SB1667 EngrossedLRB098 09990 MGM 40148 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Residential Mortgage License Act of 1987 is
5amended by changing Sections 1-3 and 4-2 and adding Section
67-15 as follows:
 
7    (205 ILCS 635/1-3)  (from Ch. 17, par. 2321-3)
8    Sec. 1-3. Necessity for License; Scope of Act.
9    (a) No person, partnership, association, corporation or
10other entity shall engage in the business of brokering,
11funding, originating, servicing or purchasing of residential
12mortgage loans without first obtaining a license from the
13Secretary Commissioner in accordance with the licensing
14procedure provided in this Article I and such regulations as
15may be promulgated by the Secretary Commissioner. The licensing
16provisions of this Section shall not apply to any entity
17engaged solely in commercial mortgage lending or to any person,
18partnership association, corporation or other entity exempted
19pursuant to Section 1-4, subsection (d), of this Act or in
20accordance with regulations promulgated by the Secretary
21Commissioner hereunder. No provision of this Act shall apply to
22an exempt person or entity as defined in items (1) and (1.5) of
23subsection (d) of Section 1-4 of this Act. Notwithstanding

 

 

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1anything to the contrary in the preceding sentence, an
2individual acting as a mortgage loan originator who is not
3employed by and acting for an entity described in item (1) of
4subsection (tt) of Section 1-4 of this Act shall be subject to
5the mortgage loan originator licensing requirements of Article
6VII of this Act.
7    Effective January 1, 2011, no provision of this Act shall
8apply to an exempt person or entity as defined in item (1.8) of
9subsection (d) of Section 1-4 of this Act. Notwithstanding
10anything to the contrary in the preceding sentence, an
11individual acting as a mortgage loan originator who is not
12employed by and acting for an entity described in item (1) of
13subsection (tt) of Section 1-4 of this Act shall be subject to
14the mortgage loan originator licensing requirements of Article
15VII of this Act, and provided that an individual acting as a
16mortgage loan originator under item (1.8) of subsection (d) of
17Section 1-4 of this Act shall be further subject to a
18determination by the U.S. Department of Housing and Urban
19Development through final rulemaking or other authorized
20agency determination under the federal Secure and Fair
21Enforcement for Mortgage Licensing Act of 2008.
22    (a-1) A person who is exempt from licensure pursuant to
23paragraph (ii) of item (1) of subsection (d) of Section 1-4 of
24this Act as a federally chartered savings bank that is
25registered with the Nationwide Mortgage Licensing System and
26Registry may apply to the Secretary for an exempt company

 

 

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1registration for the purpose of sponsoring one or more
2individuals subject to the mortgage loan originator licensing
3requirements of Article VII of this Act. Registration with the
4Division of Banking of the Department shall not affect the
5exempt status of the applicant.
6        (1) A mortgage loan originator eligible for licensure
7    under this subsection shall (A) be covered under an
8    exclusive written contract with, and originate residential
9    mortgage loans solely on behalf of, that exempt person; and
10    (B) hold a current, valid insurance producer license under
11    Article XXXI of the Illinois Insurance Code.
12        (2) An exempt person shall: (A) fulfill any reporting
13    requirements required by the Nationwide Mortgage Licensing
14    System and Registry or the Secretary; (B) provide a blanket
15    surety bond pursuant to Section 7-12 of this Act covering
16    the activities of all its sponsored mortgage loan
17    originators; (C) reasonably supervise the activities of
18    all its sponsored mortgage loan originators; (D) comply
19    with all rules and orders (including the averments
20    contained in Section 2-4 of this Act as applicable to a
21    non-licensed exempt entity provided for in this Section)
22    that the Secretary deems necessary to ensure compliance
23    with the federal SAFE Act; and (E) pay an annual
24    registration fee established by the Director.
25        (3) The Secretary may deny an exempt company
26    registration to an exempt person or fine, suspend, or

 

 

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1    revoke an exempt company registration if the Secretary
2    finds one of the following:
3            (A) that the exempt person is not a person of
4        honesty, truthfulness, or good character;
5            (B) that the exempt person violated any applicable
6        law, rule, or order;
7            (C) that the exempt person refused or failed to
8        furnish, within a reasonable time, any information or
9        make any report that may be required by the Secretary;
10            (D) that the exempt person had a final judgment
11        entered against him or her in a civil action on grounds
12        of fraud, deceit, or misrepresentation, and the
13        conduct on which the judgment is based indicates that
14        it would be contrary to the interest of the public to
15        permit the exempt person to manage a loan originator;
16            (E) that the exempt person had an order entered
17        against him or her involving fraud, deceit, or
18        misrepresentation by an administrative agency of this
19        State, the federal government, or any other state or
20        territory of the United States, and the facts relating
21        to the order indicate that it would be contrary to the
22        interest of the public to permit the exempt person to
23        manage a loan originator;
24            (F) that the exempt person made a material
25        misstatement or suppressed or withheld information on
26        the application for an exempt company registration or

 

 

