SB1603 EnrolledLRB097 09201 CEL 49336 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Residential Mortgage License Act of 1987 is
5amended by changing Sections 1-3 and 1-4 as follows:
 
6    (205 ILCS 635/1-3)  (from Ch. 17, par. 2321-3)
7    Sec. 1-3. Necessity for License; Scope of Act.
8    (a) No person, partnership, association, corporation or
9other entity shall engage in the business of brokering,
10funding, originating, servicing or purchasing of residential
11mortgage loans without first obtaining a license from the
12Commissioner in accordance with the licensing procedure
13provided in this Article I and such regulations as may be
14promulgated by the Commissioner. The licensing provisions of
15this Section shall not apply to any entity engaged solely in
16commercial mortgage lending or to any person, partnership
17association, corporation or other entity exempted pursuant to
18Section 1-4, subsection (d), of this Act or in accordance with
19regulations promulgated by the Commissioner hereunder. No
20provision of this Act shall apply to an exempt person or entity
21as defined in items (1) and (1.5) of subsection (d) of Section
221-4 of this Act. Notwithstanding anything to the contrary in
23the preceding sentence, an individual acting as a mortgage loan

 

 

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1originator who is not employed by and acting for an entity
2described in item (1) of subsection (tt) of Section 1-4 of this
3Act shall be subject to the mortgage loan originator licensing
4requirements of Article VII of this Act.
5    Effective January 1, 2011, no provision of this Act shall
6apply to an exempt person or entity as defined in item (1.8) of
7subsection (d) of Section 1-4 of this Act. Notwithstanding
8anything to the contrary in the preceding sentence, an
9individual acting as a mortgage loan originator who is not
10employed by and acting for an entity described in item (1) of
11subsection (tt) of Section 1-4 of this Act shall be subject to
12the mortgage loan originator licensing requirements of Article
13VII of this Act, and provided that an individual acting as a
14mortgage loan originator under item (1.8) of subsection (d) of
15Section 1-4 of this Act shall be further subject to a
16determination by the U.S. Department of Housing and Urban
17Development through final rulemaking or other authorized
18agency determination under the federal Secure and Fair
19Enforcement for Mortgage Licensing Act of 2008.
20    (b) No person, partnership, association, corporation, or
21other entity except a licensee under this Act or an entity
22exempt from licensing pursuant to Section 1-4, subsection (d),
23of this Act shall do any business under any name or title, or
24circulate or use any advertising or make any representation or
25give any information to any person, which indicates or
26reasonably implies activity within the scope of this Act.

 

 

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1    (c) The Commissioner may, through the Attorney General,
2request the circuit court of either Cook or Sangamon County to
3issue an injunction to restrain any person from violating or
4continuing to violate any of the foregoing provisions of this
5Section.
6    (d) When the Commissioner has reasonable cause to believe
7that any entity which has not submitted an application for
8licensure is conducting any of the activities described in
9subsection (a) hereof, the Commissioner shall have the power to
10examine all books and records of the entity and any additional
11documentation necessary in order to determine whether such
12entity should become licensed under this Act.
13    (d-1) The Commissioner may issue orders against any person
14if the Commissioner has reasonable cause to believe that an
15unsafe, unsound, or unlawful practice has occurred, is
16occurring, or is about to occur, if any person has violated, is
17violating, or is about to violate any law, rule, or written
18agreement with the Commissioner, or for the purposes of
19administering the provisions of this Act and any rule adopted
20in accordance with this Act.
21    (e) Any person, partnership, association, corporation or
22other entity who violates any provision of this Section commits
23a business offense and shall be fined an amount not to exceed
24$25,000.
25    (f) Each person, partnership, association, corporation or
26other entity conducting activities regulated by this Act shall

 

 

