HB0705 Engrossed LRB096 08469 AJO 18588 b

1     AN ACT concerning property.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Residential Real Property Disclosure Act is
5 amended by changing Section 70 as follows:
 
6     (765 ILCS 77/70)
7     Sec. 70. Predatory lending database program.
8     (a) As used in this Article:
9     "Adjustable rate mortgage" or "ARM" means a closed-end
10 mortgage transaction that allows adjustments of the loan
11 interest rate during the first 3 years of the loan term.
12     "Borrower" means a person seeking a mortgage loan.
13     "Broker" means a "broker" or "loan broker", as defined in
14 subsection (p) of Section 1-4 of the Residential Mortgage
15 License Act of 1987.
16     "Closing agent" means an individual assigned by a title
17 insurance company or a broker or originator to ensure that the
18 execution of documents related to the closing of a real estate
19 sale or the refinancing of a real estate loan and the
20 disbursement of closing funds are in conformity with the
21 instructions of the entity financing the transaction.
22     "Counseling" means in-person counseling provided by a
23 counselor employed by a HUD-certified counseling agency to all

 

 

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1 borrowers, or documented telephone counseling where a hardship
2 would be imposed on one or more borrowers. A hardship shall
3 exist in instances in which the borrower is confined to his or
4 her home due to medical conditions, as verified in writing by a
5 physician, or the borrower resides 50 miles or more from the
6 nearest participating HUD-certified housing counseling agency.
7 In instances of telephone counseling, the borrower must supply
8 all necessary documents to the counselor at least 72 hours
9 prior to the scheduled telephone counseling session.
10     "Counselor" means a counselor employed by a HUD-certified
11 housing counseling agency.
12     "Credit score" means a credit risk score as defined by the
13 Fair Isaac Corporation, or its successor, and reported under
14 such names as "BEACON", "EMPIRICA", and "FAIR ISAAC RISK SCORE"
15 by one or more of the following credit reporting agencies or
16 their successors: Equifax, Inc., Experian Information
17 Solutions, Inc., and TransUnion LLC. If the borrower's credit
18 report contains credit scores from 2 reporting agencies, then
19 the broker or loan originator shall report the lower score. If
20 the borrower's credit report contains credit scores from 3
21 reporting agencies, then the broker or loan originator shall
22 report the middle score.
23     "Department" means the Department of Financial and
24 Professional Regulation.
25     "Exempt person" means that term as it is defined in
26 subsections (d)(1) and (d)(1.5) of Section 1-4 of the

 

 

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1 Residential Mortgage License Act of 1987.
2     "First-time homebuyer" means a borrower who has not held an
3 ownership interest in residential property.
4     "HUD-certified counseling" or "counseling" means
5 counseling given to a borrower by a counselor employed by a
6 HUD-certified housing counseling agency.
7     "Interest only" means a closed-end loan that permits one or
8 more payments of interest without any reduction of the
9 principal balance of the loan, other than the first payment on
10 the loan.
11     "Lender" means that term as it is defined in subsection (g)
12 of Section 1-4 of the Residential Mortgage License Act of 1987.
13     "Licensee" means that term as it is defined in subsection
14 (e) of Section 1-4 of the Residential Mortgage License Act of
15 1987.
16     "Mortgage loan" means that term as it is defined in
17 subsection (f) of Section 1-4 of the Residential Mortgage
18 License Act of 1987.
19     "Negative amortization" means an amortization method under
20 which the outstanding balance may increase at any time over the
21 course of the loan because the regular periodic payment does
22 not cover the full amount of interest due.
23     "Originator" means a "loan originator" as defined in
24 subsection (hh) of Section 1-4 of the Residential Mortgage
25 License Act of 1987, except an exempt person.
26     "Points and fees" has the meaning ascribed to that term in

 

 

