[ Search ] [ PDF text ] [ Legislation ]
[ Home ] [ Back ] [ Bottom ]
| [ Introduced ] | [ House Amendment 001 ] |
92_HB0047ham002
LRB9200795JSdvam04
1 AMENDMENT TO HOUSE BILL 47
2 AMENDMENT NO. . Amend House Bill 47, AS AMENDED, by
3 replacing the title with the following:
4 "AN ACT concerning lending practices."; and
5 by replacing everything after the enacting clause with the
6 following:
7 "Section 5. The Illinois Banking Act is amended by
8 changing Section 2 and adding Sections 6.2, 6.3, 6.4, 6.5,
9 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16,
10 6.17, and 6.18 as follows:
11 (205 ILCS 5/2) (from Ch. 17, par. 302)
12 Sec. 2. General definitions. In this Act, unless the
13 context otherwise requires, the following words and phrases
14 shall have the following meanings:
15 "Accommodation party" shall have the meaning ascribed to
16 that term in Section 3-419 of the Uniform Commercial Code.
17 "Action" in the sense of a judicial proceeding includes
18 recoupments, counterclaims, set-off, and any other proceeding
19 in which rights are determined.
20 "Affiliate facility" of a bank means a main banking
21 premises or branch of another commonly owned bank. The main
-2- LRB9200795JSdvam04
1 banking premises or any branch of a bank may be an "affiliate
2 facility" with respect to one or more other commonly owned
3 banks.
4 "Appropriate federal banking agency" means the Federal
5 Deposit Insurance Corporation, the Federal Reserve Bank of
6 Chicago, or the Federal Reserve Bank of St. Louis, as
7 determined by federal law.
8 "Bank" means any person doing a banking business whether
9 subject to the laws of this or any other jurisdiction.
10 A "banking house", "branch", "branch bank" or "branch
11 office" shall mean any place of business of a bank at which
12 deposits are received, checks paid, or loans made, but shall
13 not include any place at which only records thereof are made,
14 posted, or kept. A place of business at which deposits are
15 received, checks paid, or loans made shall not be deemed to
16 be a branch, branch bank, or branch office if the place of
17 business is adjacent to and connected with the main banking
18 premises, or if it is separated from the main banking
19 premises by not more than an alley; provided always that (i)
20 if the place of business is separated by an alley from the
21 main banking premises there is a connection between the two
22 by public or private way or by subterranean or overhead
23 passage, and (ii) if the place of business is in a building
24 not wholly occupied by the bank, the place of business shall
25 not be within any office or room in which any other business
26 or service of any kind or nature other than the business of
27 the bank is conducted or carried on. A place of business at
28 which deposits are received, checks paid, or loans made shall
29 not be deemed to be a branch, branch bank, or branch office
30 (i) of any bank if the place is a terminal established and
31 maintained in accordance with paragraph (17) of Section 5 of
32 this Act, or (ii) of a commonly owned bank by virtue of
33 transactions conducted at that place on behalf of the other
34 commonly owned bank under paragraph (23) of Section 5 of this
-3- LRB9200795JSdvam04
1 Act if the place is an affiliate facility with respect to the
2 other bank.
3 "Branch of an out-of-state bank" means a branch
4 established or maintained in Illinois by an out-of-state bank
5 as a result of a merger between an Illinois bank and the
6 out-of-state bank that occurs on or after May 31, 1997, or
7 any branch established by the out-of-state bank following the
8 merger.
9 "Call report fee" means the fee to be paid to the
10 Commissioner by each State bank pursuant to paragraph (a) of
11 subsection (3) of Section 48 of this Act.
12 "Capital" includes the aggregate of outstanding capital
13 stock and preferred stock.
14 "Cash flow reserve account" means the account within the
15 books and records of the Commissioner of Banks and Real
16 Estate used to record funds designated to maintain a
17 reasonable Bank and Trust Company Fund operating balance to
18 meet agency obligations on a timely basis.
19 "Charter" includes the original charter and all
20 amendments thereto and articles of merger or consolidation.
21 "Commissioner" means the Commissioner of Banks and Real
22 Estate or a person authorized by the Commissioner, the Office
23 of Banks and Real Estate Act, or this Act to act in the
24 Commissioner's stead.
25 "Commonly owned banks" means 2 or more banks that each
26 qualify as a bank subsidiary of the same bank holding company
27 pursuant to Section 18 of the Federal Deposit Insurance Act;
28 "commonly owned bank" refers to one of a group of commonly
29 owned banks but only with respect to one or more of the other
30 banks in the same group.
31 "Community" means a city, village, or incorporated town
32 in this State.
33 "Company" means a corporation, partnership, business
34 trust, association, or similar organization and, unless
-4- LRB9200795JSdvam04
1 specifically excluded, includes a "State bank" and a "bank".
2 "Consolidating bank" means a party to a consolidation.
3 "Consolidation" takes place when 2 or more banks, or a
4 trust company and a bank, are extinguished and by the same
5 process a new bank is created, taking over the assets and
6 assuming the liabilities of the banks or trust company
7 passing out of existence.
8 "Continuing bank" means a merging bank, the charter of
9 which becomes the charter of the resulting bank.
10 "Converting bank" means a State bank converting to become
11 a national bank, or a national bank converting to become a
12 State bank.
13 "Converting trust company" means a trust company
14 converting to become a State bank.
15 "Court" means a court of competent jurisdiction.
16 "Eligible depository institution" means an insured
17 savings association that is in default, an insured savings
18 association that is in danger of default, a State or national
19 bank that is in default or a State or national bank that is
20 in danger of default, as those terms are defined in this
21 Section, or a new bank as that term defined in Section 11(m)
22 of the Federal Deposit Insurance Act or a bridge bank as that
23 term is defined in Section 11(n) of the Federal Deposit
24 Insurance Act or a new federal savings association authorized
25 under Section 11(d)(2)(f) of the Federal Deposit Insurance
26 Act.
27 "Fiduciary" means trustee, agent, executor,
28 administrator, committee, guardian for a minor or for a
29 person under legal disability, receiver, trustee in
30 bankruptcy, assignee for creditors, or any holder of similar
31 position of trust.
32 "Financial institution" means a bank, savings and loan
33 association, credit union, or any licensee under the Consumer
34 Installment Loan Act or the Sales Finance Agency Act and, for
-5- LRB9200795JSdvam04
1 purposes of Section 48.3, any proprietary network, funds
2 transfer corporation, or other entity providing electronic
3 funds transfer services, or any corporate fiduciary, its
4 subsidiaries, affiliates, parent company, or contractual
5 service provider that is examined by the Commissioner.
6 "Foundation" means the Illinois Bank Examiners' Education
7 Foundation.
8 "General obligation" means a bond, note, debenture,
9 security, or other instrument evidencing an obligation of the
10 issuer that is supported by the full available resources of
11 the issuer, the principal and interest of which is payable in
12 whole or in part by taxation.
13 "Guarantee" means an undertaking or promise to answer for
14 payment of another's debt or performance of another's duty,
15 liability, or obligation whether "payment guaranteed" or
16 "collection guaranteed".
17 "High risk home loan" means a home equity loan in which:
18 (1) at the time of origination, the APR exceeds by
19 more than 6 percentage points in the case of a first lien
20 mortgage, or by more than 8 percentage points in the case
21 of a junior mortgage, the yield on U.S. Treasury
22 securities having comparable periods of maturity to the
23 loan maturity as of the 15th day of the month immediately
24 preceding the month in which the application for the loan
25 is received by the bank; or
26 (2) the total points and fees payable by the
27 consumer at or before closing will exceed the greater of
28 5% of the total loan amount or $800.
29 The $800 limitation shall be adjusted annually on January
30 1 by the annual percentage change in the Consumer Price
31 Index.
32 However, "high risk home loan" does not mean a loan that
33 is made primarily for a business purpose unrelated to the
34 residential real property securing the loan and to an
-6- LRB9200795JSdvam04
1 open-end credit plan subject to subchapter B or Section
2 226.32 of 12 CFR 226 (2000), no subsequent dates or editions
3 are included.
4 "In danger of default" means a State or national bank, a
5 federally chartered insured savings association or an
6 Illinois state chartered insured savings association with
7 respect to which the Commissioner or the appropriate federal
8 banking agency has advised the Federal Deposit Insurance
9 Corporation that:
10 (1) in the opinion of the Commissioner or the
11 appropriate federal banking agency,
12 (A) the State or national bank or insured
13 savings association is not likely to be able to meet
14 the demands of the State or national bank's or
15 savings association's obligations in the normal
16 course of business; and
17 (B) there is no reasonable prospect that the
18 State or national bank or insured savings
19 association will be able to meet those demands or
20 pay those obligations without federal assistance; or
21 (2) in the opinion of the Commissioner or the
22 appropriate federal banking agency,
23 (A) the State or national bank or insured
24 savings association has incurred or is likely to
25 incur losses that will deplete all or substantially
26 all of its capital; and
27 (B) there is no reasonable prospect that the
28 capital of the State or national bank or insured
29 savings association will be replenished without
30 federal assistance.
31 "In default" means, with respect to a State or national
32 bank or an insured savings association, any adjudication or
33 other official determination by any court of competent
34 jurisdiction, the Commissioner, the appropriate federal
-7- LRB9200795JSdvam04
1 banking agency, or other public authority pursuant to which a
2 conservator, receiver, or other legal custodian is appointed
3 for a State or national bank or an insured savings
4 association.
5 "Insured savings association" means any federal savings
6 association chartered under Section 5 of the federal Home
7 Owners' Loan Act and any State savings association chartered
8 under the Illinois Savings and Loan Act of 1985 or a
9 predecessor Illinois statute, the deposits of which are
10 insured by the Federal Deposit Insurance Corporation. The
11 term also includes a savings bank organized or operating
12 under the Savings Bank Act.
13 "Insured savings association in recovery" means an
14 insured savings association that is not an eligible
15 depository institution and that does not meet the minimum
16 capital requirements applicable with respect to the insured
17 savings association.
18 "Issuer" means for purposes of Section 33 every person
19 who shall have issued or proposed to issue any security;
20 except that (1) with respect to certificates of deposit,
21 voting trust certificates, collateral-trust certificates, and
22 certificates of interest or shares in an unincorporated
23 investment trust not having a board of directors (or persons
24 performing similar functions), "issuer" means the person or
25 persons performing the acts and assuming the duties of
26 depositor or manager pursuant to the provisions of the trust,
27 agreement, or instrument under which the securities are
28 issued; (2) with respect to trusts other than those specified
29 in clause (1) above, where the trustee is a corporation
30 authorized to accept and execute trusts, "issuer" means the
31 entrusters, depositors, or creators of the trust and any
32 manager or committee charged with the general direction of
33 the affairs of the trust pursuant to the provisions of the
34 agreement or instrument creating the trust; and (3) with
-8- LRB9200795JSdvam04
1 respect to equipment trust certificates or like securities,
2 "issuer" means the person to whom the equipment or property
3 is or is to be leased or conditionally sold.