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1be issued one license. Each office, place of business or
2location at which a residential mortgage licensee conducts any
3part of his or her business must be recorded with the
4Commissioner pursuant to Section 2-8 of this Act.
5    (g) Licensees under this Act shall solicit, broker, fund,
6originate, service and purchase residential mortgage loans
7only in conformity with the provisions of this Act and such
8rules and regulations as may be promulgated by the
9Commissioner.
10    (h) This Act applies to all entities doing business in
11Illinois as residential mortgage bankers, as defined by "An Act
12to provide for the regulation of mortgage bankers", approved
13September 15, 1977, as amended, regardless of whether licensed
14under that or any prior Act. Any existing residential mortgage
15lender or residential mortgage broker in Illinois whether or
16not previously licensed, must operate in accordance with this
17Act.
18    (i) This Act is a successor Act to and a continuance of the
19regulation of residential mortgage bankers provided in, "An Act
20to provide for the regulation of mortgage bankers", approved
21September 15, 1977, as amended.
22    Entities and persons subject to the predecessor Act shall
23be subject to this Act from and after its effective date.
24(Source: P.A. 96-112, eff. 7-31-09; 96-1216, eff. 1-1-11.)
 
25    (205 ILCS 635/1-4)

 

 

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1    Sec. 1-4. Definitions.
2    (a) "Residential real property" or "residential real
3estate" shall mean any real property located in Illinois, upon
4which is constructed or intended to be constructed a dwelling.
5    (b) "Making a residential mortgage loan" or "funding a
6residential mortgage loan" shall mean for compensation or gain,
7either directly or indirectly, advancing funds or making a
8commitment to advance funds to a loan applicant for a
9residential mortgage loan.
10    (c) "Soliciting, processing, placing, or negotiating a
11residential mortgage loan" shall mean for compensation or gain,
12either directly or indirectly, accepting or offering to accept
13an application for a residential mortgage loan, assisting or
14offering to assist in the processing of an application for a
15residential mortgage loan on behalf of a borrower, or
16negotiating or offering to negotiate the terms or conditions of
17a residential mortgage loan with a lender on behalf of a
18borrower including, but not limited to, the submission of
19credit packages for the approval of lenders, the preparation of
20residential mortgage loan closing documents, including a
21closing in the name of a broker.
22    (d) "Exempt person or entity" shall mean the following:
23        (1) (i) Any banking organization or foreign banking
24    corporation licensed by the Illinois Commissioner of Banks
25    and Real Estate or the United States Comptroller of the
26    Currency to transact business in this State; (ii) any

 

 

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1    national bank, federally chartered savings and loan
2    association, federal savings bank, federal credit union;
3    (iii) any pension trust, bank trust, or bank trust company;
4    (iv) any bank, savings and loan association, savings bank,
5    or credit union organized under the laws of this or any
6    other state; (v) any Illinois Consumer Installment Loan Act
7    licensee; (vi) any insurance company authorized to
8    transact business in this State; (vii) any entity engaged
9    solely in commercial mortgage lending; (viii) any service
10    corporation of a savings and loan association or savings
11    bank organized under the laws of this State or the service
12    corporation of a federally chartered savings and loan
13    association or savings bank having its principal place of
14    business in this State, other than a service corporation
15    licensed or entitled to reciprocity under the Real Estate
16    License Act of 2000; or (ix) any first tier subsidiary of a
17    bank, the charter of which is issued under the Illinois
18    Banking Act by the Illinois Commissioner of Banks and Real
19    Estate, or the first tier subsidiary of a bank chartered by
20    the United States Comptroller of the Currency and that has
21    its principal place of business in this State, provided
22    that the first tier subsidiary is regularly examined by the
23    Illinois Commissioner of Banks and Real Estate or the
24    Comptroller of the Currency, or a consumer compliance
25    examination is regularly conducted by the Federal Reserve
26    Board.