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1 Section 10 of the High Risk Home Loan Act.
2     "Prepayment penalty" means a charge imposed by a lender
3 under a mortgage note or rider when the loan is paid before the
4 expiration of the term of the loan.
5     "Refinancing" means a loan secured by the borrower's or
6 borrowers' primary residence where the proceeds are not used as
7 purchase money for the residence.
8     "Title insurance company" means any domestic company
9 organized under the laws of this State for the purpose of
10 conducting the business of guaranteeing or insuring titles to
11 real estate and any title insurance company organized under the
12 laws of another State, the District of Columbia, or a foreign
13 government and authorized to transact the business of
14 guaranteeing or insuring titles to real estate in this State.
15     (a-5) A predatory lending database program shall be
16 established within Cook County. The program shall be
17 administered in accordance with this Article. The inception
18 date of the program shall be July 1, 2008. A predatory lending
19 database program shall be expanded to include Kane, Peoria, and
20 Will counties. The inception date of the expansion of the
21 program as it applies to Kane, Peoria, and Will counties shall
22 be July 1, 2010. Until the inception date, none of the duties,
23 obligations, contingencies, or consequences of or from the
24 program shall be imposed. The program shall apply to all
25 mortgage applications that are governed by this Article and
26 that are made or taken on or after the inception of the

 

 

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1 program.
2     (b) The database created under this program shall be
3 maintained and administered by the Department. The database
4 shall be designed to allow brokers, originators, counselors,
5 title insurance companies, and closing agents to submit
6 information to the database online. The database shall not be
7 designed to allow those entities to retrieve information from
8 the database, except as otherwise provided in this Article.
9 Information submitted by the broker or originator to the
10 Department may be used to populate the online form submitted by
11 a counselor, title insurance company, or closing agent.
12     (c) Within 10 days after taking a mortgage application, the
13 broker or originator for any mortgage on residential property
14 within the program area must submit to the predatory lending
15 database all of the information required under Section 72 and
16 any other information required by the Department by rule.
17 Within 7 days after receipt of the information, the Department
18 shall compare that information to the housing counseling
19 standards in Section 73 and issue to the borrower and the
20 broker or originator a determination of whether counseling is
21 recommended for the borrower. The borrower may not waive
22 counseling. If at any time after submitting the information
23 required under Section 72 the broker or originator (i) changes
24 the terms of the loan or (ii) issues a new commitment to the
25 borrower, then, within 5 days thereafter, the broker or
26 originator shall re-submit all of the information required

 

 

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1 under Section 72 and, within 4 days after receipt of the
2 information re-submitted by the broker or originator, the
3 Department shall compare that information to the housing
4 counseling standards in Section 73 and shall issue to the
5 borrower and the broker or originator a new determination of
6 whether re-counseling is recommended for the borrower based on
7 the information re-submitted by the broker or originator. The
8 Department shall require re-counseling if the loan terms have
9 been modified to meet another counseling standard in Section
10 73, or if the broker has increased the interest rate by more
11 than 200 basis points.
12     (d) If the Department recommends counseling for the
13 borrower under subsection (c), then the Department shall notify
14 the borrower of all participating HUD-certified counseling
15 agencies located within the State and direct the borrower to
16 interview with a counselor associated with one of those
17 agencies. Within 10 days after receipt of the notice of
18 HUD-certified counseling agencies, the borrower shall select
19 one of those agencies and shall engage in an interview with a
20 counselor associated with that agency. Within 7 days after
21 interviewing the borrower, the counselor must submit to the
22 predatory lending database all of the information required
23 under Section 74 and any other information required by the
24 Department by rule. Reasonable and customary costs not to
25 exceed $300 associated with counseling provided under the
26 program shall be paid by the broker or originator. The

 

 