4 "Letter of credit" and "customer" shall have the meanings
5 ascribed to those terms in Section 5-102 of the Uniform
6 Commercial Code.
7 "Main banking premises" means the location that is
8 designated in a bank's charter as its main office.
9 "Maker or obligor" means for purposes of Section 33 the
10 issuer of a security, the promisor in a debenture or other
11 debt security, or the mortgagor or grantor of a trust deed or
12 similar conveyance of a security interest in real or personal
13 property.
14 "Merged bank" means a merging bank that is not the
15 continuing, resulting, or surviving bank in a consolidation
16 or merger.
17 "Merger" includes consolidation.
18 "Merging bank" means a party to a bank merger.
19 "Merging trust company" means a trust company party to a
20 merger with a State bank.
21 "Mid-tier bank holding company" means a corporation that
22 (a) owns 100% of the issued and outstanding shares of each
23 class of stock of a State bank, (b) has no other
24 subsidiaries, and (c) 100% of the issued and outstanding
25 shares of the corporation are owned by a parent bank holding
26 company.
27 "Municipality" means any municipality, political
28 subdivision, school district, taxing district, or agency.
29 "National bank" means a national banking association
30 located in this State and after May 31, 1997, means a
31 national banking association without regard to its location.
32 "Out-of-state bank" means a bank chartered under the laws
33 of a state other than Illinois, a territory of the United
34 States, or the District of Columbia.
-9- LRB9200795JSdvam04
1 "Parent bank holding company" means a corporation that is
2 a bank holding company as that term is defined in the
3 Illinois Bank Holding Company Act of 1957 and owns 100% of
4 the issued and outstanding shares of a mid-tier bank holding
5 company.
6 "Person" means an individual, corporation, partnership,
7 joint venture, trust, estate, or unincorporated association.
8 "Points and fees" means:
9 (1) all items required to be disclosed under 12 CFR
10 226.5 (2000), no subsequent dates or editions are
11 included;
12 (2) the premium of any single premium credit life,
13 credit disability, credit unemployment, or any other life
14 or health insurance that is financed directly or
15 indirectly into the loan; and
16 (3) all compensation paid directly or indirectly to
17 a mortgage broker, including a broker that originates a
18 loan in its own name in a tablefunded transaction.
19 "Public agency" means the State of Illinois, the various
20 counties, townships, cities, towns, villages, school
21 districts, educational service regions, special road
22 districts, public water supply districts, fire protection
23 districts, drainage districts, levee districts, sewer
24 districts, housing authorities, the Illinois Bank Examiners'
25 Education Foundation, the Chicago Park District, and all
26 other political corporations or subdivisions of the State of
27 Illinois, whether now or hereafter created, whether herein
28 specifically mentioned or not, and shall also include any
29 other state or any political corporation or subdivision of
30 another state.
31 "Public funds" or "public money" means current operating
32 funds, special funds, interest and sinking funds, and funds
33 of any kind or character belonging to, in the custody of, or
34 subject to the control or regulation of the United States or
-10- LRB9200795JSdvam04
1 a public agency. "Public funds" or "public money" shall
2 include funds held by any of the officers, agents, or
3 employees of the United States or of a public agency in the
4 course of their official duties and, with respect to public
5 money of the United States, shall include Postal Savings
6 funds.
7 "Published" means, unless the context requires otherwise,
8 the publishing of the notice or instrument referred to in
9 some newspaper of general circulation in the community in
10 which the bank is located at least once each week for 3
11 successive weeks. Publishing shall be accomplished by, and
12 at the expense of, the bank required to publish. Where
13 publishing is required, the bank shall submit to the
14 Commissioner that evidence of the publication as the
15 Commissioner shall deem appropriate.
16 "Recorded" means the filing or recording of the notice or
17 instrument referred to in the office of the Recorder of the
18 county wherein the bank is located.
19 "Resulting bank" means the bank resulting from a merger
20 or conversion.
21 "Securities" means stocks, bonds, debentures, notes, or
22 other similar obligations.
23 "Servicer" means any entity subject to this Act that is
24 responsible for the collection or remittance for, or the
25 right or obligation to collect or remit for, any lender,
26 noteowner, noteholder, or for the entity's own account, of
27 payments, interest, principal, and trust items such as hazard
28 insurance and taxes on a residential mortgage loan in
29 accordance with the terms of the residential mortgage loan;
30 and includes loan payment follow-up, delinquency loan
31 follow-up, loan analysis, and any notifications to the
32 borrower that are necessary to enable the borrower to keep
33 the loan current and in good standing.
34 "Stand-by letter of credit" means a letter of credit
-11- LRB9200795JSdvam04
1 under which drafts are payable upon the condition the
2 customer has defaulted in performance of a duty, liability,
3 or obligation.
4 "State bank" means any banking corporation that has a
5 banking charter issued by the Commissioner under this Act.
6 "State Banking Board" means the State Banking Board of
7 Illinois.
8 "Subsidiary" with respect to a specified company means a
9 company that is controlled by the specified company. For
10 purposes of paragraphs (8) and (12) of Section 5 of this Act,
11 "control" means the exercise of operational or managerial
12 control of a corporation by the bank, either alone or
13 together with other affiliates of the bank.
14 "Surplus" means the aggregate of (i) amounts paid in
15 excess of the par value of capital stock and preferred stock;
16 (ii) amounts contributed other than for capital stock and
17 preferred stock and allocated to the surplus account; and
18 (iii) amounts transferred from undivided profits.
19 "Tier 1 Capital" and "Tier 2 Capital" have the meanings
20 assigned to those terms in regulations promulgated for the
21 appropriate federal banking agency of a state bank, as those
22 regulations are now or hereafter amended.
23 "Total loan amount" means the same as the term used in
24 Section 226.32 of Title 12 of the Code of Federal
25 Regulations, and the same shall be calculated in accordance
26 with the Federal Reserve Board's Official Staff Commentary
27 thereto.
28 "Trust company" means a corporation incorporated in this
29 State for the purpose of accepting and executing trusts.
30 "Undivided profits" means undistributed earnings less
31 discretionary transfers to surplus.
32 "Unimpaired capital and unimpaired surplus", for the
33 purposes of paragraph (21) of Section 5 and Sections 32, 33,
34 34, 35.1, 35.2, and 47 of this Act means the sum of the state
-12- LRB9200795JSdvam04
1 bank's Tier 1 Capital and Tier 2 Capital plus such other
2 shareholder equity as may be included by regulation of the
3 Commissioner. Unimpaired capital and unimpaired surplus
4 shall be calculated on the basis of the date of the last
5 quarterly call report filed with the Commissioner preceding
6 the date of the transaction for which the calculation is
7 made, provided that: (i) when a material event occurs after
8 the date of the last quarterly call report filed with the
9 Commissioner that reduces or increases the bank's unimpaired
10 capital and unimpaired surplus by 10% or more, then the
11 unimpaired capital and unimpaired surplus shall be calculated
12 from the date of the material event for a transaction
13 conducted after the date of the material event; and (ii) if
14 the Commissioner determines for safety and soundness reasons
15 that a state bank should calculate unimpaired capital and
16 unimpaired surplus more frequently than provided by this
17 paragraph, the Commissioner may by written notice direct the
18 bank to calculate unimpaired capital and unimpaired surplus
19 at a more frequent interval. In the case of a state bank
20 newly chartered under Section 13 or a state bank resulting
21 from a merger, consolidation, or conversion under Sections 21
22 through 26 for which no preceding quarterly call report has
23 been filed with the Commissioner, unimpaired capital and
24 unimpaired surplus shall be calculated for the first calendar
25 quarter on the basis of the effective date of the charter,
26 merger, consolidation, or conversion.
27 (Source: P.A. 89-208, eff. 9-29-95; 89-364, eff. 8-18-95;
28 89-508, eff. 7-3-96; 89-534, eff. 1-1-97; 89-567, eff.
29 7-26-96; 89-626, eff. 8-9-96; 90-14, eff. 7-1-97; 90-301,
30 eff. 8-1-97.)
31 (205 ILCS 5/6.2 new)
32 Sec. 6.2. Ability to repay. A bank may not make a high
33 risk home loan if the bank does not believe at the time the
-13- LRB9200795JSdvam04
1 loan is consummated that the borrower or borrowers will be
2 able to make the scheduled payments to repay the obligation
3 based upon a consideration of their current and expected
4 income, current obligations, employment status, and other
5 financial resources (other than the borrower's equity in the
6 dwelling that secures repayment of the loan). A borrower
7 shall be presumed to be able to repay the loan if, at the
8 time the loan is consummated, or at the time of the first
9 rate adjustment in the case of a lower introductory interest
10 rate, the borrower's scheduled monthly payments on the loan
11 (including principal, interest, taxes, insurance, and
12 assessments), combined with the scheduled payments for all
13 other disclosed debts, do not exceed 50% of the borrower's
14 monthly gross income.
15 (205 ILCS 5/6.3 new)
16 Sec. 6.3. Verification of ability to pay loan. The bank
17 shall verify the borrower's ability to repay the loan in the
18 case of high risk home loans. The verification shall
19 require, at a minimum, that the bank:
20 (1) prepare a personal income and expense
21 statement, with information provided by the borrower, in
22 a form prescribed by the Commissioner;
23 (2) verify the borrower's income by means of tax
24 returns, pay stubs, accounting statements, or other
25 prudent means; and
26 (3) obtain a credit report regarding the borrower.
27 (205 ILCS 5/6.4 new)
28 Sec. 6.4. Fraudulent or deceptive practices. A bank may
29 not employ employ fraudulent or deceptive acts or practices
30 in the making of a high risk home loan, including deceptive
31 marketing and sales efforts.
-14- LRB9200795JSdvam04
1 (205 ILCS 5/6.5 new)
2 Sec. 6.5. Prepayment penalties. A bank may not make a
3 high risk home loan that calls for a prepayment penalty (i)
4 made after the expiration of the 36-month period following
5 the date the loan was made or (ii) that is more than 3% of
6 the total loan amount if the prepayment is made within the
7 first 12-month period following the date the loan was made,
8 or more than 2% of the total loan amount if the prepayment is
9 made within the second 12 month period after the date the
10 loan was made, or more than 1% of the total loan amount if
11 the prepayment is made within the third 12-month period
12 following the date the loan was made.
13 (205 ILCS 5/6.6 new)
14 Sec. 6.6. Pre-paid insurance products and warranties. A
15 bank may not make a high risk home loan that finances a
16 single premium credit life, credit disability, credit
17 unemployment, or any other life or health insurance, directly
18 or indirectly. Insurance previously calculated and paid on a
19 monthly basis shall not be considered to be financed by the
20 bank.