 

 

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1        (1.5) Any employee of a person or entity mentioned in
2    item (1) of this subsection, when acting for such person or
3    entity, or any registered mortgage loan originator when
4    acting for an entity described in subsection (tt) of this
5    Section.
6        (1.8) Any person or entity that does not originate
7    mortgage loans in the ordinary course of business, but
8    makes or acquires residential mortgage loans with his or
9    her own funds for his or her or its own investment without
10    intent to make, acquire, or resell more than 3 residential
11    mortgage loans in any one calendar year.
12        (2) (Blank).
13        (3) Any person employed by a licensee to assist in the
14    performance of the residential mortgage licensee's
15    activities regulated by this Act who is compensated in any
16    manner by only one licensee.
17        (4) (Blank).
18        (5) Any individual, corporation, partnership, or other
19    entity that originates, services, or brokers residential
20    mortgage loans, as these activities are defined in this
21    Act, and who or which receives no compensation for those
22    activities, subject to the Commissioner's regulations and
23    the federal Secure and Fair Enforcement for Mortgage
24    Licensing Act of 2008 and the rules promulgated under that
25    Act with regard to the nature and amount of compensation.
26        (6) (Blank).

 

 

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1    (e) "Licensee" or "residential mortgage licensee" shall
2mean a person, partnership, association, corporation, or any
3other entity who or which is licensed pursuant to this Act to
4engage in the activities regulated by this Act.
5    (f) "Mortgage loan" "residential mortgage loan" or "home
6mortgage loan" shall mean any loan primarily for personal,
7family, or household use that is secured by a mortgage, deed of
8trust, or other equivalent consensual security interest on a
9dwelling as defined in Section 103(v) of the federal Truth in
10Lending Act, or residential real estate upon which is
11constructed or intended to be constructed a dwelling.
12    (g) "Lender" shall mean any person, partnership,
13association, corporation, or any other entity who either lends
14or invests money in residential mortgage loans.
15    (h) "Ultimate equitable owner" shall mean a person who,
16directly or indirectly, owns or controls an ownership interest
17in a corporation, foreign corporation, alien business
18organization, trust, or any other form of business organization
19regardless of whether the person owns or controls the ownership
20interest through one or more persons or one or more proxies,
21powers of attorney, nominees, corporations, associations,
22partnerships, trusts, joint stock companies, or other entities
23or devices, or any combination thereof.
24    (i) "Residential mortgage financing transaction" shall
25mean the negotiation, acquisition, sale, or arrangement for or
26the offer to negotiate, acquire, sell, or arrange for, a

 

 

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1residential mortgage loan or residential mortgage loan
2commitment.
3    (j) "Personal residence address" shall mean a street
4address and shall not include a post office box number.
5    (k) "Residential mortgage loan commitment" shall mean a
6contract for residential mortgage loan financing.
7    (l) "Party to a residential mortgage financing
8transaction" shall mean a borrower, lender, or loan broker in a
9residential mortgage financing transaction.
10    (m) "Payments" shall mean payment of all or any of the
11following: principal, interest and escrow reserves for taxes,
12insurance and other related reserves, and reimbursement for
13lender advances.
14    (n) "Commissioner" shall mean the Commissioner of Banks and
15Real Estate, except that, beginning on April 6, 2009 (the
16effective date of Public Act 95-1047), all references in this
17Act to the Commissioner of Banks and Real Estate are deemed, in
18appropriate contexts, to be references to the Secretary of
19Financial and Professional Regulation, or his or her designee,
20including the Director of the Division of Banking of the
21Department of Financial and Professional Regulation.
22    (n-1) "Director" shall mean the Director of the Division of
23Banking of the Department of Financial and Professional
24Regulation, except that, beginning on July 31, 2009 (the
25effective date of Public Act 96-112), all references in this
26Act to the Director are deemed, in appropriate contexts, to be

 

 