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1 Department shall annually calculate to the nearest dollar an
2 adjusted rate for inflation. A counselor shall not recommend or
3 suggest that a borrower contact any specific mortgage
4 origination company, financial institution, or entity that
5 deals in mortgage finance to obtain a loan, another quote, or
6 for any other reason related to the specific mortgage
7 transaction; however, a counselor may suggest that the borrower
8 seek an opinion or a quote from another mortgage origination
9 company, financial institution, or entity that deals in
10 mortgage finance. A counselor or housing counseling agency that
11 in good faith provides counseling shall not be liable to a
12 broker or originator or borrower for civil damages, except for
13 willful or wanton misconduct on the part of the counselor in
14 providing the counseling.
15     (e) The broker or originator and the borrower may not take
16 any legally binding action concerning the loan transaction
17 until the later of the following:
18         (1) the Department issues a determination not to
19     recommend HUD-certified counseling for the borrower in
20     accordance with subsection (c); or
21         (2) the Department issues a determination that
22     HUD-certified counseling is recommended for the borrower
23     and the counselor submits all required information to the
24     database in accordance with subsection (d).
25     (f) Within 10 days after closing, the title insurance
26 company or closing agent must submit to the predatory lending

 

 

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1 database all of the information required under Section 76 and
2 any other information required by the Department by rule.
3     (g) The title insurance company or closing agent shall
4 attach to the mortgage a certificate of compliance with the
5 requirements of this Article, as generated by the database. If
6 the title insurance company or closing agent fails to attach
7 the certificate of compliance, then the mortgage is not
8 recordable. In addition, if any lis pendens for a residential
9 mortgage foreclosure is recorded on the property within the
10 program area, a certificate of service must be simultaneously
11 recorded that affirms that a copy of the lis pendens was filed
12 with the Department. If the certificate of service is not
13 recorded, then the lis pendens pertaining to the residential
14 mortgage foreclosure in question is not recordable and is of no
15 force and effect.
16     (h) All information provided to the predatory lending
17 database under the program is confidential and is not subject
18 to disclosure under the Freedom of Information Act, except as
19 otherwise provided in this Article. Information or documents
20 obtained by employees of the Department in the course of
21 maintaining and administering the predatory lending database
22 are deemed confidential. Employees are prohibited from making
23 disclosure of such confidential information or documents. Any
24 request for production of information from the predatory
25 lending database, whether by subpoena, notice, or any other
26 source, shall be referred to the Department of Financial and

 

 

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1 Professional Regulation. Any borrower may authorize in writing
2 the release of database information. The Department may use the
3 information in the database without the consent of the
4 borrower: (i) for the purposes of administering and enforcing
5 the program; (ii) to provide relevant information to a
6 counselor providing counseling to a borrower under the program;
7 or (iii) to the appropriate law enforcement agency or the
8 applicable administrative agency if the database information
9 demonstrates criminal, fraudulent, or otherwise illegal
10 activity.
11     (i) Nothing in this Article is intended to prevent a
12 borrower from making his or her own decision as to whether to
13 proceed with a transaction.
14     (j) Any person who violates any provision of this Article
15 commits an unlawful practice within the meaning of the Consumer
16 Fraud and Deceptive Business Practices Act.
17     (k) During the existence of the program, the Department
18 shall submit semi-annual reports to the Governor and to the
19 General Assembly by May 1 and November 1 of each year detailing
20 its findings regarding the program. The report shall include,
21 by county, at least the following information for each
22 reporting period:
23         (1) the number of loans registered with the program;
24         (2) the number of borrowers receiving counseling;
25         (3) the number of loans closed;
26         (4) the number of loans requiring counseling for each

 

 

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1     of the standards set forth in Section 73;
2         (5) the number of loans requiring counseling where the
3     mortgage originator changed the loan terms subsequent to
4     counseling; .
5         (6) the number of licensed mortgage brokers and loan
6     originators entering information into the database;
7         (7) the number of investigations based on information
8     obtained from the database, including the number of
9     licensees fined, the number of licenses suspended, and the
10     number of licenses revoked;
11         (8) a summary of the types of non-traditional mortgage
12     products being offered; and
13         (9) a summary of how the Department is actively
14     utilizing the program to combat mortgage fraud.
15 (Source: P.A. 94-280, eff. 1-1-06; 94-1029, eff. 7-14-06;
16 95-691, eff. 6-1-08; revised 11-6-08.)
 
17     Section 99. Effective date. This Act takes effect upon
18 becoming law.