21 (205 ILCS 5/6.7 new)
22 Sec. 6.7. Refinancing prohibited in certain cases. A
23 bank may not refinance any high risk home loan where the
24 refinancing charges additional points and fees within a 12
25 month period after the refinanced loan was originated, unless
26 the refinancing results in a financial benefit to the
27 borrower.
28 (205 ILCS 5/6.8 new)
29 Sec. 6.8. Balloon payments. A bank may not make a high
30 risk home loan that contains a scheduled final payment that
31 is more than twice as large as the average of earlier
-15- LRB9200795JSdvam04
1 scheduled monthly payments unless the balloon payment becomes
2 due and payable at least 15 years after the loan's
3 origination. This prohibition does not apply when the
4 payment schedule is adjusted to account for the seasonal or
5 irregular income of the borrower or if the purpose of the
6 loan is a "bridge" loan connected with the acquisition or
7 construction of a dwelling intended to become the borrower's
8 principal dwelling.
9 (205 ILCS 5/6.9 new)
10 Sec. 6.9. Financing of certain points and fees. A bank
11 may not make a high risk home loan that finances points and
12 fees in excess of 6% of the total loan amount.
13 (205 ILCS 5/6.10 new)
14 Sec. 6.10. Payments to contractors. A bank may not make a
15 payment to a contractor under a home improvement contract
16 other than:
17 (1) by instrument payable to the borrower or
18 jointly to the borrower and the contractor; or
19 (2) at the election of the borrower, by a third
20 party escrow agent in accordance with the terms
21 established in a written agreement signed by the
22 borrower, the bank, and the contractor before the date of
23 payment.
24 (205 ILCS 5/6.11 new)
25 Sec. 6.11. Negative amortization. A bank may not make a
26 high risk home loan, other than a loan secured only by a
27 reverse mortgage, with terms under which the outstanding
28 balance will increase at any time over the course of the loan
29 because the regular periodic payments do not cover the full
30 amount of the interest due, unless the negative amortization
31 is the consequence of a temporary forbearance sought by the
-16- LRB9200795JSdvam04
1 borrower.
2 (205 ILCS 5/6.12 new)
3 Sec. 6.12. Negative equity. A bank may not make a high
4 risk home loan where the loan amount exceeds the equity of
5 the property securing the loan.
6 (205 ILCS 5/6.13 new)
7 Sec. 6.13. Counseling prior to perfecting foreclosure
8 proceedings.
9 (a) If a high risk home loan becomes delinquent by more
10 than 30 days, the servicer shall send a notice advising the
11 borrower that he or she may wish to seek consumer credit
12 counseling.
13 (b) The notice required in subsection (a) shall, at a
14 minimum, include the following language:
15 "YOUR LOAN IS OR WAS MORE THAN 30 DAYS PAST DUE. YOU MAY
16 BE EXPERIENCING FINANCIAL DIFFICULTY. IT MAY BE IN YOUR
17 BEST INTEREST TO SEEK APPROVED CONSUMER CREDIT
18 COUNSELING. A LIST OF APPROVED CREDIT COUNSELORS MAY BE
19 OBTAINED FROM THE ILLINOIS OFFICE OF BANKS AND REAL
20 ESTATE."
21 (c) If a bank or its agent is notified in writing by an
22 approved consumer credit counselor and the approved consumer
23 credit counselor advises the bank or its agent that the
24 borrower is seeking approved consumer credit counseling, then
25 the bank and its agent shall not institute legal action under
26 Part 15 of Article XV of the Code of Civil Procedure for 30
27 days from the date of that notice. Only one such 30-day
28 period of forbearance is allowed under this Section per
29 subject loan.
30 (d) If, within the 30-day period provided under
31 subsection (c), the bank or its agent, the approved consumer
32 credit counselor, and the borrower agree to a debt management
-17- LRB9200795JSdvam04
1 plan, then the bank and its agent shall not institute legal
2 action under Part 15 of Article XV of the Code of Civil
3 Procedure for so long as the debt management plan is complied
4 with by the borrower.
5 (1) The agreed debt management plan must be in
6 writing and signed by the bank or its agent, the approved
7 consumer credit counselor, and the borrower. A
8 modification of an approved debt management plan may not
9 be made without the mutual agreement of the bank or its
10 agent, the approved consumer credit counselor, and the
11 borrower.
12 (2) Upon written notice to the bank or its agent,
13 the borrower may change approved consumer credit
14 counselors.
15 (e) If the borrower fails to comply with the agreed debt
16 management plan, then nothing in this Section shall be
17 construed to impair the legal right of the bank or its agent
18 to enforce contracts or mortgage agreements.
19 (f) This Section applies only to high risk home loans.
20 (205 ILCS 5/6.14 new)
21 Sec. 6.14. Mortgage awareness program.
22 (a) The Mortgage Awareness Program is a counseling and
23 educational component that is provided by the Director of
24 the Department of Financial Institutions.
25 (b) The core curriculum of the Mortgage Awareness
26 Program shall include:
27 (1) explanation of the amount financed;
28 (2) explanation of the finance charge;
29 (3) explanation of the annual percentage rate;
30 (4) explanation of the total payments;
31 (5) explanation of the loan costs, including
32 broker's fees, finance charges, points, origination fees,
33 and all other charges and fees;
-18- LRB9200795JSdvam04
1 (6) explanation of the right of rescission;
2 (7) explanation of foreclosure procedures;
3 (8) explanation of the significant debt ratios,
4 including total debt to income, loan debt to income, and
5 loan debt to value of residence;
6 (9) explanation of adjustable rate mortgage;
7 (10) explanation of balloon payments;
8 (11) explanation of credit options;
9 (12) explanation of each item that appears on a
10 good faith estimate; and
11 (13) explanation of pre-payment penalties.
12 (c) Counseling session attendees must also complete a
13 personal income and expense statement, as well as a balance
14 sheet, on forms provided by the Commissioner.
15 (d) Prior to signing a certificate of completion,
16 counselors shall privately discuss with the attendee that
17 attendee's income and expense statement and balance sheet, as
18 well as the terms of any loan the attendee currently has or
19 may be contemplating and provide a third party review to
20 establish the affordability of the loan.
21 (e) Counseling session attendees must also be given a
22 brochure that contains information covered by the Mortgage
23 Awareness Program.
24 (f) A bank, prior to making a high risk home loan, shall
25 inform the borrower in writing of the right to participate in
26 the Mortgage Awareness Program.
27 (g) A bank may not offer less favorable loan terms to a
28 borrower due to a borrower participating in a Mortgage
29 Awareness Program.
30 (h) Except as prohibited elsewhere in this Act, the
31 borrower may waive participation in the program, provided
32 that the waiver occurs no less than 2 business days after the
33 day that the borrower receives the written notice required by
34 subsection (f) and that the waiver is in writing in a form
-19- LRB9200795JSdvam04
1 approved by the Commissioner.
2 (205 ILCS 5/6.15 new)
3 Sec. 6.15. Report of default and foreclosure rates on
4 conventional loans.
5 (a) On or before August 1 and February 1 of each year, a
6 bank that is a servicer of Illinois residential mortgage
7 loans shall report to the Commissioner the default and
8 foreclosure data of conventional loans for the 6-month
9 periods ending June 30 and December 31, respectively.
10 (b) A bank shall report for each loan in default or
11 foreclosure:
12 (1) name of borrowers;
13 (2) address of the property mortgaged;
14 (3) census tract of the property mortgaged;
15 (4) status of the loan (default or foreclosure);
16 (5) date the loan was consummated;
17 (6) name and license number of any licensee under
18 the Residential Mortgage License Act of 1987 who
19 originated the loan;
20 (7) name and address of any non-licensed or exempt
21 entity that originated the loan.
22 (205 ILCS 5/6.16 new)
23 Sec. 6.16. Commissioner's authority; unusually high
24 foreclosure rate on conventional loans. The Commissioner may
25 take any action permitted under Section 6.17 or any other
26 Section of this Act whenever the Commissioner determines
27 that, based upon a bank's report under Section 6.15, the
28 bank's foreclosure rate on conventional mortgage loans in a
29 particular area, as deemed by the Commissioner on a
30 case-by-case basis, is higher than a rate deemed appropriate
31 by the Commissioner in that particular area. The
32 Commissioner shall determine the appropriate rate for a
-20- LRB9200795JSdvam04
1 particular area by calculating the average of the default and
2 foreclosure rates on conventional mortgage loans in the same
3 area for the same period of time based on information filed
4 with the Commissioner pursuant to the Act. A bank's rate
5 that exceeds such average shall be considered unusually high.
6 (205 ILCS 5/6.17 new)
7 Sec. 6.17. Commissioner's action; unusually high
8 foreclosure rate on conventional loans.
9 (a) Whenever a bank's conventional loan default and
10 foreclosure rate for a particular 6-month period exceeds the
11 average calculated in Section 6.16, the Commissioner shall:
12 (1) conduct an examination of the bank;
13 (2) enter into a supervisory agreement with the
14 bank to lower its default and foreclosure rate on
15 conventional loans based on an analysis of its rate and
16 the results of the examination with a timetable for
17 achieving results;
18 (3) use a variety of remedies in a supervisory
19 agreement on a case-by-case basis to effect a lowering of
20 a default and foreclosure rate on conventional loans,
21 such as:
22 (A) requiring use of borrower balance sheet,
23 cash flow statement, and income and expense forms on
24 future loans;
25 (B) providing of a counseling video to
26 borrowers of future loans;
27 (C) mandating that all prospective borrowers
28 bring their loan applications to the Commissioner
29 for a third party review as described in Section
30 6.18;
31 (D) levying fines;
32 (E) using other regulatory means up to and
33 including issuance of a cease and desist order.
-21- LRB9200795JSdvam04
1 (b) When the loan analysis described in subsection (a)
2 of Section 6.15 and in Section 6.16 shows that a licensee
3 under the Residential Mortgage License Act of 1987 acting as
4 broker or originator is contributing to the high default and
5 foreclosure rate of the reporting bank, that broker or
6 originator shall also be subject to examination and
7 supervisory agreement as defined in subsection (a).
8 (205 ILCS 5/6.18 new)
9 Sec. 6.18. Third party review of high risk home loans.
10 (a) In the case of any high risk home loan, the borrower
11 shall be afforded the opportunity to seek independent review
12 of the loan terms in order to determine affordability of the
13 loan when and if the General Assembly appropriates adequate
14 funding to the Office of Banks and Real Estate specifically
15 for this program.
16 (b) The Commissioner shall establish a loan worksheet
17 and a system for review of loan terms to be performed by
18 staff of the Office of Banks and Real Estate.
19 (c) A borrower shall submit information requested on the
20 worksheet, including but not limited to information regarding
21 the borrower's financial status and budget and the terms of
22 the loan.