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1the Secretary of Financial and Professional Regulation, or his
2or her designee, including the Director of the Division of
3Banking of the Department of Financial and Professional
4Regulation.
5    (o) "Loan brokering", "brokering", or "brokerage service"
6shall mean the act of helping to obtain from another entity,
7for a borrower, a loan secured by residential real estate
8situated in Illinois or assisting a borrower in obtaining a
9loan secured by residential real estate situated in Illinois in
10return for consideration to be paid by either the borrower or
11the lender including, but not limited to, contracting for the
12delivery of residential mortgage loans to a third party lender
13and soliciting, processing, placing, or negotiating
14residential mortgage loans.
15    (p) "Loan broker" or "broker" shall mean a person,
16partnership, association, corporation, or limited liability
17company, other than those persons, partnerships, associations,
18corporations, or limited liability companies exempted from
19licensing pursuant to Section 1-4, subsection (d), of this Act,
20who performs the activities described in subsections (c) and
21(o) of this Section.
22    (q) "Servicing" shall mean the collection or remittance for
23or the right or obligation to collect or remit for any lender,
24noteowner, noteholder, or for a licensee's own account, of
25payments, interests, principal, and trust items such as hazard
26insurance and taxes on a residential mortgage loan in

 

 

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1accordance with the terms of the residential mortgage loan; and
2includes loan payment follow-up, delinquency loan follow-up,
3loan analysis and any notifications to the borrower that are
4necessary to enable the borrower to keep the loan current and
5in good standing.
6    (r) "Full service office" shall mean an office, provided by
7the licensee and not subleased from the licensee's employees,
8and staff in Illinois reasonably adequate to handle efficiently
9communications, questions, and other matters relating to any
10application for, or an existing home mortgage secured by
11residential real estate situated in Illinois with respect to
12which the licensee is brokering, funding originating,
13purchasing, or servicing. The management and operation of each
14full service office must include observance of good business
15practices such as proper signage; adequate, organized, and
16accurate books and records; ample phone lines, hours of
17business, staff training and supervision, and provision for a
18mechanism to resolve consumer inquiries, complaints, and
19problems. The Commissioner shall issue regulations with regard
20to these requirements and shall include an evaluation of
21compliance with this Section in his or her periodic examination
22of each licensee.
23    (s) "Purchasing" shall mean the purchase of conventional or
24government-insured mortgage loans secured by residential real
25estate situated in Illinois from either the lender or from the
26secondary market.

 

 

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1    (t) "Borrower" shall mean the person or persons who seek
2the services of a loan broker, originator, or lender.
3    (u) "Originating" shall mean the issuing of commitments for
4and funding of residential mortgage loans.
5    (v) "Loan brokerage agreement" shall mean a written
6agreement in which a broker or loan broker agrees to do either
7of the following:
8        (1) obtain a residential mortgage loan for the borrower
9    or assist the borrower in obtaining a residential mortgage
10    loan; or
11        (2) consider making a residential mortgage loan to the
12    borrower.
13    (w) "Advertisement" shall mean the attempt by publication,
14dissemination, or circulation to induce, directly or
15indirectly, any person to enter into a residential mortgage
16loan agreement or residential mortgage loan brokerage
17agreement relative to a mortgage secured by residential real
18estate situated in Illinois.
19    (x) "Residential Mortgage Board" shall mean the
20Residential Mortgage Board created in Section 1-5 of this Act.
21    (y) "Government-insured mortgage loan" shall mean any
22mortgage loan made on the security of residential real estate
23insured by the Department of Housing and Urban Development or
24Farmers Home Loan Administration, or guaranteed by the Veterans
25Administration.
26    (z) "Annual audit" shall mean a certified audit of the

 

 

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1licensee's books and records and systems of internal control
2performed by a certified public accountant in accordance with
3generally accepted accounting principles and generally
4accepted auditing standards.
5    (aa) "Financial institution" shall mean a savings and loan
6association, savings bank, credit union, or a bank organized
7under the laws of Illinois or a savings and loan association,
8savings bank, credit union or a bank organized under the laws
9of the United States and headquartered in Illinois.
10    (bb) "Escrow agent" shall mean a third party, individual or
11entity charged with the fiduciary obligation for holding escrow
12funds on a residential mortgage loan pending final payout of
13those funds in accordance with the terms of the residential
14mortgage loan.
15    (cc) "Net worth" shall have the meaning ascribed thereto in
16Section 3-5 of this Act.
17    (dd) "Affiliate" shall mean:
18        (1) any entity that directly controls or is controlled
19    by the licensee and any other company that is directly
20    affecting activities regulated by this Act that is
21    controlled by the company that controls the licensee;
22        (2) any entity:
23            (A) that is controlled, directly or indirectly, by
24        a trust or otherwise, by or for the benefit of
25        shareholders who beneficially or otherwise control,
26        directly or indirectly, by trust or otherwise, the

