HB0537 Engrossed LRB096 06068 MJR 16150 b

1     AN ACT concerning financial regulation.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Residential Mortgage License Act of 1987 is
5 amended by changing Section 5-8 as follows:
 
6     (205 ILCS 635/5-8)
7     Sec. 5-8. Prepayment penalties prohibited.
8     (a) No licensee may make, provide, or arrange a mortgage
9 loan with a prepayment penalty unless the licensee offers the
10 borrower a loan without a prepayment penalty, the offer is in
11 writing, and the borrower initials the offer to indicate that
12 the borrower has declined the offer. In addition, the licensee
13 must disclose the discount in rate received in consideration
14 for a mortgage loan with the prepayment penalty.
15     (b) (Blank). If a borrower declines an offer required under
16 subsection (a) of this Section, the licensee may include a
17 prepayment penalty that extends no longer than three years or
18 the first change date or rate adjustment of a variable rate
19 mortgage, whichever comes earlier, provided that, if a
20 prepayment is made during the fixed rate period, the licensee
21 shall receive an amount that is no more than:
22         (1) 3% of the total loan amount if the prepayment is
23     made within the first 12-month period following the date

 

 

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1     the loan was made;
2         (2) 2% of the total loan amount if the prepayment is
3     made within the second 12-month period following the date
4     the loan was made; or
5         (3) 1% of the total loan amount if the prepayment is
6     made within the third 12-month period following the date
7     the loan was made, if the fixed rate period extends 3
8     years.
9     (c) Prepayment Notwithstanding any provision in this
10 Section, prepayment penalties are prohibited in connection
11 with the sale or destruction of a dwelling secured by a
12 residential mortgage loan.
13     (d) This Section applies to loans made, refinanced,
14 renewed, extended, or modified on or after the effective date
15 of this amendatory Act of the 95th General Assembly.
16 (Source: P.A. 95-691, eff. 6-1-08.)
 
17     Section 10. The High Risk Home Loan Act is amended by
18 changing Section 30 as follows:
 
19     (815 ILCS 137/30)
20     Sec. 30. Prepayment penalty. For any loan that is subject
21 to the provisions of this Act and is not subject to the
22 provisions of the Home Ownership and Equity Protection Act of
23 1994, no lender shall make a high risk home loan that includes
24 a penalty provision for payment made: (i) after the expiration

 

 

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1 of the 36-month period following the date the loan was made; or
2 (ii) that is more than:
3         (1) 3% of the total loan amount if the prepayment is
4     made within the first 12-month period following the date
5     the loan was made;
6         (2) 2% of the total loan amount if the prepayment is
7     made within the second 12-month period following the date
8     the loan was made; or
9         (3) 1% of the total loan amount if the prepayment is
10     made within the third 12-month period following the date
11     the loan was made.
12 (Source: P.A. 93-561, eff. 1-1-04.)
 
13     Section 15. The Interest Act is amended by changing Section
14 4.1a as follows:
 
15     (815 ILCS 205/4.1a)  (from Ch. 17, par. 6406)
16     Sec. 4.1a. Charges for and cost of the following items paid
17 or incurred by any lender in connection with any loan shall not
18 be deemed to be charges for or in connection with any loan of
19 money referred to in Section 6 of this Act, or charges by the
20 lender as a consideration for the loan referred to in this
21 Section:
22         (a) hazard, mortgage or life insurance premiums,
23     survey, credit report, title insurance, abstract and
24     attorneys' fees, recording charges, escrow and appraisal

 

 

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1     fees, and similar charges.
2         (b) in the case of construction loans, in addition to
3     the matters referred to in clause (a) above, the actual
4     cost incurred by the lender for services for making
5     physical inspections, processing payouts, examining and
6     reviewing contractors' and subcontractors' sworn
7     statements and waivers of lien and the like.
8         (c) in the case of any loan made pursuant to the
9     provisions of the Emergency Home Purchase Assistance Act of
10     1974 (Section 313 of the National Housing Act, Chapter B of
11     Title 12 of the United States Code), in addition to the
12     matters referred to in paragraphs (a) and (b) of this
13     Section all charges required or allowed by the Government
14     National Mortgage Association, whether designated as
15     processing fees, commitment fees, loss reserve and
16     marketing fees, discounts, origination fees or otherwise
17     designated.
18         (d) in the case of a single payment loan, made for a
19     period of 6 months or less, a regulated financial
20     institution or licensed lender may contract for and receive
21     a maximum charge of $15 in lieu of interest. Such charge
22     may be collected when the loan is made, but only one such
23     charge may be contracted for, received, or collected for
24     any such loan, including any extension or renewal thereof.
25         (e) if the agreement governing the loan so provides, a
26     charge not to exceed the rate permitted under Section 3-806

 

 

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1     of the Uniform Commercial Code-Commercial Paper for any
2     check, draft or order for the payment of money submitted in
3     accordance with said agreement which is unpaid or not
4     honored by a bank or other depository institution.
5         (f) if the agreement governing the loan so provides,
6     for each loan installment in default for a period of not
7     less than 10 days, a charge in an amount not in excess of
8     5% of such loan installment. Only one delinquency charge
9     may be collected on any such loan installment regardless of
10     the period during which it remains in default. Payments
11     timely received by the lender under a written extension or
12     deferral agreement shall not be subject to any delinquency
13     charge.
14     Notwithstanding items (k) and (l) of subsection (1) of
15 Section 4 of this Act, the lender, in the case of any nonexempt
16 residential mortgage loan, as defined in Section 1-4 of the
17 Residential Mortgage License Act of 1987, shall have the right
18 to include a prepayment penalty that extends no longer than the
19 fixed rate period of a variable rate mortgage provided that, if
20 a prepayment is made during the fixed rate period and not in
21 connection with the sale or destruction of the dwelling
22 securing the loan, the lender shall receive an amount that is
23 no more than:
24         (1) 3% of the total loan amount if the prepayment is
25     made within the first 12-month period following the date
26     the loan was made;

 

 

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1         (2) 2% of the total loan amount if the prepayment is
2     made within the second 12-month period following the date
3     the loan was made; or
4         (3) 1% of the total loan amount if the prepayment is
5     made within the third 12-month period following the date
6     the loan was made, if the fixed rate period extends 3
7     years.
8     This Section applies to loans made, refinanced, renewed,
9 extended, or modified on or after the effective date of this
10 amendatory Act of the 95th General Assembly.
11     Where there is a charge in addition to the stated rate of
12 interest payable directly or indirectly by the borrower and
13 imposed directly or indirectly by the lender as a consideration
14 for the loan, or for or in connection with the loan of money,
15 whether paid or payable by the borrower, the seller, or any
16 other person on behalf of the borrower to the lender or to a
17 third party, or for or in connection with the loan of money,
18 other than as hereinabove in this Section provided, whether
19 denominated "points," "service charge," "discount,"
20 "commission," or otherwise, and without regard to declining
21 balances of principal which would result from any required or
22 optional amortization of the principal of the loan, the rate of
23 interest shall be calculated in the following manner:
24     The percentage of the principal amount of the loan
25 represented by all of such charges shall first be computed,
26 which in the case of a loan with an interest rate in excess of

 

 

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1 8% per annum secured by residential real estate, other than
2 loans described in paragraphs (e) and (f) of Section 4, shall
3 not exceed 3% of such principal amount. Said percentage shall
4 then be divided by the number of years and fractions thereof of
5 the period of the loan according to its stated maturity. The
6 percentage thus obtained shall then be added to the percentage
7 of the stated annual rate of interest.
8 (Source: P.A. 95-691, eff. 6-1-08.)