23 (d) The review of the worksheet shall provide the
24 borrower, at a minimum, with a projection of the amount of
25 each payment for the loan, taking into account balloon
26 payments and adjustable interest rates. The review shall also
27 inform the borrower of the amount of monthly payment the
28 borrower can afford within the borrower's budget.
29 (e) The results of the review shall be in the form of a
30 written report, with a signature of the borrower
31 acknowledging receipt of a copy of the report. A copy of the
32 written and signed report shall be submitted to the bank
33 prior to the closing of the loan, and shall become a part of
-22- LRB9200795JSdvam04
1 the permanent file for the loan.
2 (f) If, in the opinion of the reviewer of the high risk
3 home loan documentation, the loan does not make economic
4 sense to the borrower, the reviewer shall so note this in the
5 results of the review sent to the bank. This finding shall
6 enable the borrower to withdraw from the contemplated loan
7 with no financial penalty.
8 Section 10. The Illinois Savings and Loan Act of 1985 is
9 amended by adding Sections 1-10.39, 1-10.40, 1-10.41,
10 1-10.42, 5-17, 5-18, 5-19, 5-20, 5-21, 5-22, 5-23, 5-24,
11 5-25, 5-26, 5-27, 5-28, 5-29, 5-30, 5-31, 5-32, and 5-33 as
12 follows:
13 (205 ILCS 105/1-10.39 new)
14 Sec. 1-10.39. High risk home loan. "High risk home loan"
15 means a home equity loan in which:
16 (1) at the time of origination, the APR exceeds by
17 more than 6 percentage points in the case of a first lien
18 mortgage, or by more than 8 percentage points in the case
19 of a junior mortgage, the yield on U.S. Treasury
20 securities having comparable periods of maturity to the
21 loan maturity as of the 15th day of the month immediately
22 preceding the month in which the application for the loan
23 is received by the association; or
24 (2) the total points and fees payable by the
25 consumer at or before closing will exceed the greater of
26 5% of the total loan amount or $800.
27 The $800 limitation shall be adjusted annually on January
28 1 by the annual percentage change in the Consumer Price
29 Index.
30 However, "high risk home loan" does not mean a loan that
31 is made primarily for a business purpose unrelated to the
32 residential real property securing the loan and to an
-23- LRB9200795JSdvam04
1 open-end credit plan subject to subchapter B or Section
2 226.32 of 12 CFR 226 (2000), no subsequent dates or editions
3 are included.
4 (205 ILCS 105/1-10.40 new)
5 Sec. 1-10.40. Points and fees. "Points and fees" means:
6 (1) all items required to be disclosed under 12 CFR
7 226.5 (2000), no subsequent dates or editions are
8 included;
9 (2) the premium of any single premium credit life,
10 credit disability, credit unemployment, or any other life
11 or health insurance that is financed directly or
12 indirectly into the loan; and
13 (3) all compensation paid directly or indirectly to
14 a mortgage broker, including a broker that originates a
15 loan in its own name in a tablefunded transaction.
16 (205 ILCS 105/1-10.41 new)
17 Sec. 1-10.41. Servicer. "Servicer" means any entity
18 subject to this Act that is responsible for the collection or
19 remittance for, or the right or obligation to collect or
20 remit for, any lender, noteowner, noteholder, or for the
21 entity's own account, of payments, interest, principal, and
22 trust items such as hazard insurance and taxes on a
23 residential mortgage loan in accordance with the terms of the
24 residential mortgage loan; and includes loan payment
25 follow-up, delinquency loan follow-up, loan analysis, and any
26 notifications to the borrower that are necessary to enable
27 the borrower to keep the loan current and in good standing.
28 (205 ILCS 105/1-10.42 new)
29 Sec. 1-10.42. Total loan amount. "Total loan amount"
30 means the same as the term used in Section 226.32 of Title 12
31 of the Code of Federal Regulations, and the same shall be
-24- LRB9200795JSdvam04
1 calculated in accordance with the Federal Reserve Board's
2 Official Staff Commentary thereto.
3 (205 ILCS 105/5-17 new)
4 Sec. 5-17. Ability to repay. An association may not make
5 a high risk home loan if the association does not believe at
6 the time the loan is consummated that the borrower or
7 borrowers will be able to make the scheduled payments to
8 repay the obligation based upon a consideration of their
9 current and expected income, current obligations, employment
10 status, and other financial resources (other than the
11 borrower's equity in the dwelling that secures repayment of
12 the loan). A borrower shall be presumed to be able to repay
13 the loan if, at the time the loan is consummated, or at the
14 time of the first rate adjustment in the case of a lower
15 introductory interest rate, the borrower's scheduled monthly
16 payments on the loan (including principal, interest, taxes,
17 insurance, and assessments), combined with the scheduled
18 payments for all other disclosed debts, do not exceed 50% of
19 the borrower's monthly gross income.
20 (205 ILCS 105/5-18 new)
21 Sec. 5-18. Verification of ability to pay loan. The
22 association shall verify the borrower's ability to repay the
23 loan in the case of high risk home loans. The verification
24 shall require, at a minimum, that the association:
25 (1) prepare a personal income and expense
26 statement, with information provided by the borrower, in
27 a form prescribed by the Commissioner;
28 (2) verify the borrower's income by means of tax
29 returns, pay stubs, accounting statements, or other
30 prudent means; and
31 (3) obtain a credit report regarding the borrower.
-25- LRB9200795JSdvam04
1 (205 ILCS 105/5-19 new)
2 Sec. 5-19. Fraudulent or deceptive practices. An
3 association may not employ employ fraudulent or deceptive
4 acts or practices in the making of a high risk home loan,
5 including deceptive marketing and sales efforts.
6 (205 ILCS 105/5-20 new)
7 Sec. 5-20. Prepayment penalties. An association may not
8 make a high risk home loan that calls for a prepayment
9 penalty (i) made after the expiration of the 36-month period
10 following the date the loan was made or (ii) that is more
11 than 3% of the total loan amount if the prepayment is made
12 within the first 12-month period following the date the loan
13 was made, or more than 2% of the total loan amount if the
14 prepayment is made within the second 12 month period after
15 the date the loan was made, or more than 1% of the total loan
16 amount if the prepayment is made within the third 12-month
17 period following the date the loan was made.
18 (205 ILCS 105/5-21 new)
19 Sec. 5-21. Pre-paid insurance products and warranties.
20 An association may not make a high risk home loan that
21 finances a single premium credit life, credit disability,
22 credit unemployment, or any other life or health insurance,
23 directly or indirectly. Insurance previously calculated and
24 paid on a monthly basis shall not be considered to be
25 financed by the association.
26 (205 ILCS 105/5-22 new)
27 Sec. 5-22. Refinancing prohibited in certain cases. An
28 association may not refinance any high risk home loan where
29 the refinancing charges additional points and fees within a
30 12 month period after the refinanced loan was originated,
31 unless the refinancing results in a financial benefit to the
-26- LRB9200795JSdvam04
1 borrower.
2 (205 ILCS 105/5-23 new)
3 Sec. 5-23. Balloon payments. An association may not make
4 a high risk home loan that contains a scheduled final payment
5 that is more than twice as large as the average of earlier
6 scheduled monthly payments unless the balloon payment becomes
7 due and payable at least 15 years after the loan's
8 origination. This prohibition does not apply when the
9 payment schedule is adjusted to account for the seasonal or
10 irregular income of the borrower or if the purpose of the
11 loan is a "bridge" loan connected with the acquisition or
12 construction of a dwelling intended to become the borrower's
13 principal dwelling.
14 (205 ILCS 105/5-24 new)
15 Sec. 5-24. Financing of certain points and fees. An
16 association may not make a high risk home loan that finances
17 points and fees in excess of 6% of the total loan amount.
18 (205 ILCS 105/5-25 new)
19 Sec. 5-25. Payments to contractors. An association may
20 not make a payment to a contractor under a home improvement
21 contract other than:
22 (1) by instrument payable to the borrower or
23 jointly to the borrower and the contractor; or
24 (2) at the election of the borrower, by a third
25 party escrow agent in accordance with the terms
26 established in a written agreement signed by the
27 borrower, the association, and the contractor before the
28 date of payment.
29 (205 ILCS 105/5-26 new)
30 Sec. 5-26. Negative amortization. An association may not
-27- LRB9200795JSdvam04
1 make a high risk home loan, other than a loan secured only by
2 a reverse mortgage, with terms under which the outstanding
3 balance will increase at any time over the course of the loan
4 because the regular periodic payments do not cover the full
5 amount of the interest due, unless the negative amortization
6 is the consequence of a temporary forbearance sought by the
7 borrower.
8 (205 ILCS 105/5-27 new)
9 Sec. 5-27. Negative equity. An association may not make a
10 high risk home loan where the loan amount exceeds the equity
11 of the property securing the loan.
12 (205 ILCS 105/5-28 new)
13 Sec. 5-28. Counseling prior to perfecting foreclosure
14 proceedings.
15 (a) If a high risk home loan becomes delinquent by more
16 than 30 days, the servicer shall send a notice advising the
17 borrower that he or she may wish to seek consumer credit
18 counseling.
19 (b) The notice required in subsection (a) shall, at a
20 minimum, include the following language:
21 "YOUR LOAN IS OR WAS MORE THAN 30 DAYS PAST DUE. YOU MAY
22 BE EXPERIENCING FINANCIAL DIFFICULTY. IT MAY BE IN YOUR
23 BEST INTEREST TO SEEK APPROVED CONSUMER CREDIT
24 COUNSELING. A LIST OF APPROVED CREDIT COUNSELORS MAY BE
25 OBTAINED FROM THE ILLINOIS OFFICE OF BANKS AND REAL
26 ESTATE."
27 (c) If an association or its agent is notified in
28 writing by an approved consumer credit counselor and the
29 approved consumer credit counselor advises the association or
30 its agent that the borrower is seeking approved consumer
31 credit counseling, then the association and its agent shall
32 not institute legal action under Part 15 of Article XV of the
-28- LRB9200795JSdvam04
1 Code of Civil Procedure for 30 days from the date of that
2 notice. Only one such 30-day period of forbearance is
3 allowed under this Section per subject loan.
4 (d) If, within the 30-day period provided under
5 subsection (c), the association or its agent, the approved
6 consumer credit counselor, and the borrower agree to a debt
7 management plan, then the association and its agent shall not
8 institute legal action under Part 15 of Article XV of the
9 Code of Civil Procedure for so long as the debt management
10 plan is complied with by the borrower.
11 (1) The agreed debt management plan must be in
12 writing and signed by the association or its agent, the
13 approved consumer credit counselor, and the borrower. A
14 modification of an approved debt management plan may not
15 be made without the mutual agreement of the association
16 or its agent, the approved consumer credit counselor, and
17 the borrower.
18 (2) Upon written notice to the association or its
19 agent, the borrower may change approved consumer credit
20 counselors.
