fiduciary obligation for holding escrow
16 funds on a residential mortgage loan pending final payout of
17 those funds in accordance with the terms of the residential
18 mortgage loan.
19     (cc) "Net worth" shall have the meaning ascribed thereto in
20 Section 3-5 of this Act.
21     (dd) "Affiliate" shall mean:
22         (1) any entity that directly controls or is controlled
23     by the licensee and any other company that is directly
24     affecting activities regulated by this Act that is
25     controlled by the company that controls the licensee;
26         (2) any entity:
27             (A) that is controlled, directly or indirectly, by
28         a trust or otherwise, by or for the benefit of
29         shareholders who beneficially or otherwise control,
30         directly or indirectly, by trust or otherwise, the
31         licensee or any company that controls the licensee; or
32             (B) a majority of the directors or trustees of
33         which constitute a majority of the persons holding any
34         such office with the licensee or any company that
35         controls the licensee;
36         (3) any company, including a real estate investment

 

 

HB4570 - 8 - LRB093 19923 SAS 45667 b

1     trust, that is sponsored and advised on a contractual basis
2     by the licensee or any subsidiary or affiliate of the
3     licensee.
4     The Commissioner may define by rule and regulation any
5 terms used in this Act for the efficient and clear
6 administration of this Act.
7     (ee) "First tier subsidiary" shall be defined by regulation
8 incorporating the comparable definitions used by the Office of
9 the Comptroller of the Currency and the Illinois Commissioner
10 of Banks and Real Estate.
11     (ff) "Gross delinquency rate" means the quotient
12 determined by dividing (1) the sum of (i) the number of
13 government-insured residential mortgage loans funded or
14 purchased by a licensee in the preceding calendar year that are
15 delinquent and (ii) the number of conventional residential
16 mortgage loans funded or purchased by the licensee in the
17 preceding calendar year that are delinquent by (2) the sum of
18 (i) the number of government-insured residential mortgage
19 loans funded or purchased by the licensee in the preceding
20 calendar year and (ii) the number of conventional residential
21 mortgage loans funded or purchased by the licensee in the
22 preceding calendar year.
23     (gg) "Delinquency rate factor" means the factor set by rule
24 of the Commissioner that is multiplied by the average gross
25 delinquency rate of licensees, determined annually for the
26 immediately preceding calendar year, for the purpose of
27 determining which licensees shall be examined by the
28 Commissioner pursuant to subsection (b) of Section 4-8 of this
29 Act.
30     (hh) "Loan originator" means any natural person who, for
31 compensation or in the expectation of compensation, either
32 directly or indirectly makes, offers to make, solicits, places,
33 or negotiates a residential mortgage loan.
34 (Source: P.A. 93-561, eff. 1-1-04.)