 

 

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1        licensee or any company that controls the licensee; or
2            (B) a majority of the directors or trustees of
3        which constitute a majority of the persons holding any
4        such office with the licensee or any company that
5        controls the licensee;
6        (3) any company, including a real estate investment
7    trust, that is sponsored and advised on a contractual basis
8    by the licensee or any subsidiary or affiliate of the
9    licensee.
10    The Commissioner may define by rule and regulation any
11terms used in this Act for the efficient and clear
12administration of this Act.
13    (ee) "First tier subsidiary" shall be defined by regulation
14incorporating the comparable definitions used by the Office of
15the Comptroller of the Currency and the Illinois Commissioner
16of Banks and Real Estate.
17    (ff) "Gross delinquency rate" means the quotient
18determined by dividing (1) the sum of (i) the number of
19government-insured residential mortgage loans funded or
20purchased by a licensee in the preceding calendar year that are
21delinquent and (ii) the number of conventional residential
22mortgage loans funded or purchased by the licensee in the
23preceding calendar year that are delinquent by (2) the sum of
24(i) the number of government-insured residential mortgage
25loans funded or purchased by the licensee in the preceding
26calendar year and (ii) the number of conventional residential

 

 

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1mortgage loans funded or purchased by the licensee in the
2preceding calendar year.
3    (gg) "Delinquency rate factor" means the factor set by rule
4of the Commissioner that is multiplied by the average gross
5delinquency rate of licensees, determined annually for the
6immediately preceding calendar year, for the purpose of
7determining which licensees shall be examined by the
8Commissioner pursuant to subsection (b) of Section 4-8 of this
9Act.
10    (hh) "Loan originator" means any natural person who, for
11compensation or in the expectation of compensation, either
12directly or indirectly makes, offers to make, solicits, places,
13or negotiates a residential mortgage loan. This definition
14applies only to Section 7-1 of this Act.
15    (ii) "Confidential supervisory information" means any
16report of examination, visitation, or investigation prepared
17by the Commissioner under this Act, any report of examination
18visitation, or investigation prepared by the state regulatory
19authority of another state that examines a licensee, any
20document or record prepared or obtained in connection with or
21relating to any examination, visitation, or investigation, and
22any record prepared or obtained by the Commissioner to the
23extent that the record summarizes or contains information
24derived from any report, document, or record described in this
25subsection. "Confidential supervisory information" does not
26include any information or record routinely prepared by a

 

 

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1licensee and maintained in the ordinary course of business or
2any information or record that is required to be made publicly
3available pursuant to State or federal law or rule.
4    (jj) "Mortgage loan originator" means an individual who for
5compensation or gain or in the expectation of compensation or
6gain:
7        (i) takes a residential mortgage loan application; or
8        (ii) offers or negotiates terms of a residential
9    mortgage loan.
10    "Mortgage loan originator" does not include an individual
11engaged solely as a loan processor or underwriter except as
12otherwise provided in subsection (d) of Section 7-1A of this
13Act.
14    "Mortgage loan originator" does not include a person or
15entity that only performs real estate brokerage activities and
16is licensed in accordance with the Real Estate License Act of
172000, unless the person or entity is compensated by a lender, a
18mortgage broker, or other mortgage loan originator, or by any
19agent of that lender, mortgage broker, or other mortgage loan
20originator.
21    "Mortgage loan originator" does not include a person or
22entity solely involved in extensions of credit relating to
23timeshare plans, as that term is defined in Section 101(53D) of
24Title 11, United States Code.
25    (kk) "Depository institution" has the same meaning as in
26Section 3 of the Federal Deposit Insurance Act, and includes

 

 