21 (e) If the borrower fails to comply with the agreed debt
22 management plan, then nothing in this Section shall be
23 construed to impair the legal right of the association or its
24 agent to enforce contracts or mortgage agreements.
25 (f) This Section applies only to high risk home loans.
26 (205 ILCS 105/5-29 new)
27 Sec. 5-29. Mortgage awareness program.
28 (a) The Mortgage Awareness Program is a counseling and
29 educational component that is provided by the Director of
30 the Department of Financial Institutions.
31 (b) The core curriculum of the Mortgage Awareness
32 Program shall include:
33 (1) explanation of the amount financed;
-29- LRB9200795JSdvam04
1 (2) explanation of the finance charge;
2 (3) explanation of the annual percentage rate;
3 (4) explanation of the total payments;
4 (5) explanation of the loan costs, including
5 broker's fees, finance charges, points, origination fees,
6 and all other charges and fees;
7 (6) explanation of the right of rescission;
8 (7) explanation of foreclosure procedures;
9 (8) explanation of the significant debt ratios,
10 including total debt to income, loan debt to income, and
11 loan debt to value of residence;
12 (9) explanation of adjustable rate mortgage;
13 (10) explanation of balloon payments;
14 (11) explanation of credit options;
15 (12) explanation of each item that appears on a
16 good faith estimate; and
17 (13) explanation of pre-payment penalties.
18 (c) Counseling session attendees must also complete a
19 personal income and expense statement, as well as a balance
20 sheet, on forms provided by the Commissioner.
21 (d) Prior to signing a certificate of completion,
22 counselors shall privately discuss with the attendee that
23 attendee's income and expense statement and balance sheet, as
24 well as the terms of any loan the attendee currently has or
25 may be contemplating and provide a third party review to
26 establish the affordability of the loan.
27 (e) Counseling session attendees must also be given a
28 brochure that contains information covered by the Mortgage
29 Awareness Program.
30 (f) An association, prior to making a high risk home
31 loan, shall inform the borrower in writing of the right to
32 participate in the Mortgage Awareness Program.
33 (g) An association may not offer less favorable loan
34 terms to a borrower due to a borrower participating in a
-30- LRB9200795JSdvam04
1 Mortgage Awareness Program.
2 (h) Except as prohibited elsewhere in this Act, the
3 borrower may waive participation in the program, provided
4 that the waiver occurs no less than 2 business days after the
5 day that the borrower receives the written notice required by
6 subsection (f) and that the waiver is in writing in a form
7 approved by the Commissioner.
8 (205 ILCS 105/5-30 new)
9 Sec. 5-30. Report of default and foreclosure rates on
10 conventional loans.
11 (a) On or before August 1 and February 1 of each year,
12 an association that is a servicer of Illinois residential
13 mortgage loans shall report to the Commissioner the default
14 and foreclosure data of conventional loans for the 6-month
15 periods ending June 30 and December 31, respectively.
16 (b) An association shall report for each loan in default
17 or foreclosure:
18 (1) name of borrowers;
19 (2) address of the property mortgaged;
20 (3) census tract of the property mortgaged;
21 (4) status of the loan (default or foreclosure);
22 (5) date the loan was consummated;
23 (6) name and license number of any licensee under
24 the Residential Mortgage License Act of 1987 who
25 originated the loan;
26 (7) name and address of any non-licensed or exempt
27 entity that originated the loan.
28 (205 ILCS 105/5-31 new)
29 Sec. 5-31. Commissioner's authority; unusually high
30 foreclosure rate on conventional loans. The Commissioner may
31 take any action permitted under Section 5-32 or any other
32 Section of this Act whenever the Commissioner determines
-31- LRB9200795JSdvam04
1 that, based upon an association's report under Section 5-30,
2 the association's foreclosure rate on conventional mortgage
3 loans in a particular area, as deemed by the Commissioner on
4 a case-by-case basis, is higher than a rate deemed
5 appropriate by the Commissioner in that particular area. The
6 Commissioner shall determine the appropriate rate for a
7 particular area by calculating the average of the default and
8 foreclosure rates on conventional mortgage loans in the same
9 area for the same period of time based on information filed
10 with the Commissioner pursuant to the Act. An association's
11 rate that exceeds such average shall be considered unusually
12 high.
13 (205 ILCS 105/5-32 new)
14 Sec. 5-32. Commissioner's action; unusually high
15 foreclosure rate on conventional loans.
16 (a) Whenever an association's conventional loan default
17 and foreclosure rate for a particular 6-month period exceeds
18 the average calculated in Section 5-31, the Commissioner
19 shall:
20 (1) conduct an examination of the association;
21 (2) enter into a supervisory agreement with the
22 association to lower its default and foreclosure rate on
23 conventional loans based on an analysis of its rate and
24 the results of the examination with a timetable for
25 achieving results;
26 (3) use a variety of remedies in a supervisory
27 agreement on a case-by-case basis to effect a lowering of
28 a default and foreclosure rate on conventional loans,
29 such as:
30 (A) requiring use of borrower balance sheet,
31 cash flow statement, and income and expense forms on
32 future loans;
33 (B) providing of a counseling video to
-32- LRB9200795JSdvam04
1 borrowers of future loans;
2 (C) mandating that all prospective borrowers
3 bring their loan applications to the Commissioner
4 for a third party review as described in Section
5 5-33;
6 (D) levying fines;
7 (E) using other regulatory means up to and
8 including issuance of a cease and desist order.
9 (b) When the loan analysis described in subsection (a)
10 of Section 5-30 and in Section 5-31 shows that a licensee
11 under the Residential Mortgage License Act of 1987 acting as
12 broker or originator is contributing to the high default and
13 foreclosure rate of the reporting association, that broker or
14 originator shall also be subject to examination and
15 supervisory agreement as defined in subsection (a).
16 (205 ILCS 105/5-33 new)
17 Sec. 5-33. Third party review of high risk home loans.
18 (a) In the case of any high risk home loan, the borrower
19 shall be afforded the opportunity to seek independent review
20 of the loan terms in order to determine affordability of the
21 loan when and if the General Assembly appropriates adequate
22 funding to the Office of Banks and Real Estate specifically
23 for this program.
24 (b) The Commissioner shall establish a loan worksheet
25 and a system for review of loan terms to be performed by
26 staff of the Office of Banks and Real Estate.
27 (c) A borrower shall submit information requested on the
28 worksheet, including but not limited to information regarding
29 the borrower's financial status and budget and the terms of
30 the loan.
31 (d) The review of the worksheet shall provide the
32 borrower, at a minimum, with a projection of the amount of
33 each payment for the loan, taking into account balloon
-33- LRB9200795JSdvam04
1 payments and adjustable interest rates. The review shall also
2 inform the borrower of the amount of monthly payment the
3 borrower can afford within the borrower's budget.
4 (e) The results of the review shall be in the form of a
5 written report, with a signature of the borrower
6 acknowledging receipt of a copy of the report. A copy of the
7 written and signed report shall be submitted to the
8 association prior to the closing of the loan, and shall
9 become a part of the permanent file for the loan.
10 (f) If, in the opinion of the reviewer of the high risk
11 home loan documentation, the loan does not make economic
12 sense to the borrower, the reviewer shall so note this in the
13 results of the review sent to the association. This finding
14 shall enable the borrower to withdraw from the contemplated
15 loan with no financial penalty.
16 Section 15. The Savings Bank Act is amended by adding
17 Sections 1007.125, 1007.130, 1007,135, 1007.140, 6015, 6016,
18 6017, 6018, 6019, 6020, 6021, 6022, 6023, 6024, 6025, 6026,
19 6027, 6028, 6029, 6030, and 6031 as follows:
20 (205 ILCS 205/1007.125 new)
21 Sec. 1007.125. High risk home loan. "High risk home
22 loan" means a home equity loan in which:
23 (1) at the time of origination, the APR exceeds by
24 more than 6 percentage points in the case of a first lien
25 mortgage, or by more than 8 percentage points in the case
26 of a junior mortgage, the yield on U.S. Treasury
27 securities having comparable periods of maturity to the
28 loan maturity as of the 15th day of the month immediately
29 preceding the month in which the application for the loan
30 is received by the savings bank; or
31 (2) the total points and fees payable by the
32 consumer at or before closing will exceed the greater of
-34- LRB9200795JSdvam04
1 5% of the total loan amount or $800.
2 The $800 limitation shall be adjusted annually on January
3 1 by the annual percentage change in the Consumer Price
4 Index.
5 However, "high risk home loan" does not mean a loan that
6 is made primarily for a business purpose unrelated to the
7 residential real property securing the loan and to an
8 open-end credit plan subject to subchapter B or Section
9 226.32 of 12 CFR 226 (2000), no subsequent dates or editions
10 are included.
11 (205 ILCS 205/1007.130 new)
12 Sec. 1007.130. Points and fees. "Points and fees" means:
13 (1) all items required to be disclosed under 12 CFR
14 226.5 (2000), no subsequent dates or editions are
15 included;
16 (2) the premium of any single premium credit life,
17 credit disability, credit unemployment, or any other life
18 or health insurance that is financed directly or
19 indirectly into the loan; and
20 (3) all compensation paid directly or indirectly to
21 a mortgage broker, including a broker that originates a
22 loan in its own name in a tablefunded transaction.
23 (205 ILCS 205/1007.135 new)
24 Sec. 1007.135. Servicer. "Servicer" means any entity
25 subject to this Act that is responsible for the collection or
26 remittance for, or the right or obligation to collect or
27 remit for, any lender, noteowner, noteholder, or for the
28 entity's own account, of payments, interest, principal, and
29 trust items such as hazard insurance and taxes on a
30 residential mortgage loan in accordance with the terms of the
31 residential mortgage loan; and includes loan payment
32 follow-up, delinquency loan follow-up, loan analysis, and any
-35- LRB9200795JSdvam04
1 notifications to the borrower that are necessary to enable
2 the borrower to keep the loan current and in good standing.
3 (205 ILCS 205/1007.140 new)
4 Sec. 1007.140. Total loan amount. "Total loan amount"
5 means the same as the term used in Section 226.32 of Title 12
6 of the Code of Federal Regulations, and the same shall be
7 calculated in accordance with the Federal Reserve Board's
8 Official Staff Commentary thereto.
9 (205 ILCS 205/6015 new)
10 Sec. 6015. Ability to repay. A savings bank may not make
11 a high risk home loan if the savings bank does not believe at
12 the time the loan is consummated that the borrower or
13 borrowers will be able to make the scheduled payments to
14 repay the obligation based upon a consideration of their
15 current and expected income, current obligations, employment
16 status, and other financial resources (other than the
17 borrower's equity in the dwelling that secures repayment of
18 the loan). A borrower shall be presumed to be able to repay
19 the loan if, at the time the loan is consummated, or at the
20 time of the first rate adjustment in the case of a lower
21 introductory interest rate, the borrower's scheduled monthly
22 payments on the loan (including principal, interest, taxes,
23 insurance, and assessments), combined with the scheduled
24 payments for all other disclosed debts, do not exceed 50% of
25 the borrower's monthly gross income.
26 (205 ILCS 205/6016 new)
27 Sec. 6016. Verification of ability to pay loan. The
28 savings bank shall verify the borrower's ability to repay the
29 loan in the case of high risk home loans. The verification
30 shall require, at a minimum, that the savings bank:
31 (1) prepare a personal income and expense
-36- LRB9200795JSdvam04
1 statement, with information provided by the borrower, in
2 a form prescribed by the Commissioner;
3 (2) verify the borrower's income by means of tax
4 returns, pay stubs, accounting statements, or other
5 prudent means; and
6 (3) obtain a credit report regarding the borrower.
7 (205 ILCS 205/6017 new)
8 Sec. 6017. Fraudulent or deceptive practices. A savings
9 bank may not employ employ fraudulent or deceptive acts or
10 practices in the making of a high risk home loan, including
11 deceptive marketing and sales efforts.
12 (205 ILCS 205/6018 new)
13 Sec. 6018. Prepayment penalties. A savings bank may not
14 make a high risk home loan that calls for a prepayment
15 penalty (i) made after the expiration of the 36-month period
16 following the date the loan was made or (ii) that is more
17 than 3% of the total loan amount if the prepayment is made
18 within the first 12-month period following the date the loan
19 was made, or more than 2% of the total loan amount if the
20 prepayment is made within the second 12 month period after
21 the date the loan was made, or more than 1% of the total loan
22 amount if the prepayment is made within the third 12-month
23 period following the date the loan was made.
24 (205 ILCS 205/6019 new)
25 Sec. 6019. Pre-paid insurance products and warranties. A
26 savings bank may not make a high risk home loan that finances
27 a single premium credit life, credit disability, credit
28 unemployment, or any other life or health insurance, directly
29 or indirectly. Insurance previously calculated and paid on a
30 monthly basis shall not be considered to be financed by the
31 savings bank.
-37- LRB9200795JSdvam04
1 (205 ILCS 205/6020 new)
2 Sec. 6020. Refinancing prohibited in certain cases. A
3 savings bank may not refinance any high risk home loan where
4 the refinancing charges additional points and fees within a
5 12 month period after the refinanced loan was originated,
6 unless the refinancing results in a financial benefit to the
7 borrower.
8 (205 ILCS 205/6021 new)
9 Sec. 6021. Balloon payments. A savings bank may not make
10 a high risk home loan that contains a scheduled final payment
11 that is more than twice as large as the average of earlier
12 scheduled monthly payments unless the balloon payment becomes
13 due and payable at least 15 years after the loan's
14 origination. This prohibition does not apply when the
15 payment schedule is adjusted to account for the seasonal or
16 irregular income of the borrower or if the purpose of the
17 loan is a "bridge" loan connected with the acquisition or
18 construction of a dwelling intended to become the borrower's
19 principal dwelling.
20 (205 ILCS 205/6022 new)
21 Sec. 6022. Financing of certain points and fees. A
22 savings bank may not make a high risk home loan that finances
23 points and fees in excess of 6% of the total loan amount.
24 (205 ILCS 205/6023 new)
25 Sec. 6023. Payments to contractors. A savings bank may
26 not make a payment to a contractor under a home improvement
27 contract other than:
28 (1) by instrument payable to the borrower or
29 jointly to the borrower and the contractor; or
30 (2) at the election of the borrower, by a third
31 party escrow agent in accordance with the terms
-38- LRB9200795JSdvam04
1 established in a written agreement signed by the
2 borrower, the savings bank, and the contractor before the
3 date of payment.
4 (205 ILCS 205/6024 new)
5 Sec. 6024. Negative amortization. A savings bank may not
6 make a high risk home loan, other than a loan secured only by
7 a reverse mortgage, with terms under which the outstanding
8 balance will increase at any time over the course of the loan
9 because the regular periodic payments do not cover the full
10 amount of the interest due, unless the negative amortization
11 is the consequence of a temporary forbearance sought by the
12 borrower.
13 (205 ILCS 205/6025 new)
14 Sec. 6025. Negative equity. A savings bank may not make a
15 high risk home loan where the loan amount exceeds the equity
16 of the property securing the loan.
17 (205 ILCS 205/6026 new)
18 Sec. 6026. Counseling prior to perfecting foreclosure
19 proceedings.
20 (a) If a high risk home loan becomes delinquent by more
21 than 30 days, the servicer shall send a notice advising the
22 borrower that he or she may wish to seek consumer credit
23 counseling.
24 (b) The notice required in subsection (a) shall, at a
25 minimum, include the following language:
26 "YOUR LOAN IS OR WAS MORE THAN 30 DAYS PAST DUE. YOU MAY
27 BE EXPERIENCING FINANCIAL DIFFICULTY. IT MAY BE IN YOUR
28 BEST INTEREST TO SEEK APPROVED CONSUMER CREDIT
29 COUNSELING. A LIST OF APPROVED CREDIT COUNSELORS MAY BE
30 OBTAINED FROM THE ILLINOIS OFFICE OF BANKS AND REAL
31 ESTATE."
-39- LRB9200795JSdvam04
1 (c) If a savings bank or its agent is notified in
2 writing by an approved consumer credit counselor and the
3 approved consumer credit counselor advises the savings bank
4 or its agent that the borrower is seeking approved consumer
5 credit counseling, then the savings bank and its agent shall
6 not institute legal action under Part 15 of Article XV of the
7 Code of Civil Procedure for 30 days from the date of that
8 notice. Only one such 30-day period of forbearance is
9 allowed under this Section per subject loan.
10 (d) If, within the 30-day period provided under
11 subsection (c), the savings bank or its agent, the approved
12 consumer credit counselor, and the borrower agree to a debt
13 management plan, then the savings bank and its agent shall
14 not institute legal action under Part 15 of Article XV of the
15 Code of Civil Procedure for so long as the debt management
16 plan is complied with by the borrower.
17 (1) The agreed debt management plan must be in
18 writing and signed by the savings bank or its agent, the
19 approved consumer credit counselor, and the borrower. A
20 modification of an approved debt management plan may not
21 be made without the mutual agreement of the savings bank
22 or its agent, the approved consumer credit counselor, and
23 the borrower.
24 (2) Upon written notice to the savings bank or its
25 agent, the borrower may change approved consumer credit
26 counselors.
27 (e) If the borrower fails to comply with the agreed debt
28 management plan, then nothing in this Section shall be
29 construed to impair the legal right of the savings bank or
30 its agent to enforce contracts or mortgage agreements.
31 (f) This Section applies only to high risk home loans.
32 (205 ILCS 205/6027 new)
33 Sec. 6027. Mortgage awareness program.
-40- LRB9200795JSdvam04
1 (a) The Mortgage Awareness Program is a counseling and
2 educational component that is provided by the Director of
3 the Department of Financial Institutions.
4 (b) The core curriculum of the Mortgage Awareness
5 Program shall include:
6 (1) explanation of the amount financed;
7 (2) explanation of the finance charge;
8 (3) explanation of the annual percentage rate;
9 (4) explanation of the total payments;
10 (5) explanation of the loan costs, including
11 broker's fees, finance charges, points, origination fees,
12 and all other charges and fees;
13 (6) explanation of the right of rescission;
14 (7) explanation of foreclosure procedures;
15 (8) explanation of the significant debt ratios,
16 including total debt to income, loan debt to income, and
17 loan debt to value of residence;
18 (9) explanation of adjustable rate mortgage;
19 (10) explanation of balloon payments;
20 (11) explanation of credit options;
21 (12) explanation of each item that appears on a
22 good faith estimate; and
23 (13) explanation of pre-payment penalties.
24 (c) Counseling session attendees must also complete a
25 personal income and expense statement, as well as a balance
26 sheet, on forms provided by the Commissioner.
27 (d) Prior to signing a certificate of completion,
28 counselors shall privately discuss with the attendee that
29 attendee's income and expense statement and balance sheet, as
30 well as the terms of any loan the attendee currently has or
31 may be contemplating and provide a third party review to
32 establish the affordability of the loan.
33 (e) Counseling session attendees must also be given a
34 brochure that contains information covered by the Mortgage
-41- LRB9200795JSdvam04
1 Awareness Program.
2 (f) A savings bank, prior to making a high risk home
3 loan, shall inform the borrower in writing of the right to
4 participate in the Mortgage Awareness Program.
5 (g) A savings bank may not offer less favorable loan
6 terms to a borrower due to a borrower participating in a
7 Mortgage Awareness Program.
8 (h) Except as prohibited elsewhere in this Act, the
9 borrower may waive participation in the program, provided
10 that the waiver occurs no less than 2 business days after the
11 day that the borrower receives the written notice required by
12 subsection (f) and that the waiver is in writing in a form
13 approved by the Commissioner.
14 (205 ILCS 205/6028 new)
15 Sec. 6028. Report of default and foreclosure rates on
16 conventional loans.
17 (a) On or before August 1 and February 1 of each year, a
18 savings bank that is a servicer of Illinois residential
19 mortgage loans shall report to the Commissioner the default
20 and foreclosure data of conventional loans for the 6-month
21 periods ending June 30 and December 31, respectively.
22 (b) A savings bank shall report for each loan in default
23 or foreclosure:
24 (1) name of borrowers;
25 (2) address of the property mortgaged;
26 (3) census tract of the property mortgaged;
27 (4) status of the loan (default or foreclosure);
28 (5) date the loan was consummated;
29 (6) name and license number of any licensee under
30 the Residential Mortgage License Act of 1987 who
31 originated the loan;
32 (7) name and address of any non-licensed or exempt
33 entity that originated the loan.
-42- LRB9200795JSdvam04
1 (205 ILCS 205/6029 new)
2 Sec. 6029. Commissioner's authority; unusually high
3 foreclosure rate on conventional loans. The Commissioner may
4 take any action permitted under Section 6030 or any other
5 Section of this Act whenever the Commissioner determines
6 that, based upon a savings bank's report under Section 6028,
7 the savings bank's foreclosure rate on conventional mortgage
8 loans in a particular area, as deemed by the Commissioner on
9 a case-by-case basis, is higher than a rate deemed
10 appropriate by the Commissioner in that particular area. The
11 Commissioner shall determine the appropriate rate for a
12 particular area by calculating the average of the default and
13 foreclosure rates on conventional mortgage loans in the same
14 area for the same period of time based on information filed
15 with the Commissioner pursuant to the Act. A savings bank's
16 rate that exceeds such average shall be considered unusually
17 high.
18 (205 ILCS 205/6030 new)
19 Sec. 6030. Commissioner's action; unusually high
20 foreclosure rate on conventional loans.