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1any credit union.
2    (ll) "Dwelling" means a residential structure or mobile
3home which contains one to 4 family housing units, or
4individual units of condominiums or cooperatives.
5    (mm) "Immediate family member" means a spouse, child,
6sibling, parent, grandparent, or grandchild, and includes
7step-parents, step-children, step-siblings, or adoptive
8relationships.
9    (nn) "Individual" means a natural person.
10    (oo) "Loan processor or underwriter" means an individual
11who performs clerical or support duties as an employee at the
12direction of and subject to the supervision and instruction of
13a person licensed, or exempt from licensing, under this Act.
14"Clerical or support duties" includes subsequent to the receipt
15of an application:
16        (i) the receipt, collection, distribution, and
17    analysis of information common for the processing or
18    underwriting of a residential mortgage loan; and
19        (ii) communicating with a consumer to obtain the
20    information necessary for the processing or underwriting
21    of a loan, to the extent that the communication does not
22    include offering or negotiating loan rates or terms, or
23    counseling consumers about residential mortgage loan rates
24    or terms. An individual engaging solely in loan processor
25    or underwriter activities shall not represent to the
26    public, through advertising or other means of

 

 

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1    communicating or providing information, including the use
2    of business cards, stationery, brochures, signs, rate
3    lists, or other promotional items, that the individual can
4    or will perform any of the activities of a mortgage loan
5    originator.
6    (pp) "Nationwide Mortgage Licensing System and Registry"
7means a mortgage licensing system developed and maintained by
8the Conference of State Bank Supervisors and the American
9Association of Residential Mortgage Regulators for the
10licensing and registration of licensed mortgage loan
11originators.
12    (qq) "Nontraditional mortgage product" means any mortgage
13product other than a 30-year fixed rate mortgage.
14    (rr) "Person" means a natural person, corporation,
15company, limited liability company, partnership, or
16association.
17    (ss) "Real estate brokerage activity" means any activity
18that involves offering or providing real estate brokerage
19services to the public, including:
20        (1) acting as a real estate agent or real estate broker
21    for a buyer, seller, lessor, or lessee of real property;
22        (2) bringing together parties interested in the sale,
23    purchase, lease, rental, or exchange of real property;
24        (3) negotiating, on behalf of any party, any portion of
25    a contract relating to the sale, purchase, lease, rental,
26    or exchange of real property, other than in connection with

 

 

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1    providing financing with respect to any such transaction;
2        (4) engaging in any activity for which a person engaged
3    in the activity is required to be registered or licensed as
4    a real estate agent or real estate broker under any
5    applicable law; or
6        (5) offering to engage in any activity, or act in any
7    capacity, described in this subsection (ss).
8    (tt) "Registered mortgage loan originator" means any
9individual that:
10        (1) meets the definition of mortgage loan originator
11    and is an employee of:
12            (A) a depository institution;
13            (B) a subsidiary that is:
14                (i) owned and controlled by a depository
15            institution; and
16                (ii) regulated by a federal banking agency; or
17            (C) an institution regulated by the Farm Credit
18        Administration; and
19        (2) is registered with, and maintains a unique
20    identifier through, the Nationwide Mortgage Licensing
21    System and Registry.
22    (uu) "Unique identifier" means a number or other identifier
23assigned by protocols established by the Nationwide Mortgage
24Licensing System and Registry.
25    (vv) "Residential mortgage license" means a license issued
26pursuant to Section 1-3, 2-2, or 2-6 of this Act.

 

 

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1    (ww) "Mortgage loan originator license" means a license
2issued pursuant to Section 7-1A, 7-3, or 7-6 of this Act.
3    (xx) "Secretary" means the Secretary of the Department of
4Financial and Professional Regulation, or a person authorized
5by the Secretary or by this Act to act in the Secretary's
6stead.
7(Source: P.A. 95-1047, eff. 4-6-09; 96-112, eff. 7-31-09;
896-1000, eff. 7-2-10; 96-1216, eff. 1-1-11.)
 
9    Section 99. Effective date. This Act takes effect upon
10becoming law.