21 (a) Whenever a savings bank's conventional loan default
22 and foreclosure rate for a particular 6-month period exceeds
23 the average calculated in Section 6029, the Commissioner
24 shall:
25 (1) conduct an examination of the savings bank;
26 (2) enter into a supervisory agreement with the
27 savings bank to lower its default and foreclosure rate on
28 conventional loans based on an analysis of its rate and
29 the results of the examination with a timetable for
30 achieving results;
31 (3) use a variety of remedies in a supervisory
32 agreement on a case-by-case basis to effect a lowering of
33 a default and foreclosure rate on conventional loans,
-43- LRB9200795JSdvam04
1 such as:
2 (A) requiring use of borrower balance sheet,
3 cash flow statement, and income and expense forms on
4 future loans;
5 (B) providing of a counseling video to
6 borrowers of future loans;
7 (C) mandating that all prospective borrowers
8 bring their loan applications to the Commissioner
9 for a third party review as described in Section
10 6031;
11 (D) levying fines;
12 (E) using other regulatory means up to and
13 including issuance of a cease and desist order.
14 (b) When the loan analysis described in subsection (a)
15 of Section 6028 and in Section 6029 shows that a licensee
16 under the Residential Mortgage License Act of 1987 acting as
17 broker or originator is contributing to the high default and
18 foreclosure rate of the reporting savings bank, that broker
19 or originator shall also be subject to examination and
20 supervisory agreement as defined in subsection (a).
21 (205 ILCS 205/6031 new)
22 Sec. 6031. Third party review of high risk home loans.
23 (a) In the case of any high risk home loan, the borrower
24 shall be afforded the opportunity to seek independent review
25 of the loan terms in order to determine affordability of the
26 loan when and if the General Assembly appropriates adequate
27 funding to the Office of Banks and Real Estate specifically
28 for this program.
29 (b) The Commissioner shall establish a loan worksheet
30 and a system for review of loan terms to be performed by
31 staff of the Office of Banks and Real Estate.
32 (c) A borrower shall submit information requested on the
33 worksheet, including but not limited to information regarding
-44- LRB9200795JSdvam04
1 the borrower's financial status and budget and the terms of
2 the loan.
3 (d) The review of the worksheet shall provide the
4 borrower, at a minimum, with a projection of the amount of
5 each payment for the loan, taking into account balloon
6 payments and adjustable interest rates. The review shall also
7 inform the borrower of the amount of monthly payment the
8 borrower can afford within the borrower's budget.
9 (e) The results of the review shall be in the form of a
10 written report, with a signature of the borrower
11 acknowledging receipt of a copy of the report. A copy of the
12 written and signed report shall be submitted to the savings
13 bank prior to the closing of the loan, and shall become a
14 part of the permanent file for the loan.
15 (f) If, in the opinion of the reviewer of the high risk
16 home loan documentation, the loan does not make economic
17 sense to the borrower, the reviewer shall so note this in the
18 results of the review sent to the savings bank. This finding
19 shall enable the borrower to withdraw from the contemplated
20 loan with no financial penalty.
21 Section 20. The Illinois Credit Union Act is amended by
22 changing Section 1.1 and adding Sections 66.1, 66.2, 66.3,
23 66.4, 66.5, 66.6, 66.7, 66.8, 66.9, 66.10, 66.11, 66.12,
24 66.13, 66.14, and 66.15 as follows;
25 (205 ILCS 305/1.1) (from Ch. 17, par. 4402)
26 Sec. 1.1. Definitions. Credit Union - The term "credit
27 union" means a cooperative, non-profit association,
28 incorporated under this Act, under the laws of the United
29 States of America or under the laws of another state, for the
30 purposes of encouraging thrift among its members, creating a
31 source of credit at a reasonable rate of interest, and
32 providing an opportunity for its members to use and control
-45- LRB9200795JSdvam04
1 their own money in order to improve their economic and social
2 conditions. The membership of a credit union shall consist of
3 a group or groups each having a common bond as set forth in
4 this Act.
5 Common Bond - The term "common bond" refers to groups of
6 people who meet one of the following qualifications:
7 (1) Persons belonging to a specific association, group
8 or organization, such as a church, labor union, club or
9 society and members of their immediate families which shall
10 include any relative by blood or marriage or foster and
11 adopted children.
12 (2) Persons who reside in a reasonably compact and well
13 defined neighborhood or community, and members of their
14 immediate families which shall include any relative by blood
15 or marriage or foster and adopted children.
16 (3) Persons who have a common employer or who are
17 members of an organized labor union or an organized
18 occupational or professional group within a defined
19 geographical area, and members of their immediate families
20 which shall include any relative by blood or marriage or
21 foster and adopted children.
22 Shares - The term "shares" or "share accounts" means any
23 form of shares issued by a credit union and established by a
24 member in accordance with standards specified by a credit
25 union, including but not limited to common shares, share
26 draft accounts, classes of shares, share certificates,
27 special purpose share accounts, shares issued in trust,
28 custodial accounts, and individual retirement accounts or
29 other plans established pursuant to Section 401(d) or (f) or
30 Section 408(a) of the Internal Revenue Code, as now or
31 hereafter amended, or similar provisions of any tax laws of
32 the United States that may hereafter exist.
33 Credit Union Organization - The term "credit union
34 organization" means any organization established to serve the
-46- LRB9200795JSdvam04
1 needs of credit unions, the business of which relates to the
2 daily operations of credit unions.
3 Department - The term "Department" means the Illinois
4 Department of Financial Institutions.
5 Director - The term "Director" means the Director of the
6 Illinois Department of Financial Institutions.
7 NCUA - The term "NCUA" means the National Credit Union
8 Administration, an agency of the United States Government
9 charged with the supervision of credit unions chartered under
10 the laws of the United States of America.
11 Central Credit Union - The term "central credit union"
12 means a credit union incorporated primarily to receive shares
13 from and make loans to credit unions and Directors, Officers,
14 committee members and employees of credit unions. A central
15 credit union may also accept as members persons who were
16 members of credit unions which were liquidated and persons
17 from occupational groups not otherwise served by another
18 credit union.
19 Corporate Credit Union - The term "corporate credit
20 union" means a credit union which is a cooperative,
21 non-profit association, the membership of which is limited
22 primarily to other credit unions.
23 Insolvent - "Insolvent" means the condition that results
24 when the total of all liabilities and shares exceeds net
25 assets of the credit union.
26 Danger of insolvency - The term "Danger of insolvency" as
27 used in Section 61 means when a credit union falls below a 2%
28 capital to asset ratio.
29 "Good faith" means honesty in fact in the conduct of a
30 transaction.
31 "High risk home loan" means a home equity loan in which:
32 (1) at the time of origination, the APR exceeds by
33 more than 6 percentage points in the case of a first lien
34 mortgage, or by more than 8 percentage points in the case
-47- LRB9200795JSdvam04
1 of a junior mortgage, the yield on U.S. Treasury
2 securities having comparable periods of maturity to the
3 loan maturity as of the 15th day of the month immediately
4 preceding the month in which the application for the loan
5 is received by the credit union; or
6 (2) the total points and fees payable by the
7 consumer at or before closing will exceed the greater of
8 5% of the total loan amount or $800.
9 The $800 limitation shall be adjusted annually on January
10 1 by the annual percentage change in the Consumer Price
11 Index.
12 However, "high risk home loan" does not mean a loan that
13 is made primarily for a business purpose unrelated to the
14 residential real property securing the loan and to an
15 open-end credit plan subject to subchapter B or Section
16 226.32 of 12 CFR 226 (2000), no subsequent dates or editions
17 are included.
18 "Points and fees" means:
19 (1) all items required to be disclosed under 12 CFR
20 226.5 (2000), no subsequent dates or editions are
21 included;
22 (2) the premium of any single premium credit life,
23 credit disability, credit unemployment, or any other life
24 or health insurance that is financed directly or
25 indirectly into the loan; and
26 (3) all compensation paid directly or indirectly to
27 a mortgage broker, including a broker that originates a
28 loan in its own name in a tablefunded transaction.
29 "Total loan amount" means the same as the term used in
30 Section 226.32 of Title 12 of the Code of Federal
31 Regulations, and the same shall be calculated in accordance
32 with the Federal Reserve Board's Official Staff Commentary
33 thereto.
34 (Source: P.A. 90-665, eff. 7-30-98.)
-48- LRB9200795JSdvam04
1 (205 ILCS 305/66.1 new)
2 Sec. 66.1. Good faith requirements.
3 (a) Any disclosure or action required in connection with
4 a high risk home loan must be made in good faith.
5 (b) A credit union may not accept a fee or charge for a
6 high risk home loan application unless the credit union is
7 able to demonstrate to the Director that, if its high risk
8 home loan requirements are met, there is a reasonable
9 likelihood that a loan commitment will be issued for the loan
10 for the amount, term, rate, charges, and other conditions set
11 forth n the loan application and the applicable disclosures
12 and documents required and that the loan has a reasonable
13 likelihood of being repaid by the applicant.
14 (c) A credit union that has accepted an application for
15 a high risk home loan must make a good faith effort to
16 process the application within the time specified in the loan
17 application.
18 (205 ILCS 305/66.2 new)
19 Sec. 66.2. Ability to repay. A credit union may not make
20 a high risk home loan if the credit union does not believe at
21 the time the loan is consummated that the borrower or
22 borrowers will be able to make the scheduled payments to
23 repay the obligation based upon a consideration of their
24 current and expected income, current obligations, employment
25 status, and other financial resources (other than the
26 borrower's equity in the dwelling that secures repayment of
27 the loan). A borrower shall be presumed to be able to repay
28 the loan if, at the time the loan is consummated, or at the
29 time of the first rate adjustment in the case of a lower
30 introductory interest rate, the borrower's scheduled monthly
31 payments on the loan (including principal, interest, taxes,
32 insurance, and assessments), combined with the scheduled
33 payments for all other disclosed debts, do not exceed 50% of
-49- LRB9200795JSdvam04
1 the borrower's monthly gross income.
2 (205 ILCS 305/66.3 new)
3 Sec. 66.3. Verification of ability to pay loan. The
4 credit union shall verify the borrower's ability to repay the
5 loan in the case of high risk home loans. The verification
6 shall require, at a minimum, that the credit union:
7 (1) prepare a personal income and expense
8 statement, with information provided by the borrower, in
9 a form prescribed by the Director;
10 (2) verify the borrower's income by means of tax
11 returns, pay stubs, accounting statements, or other
12 prudent means; and
13 (3) obtain a credit report regarding the borrower.
14 (205 ILCS 305/66.4 new)
15 Sec. 66.4. Fraudulent or deceptive practices. A credit
16 union may not employ employ fraudulent or deceptive acts or
17 practices in the making of a high risk home loan, including
18 deceptive marketing and sales efforts.
19 (205 ILCS 305/66.5 new)
20 Sec. 66.5. Prepayment penalties. A credit union may not
21 make a high risk home loan that calls for a prepayment
22 penalty (i) made after the expiration of the 36-month period
23 following the date the loan was made or (ii) that is more
24 than 3% of the total loan amount if the prepayment is made
25 within the first 12-month period following the date the loan
26 was made, or more than 2% of the total loan amount if the
27 prepayment is made within the second 12 month period after
28 the date the loan was made, or more than 1% of the total loan
29 amount if the prepayment is made within the third 12-month
30 period following the date the loan was made.
-50- LRB9200795JSdvam04
1 (205 ILCS 305/66.6 new)
2 Sec. 66.6. Pre-paid insurance products and warranties. A
3 credit union may not make a high risk home loan that finances
4 a single premium credit life, credit disability, credit
5 unemployment, or any other life or health insurance, directly
6 or indirectly. Insurance previously calculated and paid on a
7 monthly basis shall not be considered to be financed by the
8 credit union.
9 (205 ILCS 305/66.7 new)
10 Sec. 66.7. Refinancing prohibited in certain cases. A
11 credit union may not refinance any high risk home loan where
12 the refinancing charges additional points and fees within a
13 12 month period after the refinanced loan was originated,
14 unless the refinancing results in a financial benefit to the
15 borrower.
16 (205 ILCS 305/66.8 new)
17 Sec. 66.8. Balloon payments. A credit union may not make
18 a high risk home loan that contains a scheduled final payment
19 that is more than twice as large as the average of earlier
20 scheduled monthly payments unless the balloon payment becomes
21 due and payable at least 15 years after the loan's
22 origination. This prohibition does not apply when the
23 payment schedule is adjusted to account for the seasonal or
24 irregular income of the borrower or if the purpose of the
25 loan is a "bridge" loan connected with the acquisition or
26 construction of a dwelling intended to become the borrower's
27 principal dwelling.
28 (205 ILCS 305/66.9 new)
29 Sec. 66.9. Financing of certain points and fees. A
30 credit union may not make a high risk home loan that finances
31 points and fees in excess of 6% of the total loan amount.
-51- LRB9200795JSdvam04
1 (205 ILCS 305/66.10 new)
2 Sec. 66.10. Payments to contractors. A credit union may
3 not make a payment to a contractor under a home improvement
4 contract other than:
5 (1) by instrument payable to the borrower or
6 jointly to the borrower and the contractor; or
7 (2) at the election of the borrower, by a third
8 party escrow agent in accordance with the terms
9 established in a written agreement signed by the
10 borrower, the credit union, and the contractor before the
11 date of payment.
12 (205 ILCS 305/66.11 new)
13 Sec. 66.11. Negative amortization. A credit union may
14 not make a high risk home loan, other than a loan secured
15 only by a reverse mortgage, with terms under which the
16 outstanding balance will increase at any time over the course
17 of the loan because the regular periodic payments do not
18 cover the full amount of the interest due, unless the
19 negative amortization is the consequence of a temporary
20 forbearance sought by the borrower.
21 (205 ILCS 305/66.12 new)
22 Sec. 66.12. Negative equity. A credit union may not make
23 a high risk home loan where the loan amount exceeds the
24 equity of the property securing the loan.
25 (205 ILCS 305/66.13 new)
26 Sec. 66.13. Counseling prior to perfecting foreclosure
27 proceedings.
28 (a) If a high risk home loan becomes delinquent by more
29 than 30 days, the credit union shall send a notice advising
30 the borrower that he or she may wish to seek consumer credit
31 counseling.
-52- LRB9200795JSdvam04
1 (b) The notice required in subsection (a) shall, at a
2 minimum, include the following language:
3 "YOUR LOAN IS OR WAS MORE THAN 30 DAYS PAST DUE. YOU MAY
4 BE EXPERIENCING FINANCIAL DIFFICULTY. IT MAY BE IN YOUR
5 BEST INTEREST TO SEEK APPROVED CONSUMER CREDIT
6 COUNSELING. A LIST OF APPROVED CREDIT COUNSELORS MAY BE
7 OBTAINED FROM THE DEPARTMENT OF FINANCIAL INSTITUTIONS."
8 (c) If a credit union or its agent is notified in
9 writing by an approved consumer credit counselor and the
10 approved consumer credit counselor advises the credit union
11 or its agent that the borrower is seeking approved consumer
12 credit counseling, then the credit union and its agent shall
13 not institute legal action under Part 15 of Article XV of the
14 Code of Civil Procedure for 30 days from the date of that
15 notice. Only one such 30-day period of forbearance is
16 allowed under this Section per subject loan.
17 (d) If, within the 30-day period provided under
18 subsection (c), the credit union or its agent, the approved
19 consumer credit counselor, and the borrower agree to a debt
20 management plan, then the credit union and its agent shall
21 not institute legal action under Part 15 of Article XV of the
22 Code of Civil Procedure for so long as the debt management
23 plan is complied with by the borrower.
24 (1) The agreed debt management plan must be in
25 writing and signed by the credit union or its agent, the
26 approved consumer credit counselor, and the borrower. A
27 modification of an approved debt management plan may not
28 be made without the mutual agreement of the credit union
29 or its agent, the approved consumer credit counselor, and
30 the borrower.
31 (2) Upon written notice to the credit union or its
32 agent, the borrower may change approved consumer credit
33 counselors.
34 (e) If the borrower fails to comply with the agreed debt
-53- LRB9200795JSdvam04
1 management plan, then nothing in this Section shall be
2 construed to impair the legal right of the credit union or
3 its agent to enforce contracts or mortgage agreements.
4 (f) This Section applies only to high risk home loans.
5 (205 ILCS 305/66.14 new)
6 Sec. 66.14. Mortgage awareness program.
7 (a) The Mortgage Awareness Program is a counseling and
8 educational program that is provided by the Director.
9 (b) The core curriculum of the Mortgage Awareness
10 Program shall include:
11 (1) explanation of the amount financed;
12 (2) explanation of the finance charge;
13 (3) explanation of the annual percentage rate;
14 (4) explanation of the total payments;
15 (5) explanation of the loan costs, including
16 broker's fees, finance charges, points, origination fees,
17 and all other charges and fees;
18 (6) explanation of the right of rescission;
19 (7) explanation of foreclosure procedures;
20 (8) explanation of the significant debt ratios,
21 including total debt to income, loan debt to income, and
22 loan debt to value of residence;
23 (9) explanation of adjustable rate mortgage;
24 (10) explanation of balloon payments;
25 (11) explanation of credit options;
26 (12) explanation of each item that appears on a
27 good faith estimate; and
28 (13) explanation of pre-payment penalties.
29 (c) Counseling session attendees must also complete a
30 personal income and expense statement, as well as a balance
31 sheet, on forms provided by the Commissioner.
32 (d) Prior to signing a certificate of completion,
33 counselors shall privately discuss with the attendee that
-54- LRB9200795JSdvam04
1 attendee's income and expense statement and balance sheet, as
2 well as the terms of any loan the attendee currently has or
3 may be contemplating and provide a third party review to
4 establish the affordability of the loan.
5 (e) Counseling session attendees must also be given a
6 brochure that contains information covered by the Mortgage
7 Awareness Program.
8 (f) A credit union, prior to making a high risk home
9 loan, shall inform the borrower in writing of the right to
10 participate in the Mortgage Awareness Program.
11 (g) A credit union may not offer less favorable loan
12 terms to a borrower due to a borrower participating in a
13 Mortgage Awareness Program.
14 (h) Except as prohibited elsewhere in this Act, the
15 borrower may waive participation in the program, provided
16 that the waiver occurs no less than 2 business days after the
17 day that the borrower receives the written notice required by
18 subsection (f) and that the waiver is in writing in a form
19 approved by the Director.
20 (205 ILCS 305/66.15 new)
21 Sec. 66.15. Third party review of high risk home loans.
22 (a) In the case of any high risk home loan, the borrower
23 shall be afforded the opportunity to seek independent review
24 of the loan terms in order to determine affordability of the
25 loan when and if the General Assembly appropriates adequate
26 funding to the Department of Financial Institutions
27 specifically for this program.
28 (b) The Director shall establish a loan worksheet and a
29 system for review of loan terms to be performed by staff of
30 the Department.
31 (c) A borrower shall submit information requested on the
32 worksheet, including but not limited to information regarding
33 the borrower's financial status and budget and the terms of
-55- LRB9200795JSdvam04
1 the loan.
2 (d) The review of the worksheet shall provide the
3 borrower, at a minimum, with a projection of the amount of
4 each payment for the loan, taking into account balloon
5 payments and adjustable interest rates. The review shall also
6 inform the borrower of the amount of monthly payment the
7 borrower can afford within the borrower's budget.
8 (e) The results of the review shall be in the form of a
9 written report, with a signature of the borrower
10 acknowledging receipt of a copy of the report. A copy of the
11 written and signed report shall be submitted to the credit
12 union prior to the closing of the loan, and shall become a
13 part of the permanent file for the loan.
14 (f) If, in the opinion of the reviewer of the high risk
15 home loan documentation, the loan does not make economic
16 sense to the borrower, the reviewer shall so note this in the
17 results of the review sent to the credit union. This finding
18 shall enable the borrower to withdraw from the contemplated
19 loan with no financial penalty.
20 Section 25. The Residential Mortgage License Act of 1987
21 is amended by changing Section 1-4 and adding Sections 5-2,
22 5-3, 5-4, 5-5, 5-6, 5-7, 5-8, 5-9, 5-10, 5-11, 5-12, 5-13,
23 5-14, 5-15, 5-16, 5-17, and 5-18 as follows:
24 (205 ILCS 635/1-4) (from Ch. 17, par. 2321-4)
25 Sec. 1-4. Definitions.
26 (a) "Residential real property" or "residential real
27 estate" shall mean real property located in this State
28 improved by a one-to-four family dwelling used or occupied,
29 wholly or partly, as the home or residence of one or more
30 persons and may refer, subject to regulations of the
31 Commissioner, to unimproved real property upon which those
32 kinds dwellings are to be constructed.
-56- LRB9200795JSdvam04
1 (b) "Making a residential mortgage loan" or "funding a
2 residential mortgage loan" shall mean for compensation or
3 gain, either directly or indirectly, advancing funds or
4 making a commitment to advance funds to a loan applicant for
5 a residential mortgage loan.
6 (c) "Soliciting, processing, placing, or negotiating a
7 residential mortgage loan" shall mean for compensation or
8 gain, either directly or indirectly, accepting or offering to
9 accept an application for a residential mortgage loan,
10 assisting or offering to assist in the processing of an
11 application for a residential mortgage loan on behalf of a
12 borrower, or negotiating or offering to negotiate the terms
13 or conditions of a residential mortgage loan with a lender on
14 behalf of a borrower including, but not limited to, the