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1        any document required to be filed with the Secretary;
2        or
3            (G) that the exempt person violated Section 4-5 of
4        this Act.
5    (b) No person, partnership, association, corporation, or
6other entity except a licensee under this Act or an entity
7exempt from licensing pursuant to Section 1-4, subsection (d),
8of this Act shall do any business under any name or title, or
9circulate or use any advertising or make any representation or
10give any information to any person, which indicates or
11reasonably implies activity within the scope of this Act.
12    (c) The Secretary Commissioner may, through the Attorney
13General, request the circuit court of either Cook or Sangamon
14County to issue an injunction to restrain any person from
15violating or continuing to violate any of the foregoing
16provisions of this Section.
17    (d) When the Secretary Commissioner has reasonable cause to
18believe that any entity which has not submitted an application
19for licensure is conducting any of the activities described in
20subsection (a) hereof, the Secretary Commissioner shall have
21the power to examine all books and records of the entity and
22any additional documentation necessary in order to determine
23whether such entity should become licensed under this Act.
24    (d-1) The Secretary Commissioner may issue orders against
25any person if the Secretary Commissioner has reasonable cause
26to believe that an unsafe, unsound, or unlawful practice has

 

 

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1occurred, is occurring, or is about to occur, if any person has
2violated, is violating, or is about to violate any law, rule,
3or written agreement with the Secretary Commissioner, or for
4the purposes of administering the provisions of this Act and
5any rule adopted in accordance with this Act.
6    (e) Any person, partnership, association, corporation or
7other entity who violates any provision of this Section commits
8a business offense and shall be fined an amount not to exceed
9$25,000.
10    (f) Each person, partnership, association, corporation or
11other entity conducting activities regulated by this Act shall
12be issued one license. Each office, place of business or
13location at which a residential mortgage licensee conducts any
14part of his or her business must be recorded with the Secretary
15Commissioner pursuant to Section 2-8 of this Act.
16    (g) Licensees under this Act shall solicit, broker, fund,
17originate, service and purchase residential mortgage loans
18only in conformity with the provisions of this Act and such
19rules and regulations as may be promulgated by the Secretary
20Commissioner.
21    (h) This Act applies to all entities doing business in
22Illinois as residential mortgage bankers, as defined by "An Act
23to provide for the regulation of mortgage bankers", approved
24September 15, 1977, as amended, regardless of whether licensed
25under that or any prior Act. Any existing residential mortgage
26lender or residential mortgage broker in Illinois whether or

 

 

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1not previously licensed, must operate in accordance with this
2Act.
3    (i) This Act is a successor Act to and a continuance of the
4regulation of residential mortgage bankers provided in, "An Act
5to provide for the regulation of mortgage bankers", approved
6September 15, 1977, as amended.
7    Entities and persons subject to the predecessor Act shall
8be subject to this Act from and after its effective date.
9(Source: P.A. 96-112, eff. 7-31-09; 96-1216, eff. 1-1-11;
1097-143, eff. 7-14-11.)
 
11    (205 ILCS 635/4-2)  (from Ch. 17, par. 2324-2)
12    Sec. 4-2. Examination; prohibited activities.
13    (a) The business affairs of a licensee under this Act shall
14be examined for compliance with this Act as often as the
15Secretary Commissioner deems necessary and proper. The
16Secretary Commissioner shall promulgate rules with respect to
17the frequency and manner of examination. The Secretary
18Commissioner shall appoint a suitable person to perform such
19examination. The Secretary Commissioner and his appointees may
20examine the entire books, records, documents, and operations of
21each licensee and its subsidiary, affiliate, or agent, and may
22examine any of the licensee's or its subsidiary's, affiliate's,
23or agent's officers, directors, employees and agents under
24oath. For purposes of this Section, "agent" includes service
25providers such as accountants, closing services providers,

 

 

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1providers of outsourced services such as call centers,
2marketing consultants, and loan processors, even if exempt from
3licensure under this Act. This Section does not apply to an
4attorney's privileged work product or communications.
5    (b) The Secretary Commissioner shall prepare a
6sufficiently detailed report of each licensee's examination,
7shall issue a copy of such report to each licensee's
8principals, officers, or directors and shall take appropriate
9steps to ensure correction of violations of this Act.
10    (c) Affiliates of a licensee shall be subject to
11examination by the Secretary Commissioner on the same terms as
12the licensee, but only when reports from, or examination of a
13licensee provides for documented evidence of unlawful activity
14between a licensee and affiliate benefiting, affecting or
15deriving from the activities regulated by this Act.
16    (d) The expenses of any examination of the licensee and
17affiliates shall be borne by the licensee and assessed by the
18Secretary Commissioner as established by regulation.
19    (e) Upon completion of the examination, the Secretary
20Commissioner shall issue a report to the licensee. All
21confidential supervisory information, including the
22examination report and the work papers of the report, shall
23belong to the Secretary's Commissioner's office and may not be
24disclosed to anyone other than the licensee, law enforcement
25officials or other regulatory agencies that have an appropriate
26regulatory interest as determined by the Secretary

 

 

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1Commissioner, or to a party presenting a lawful subpoena to the
2Office of the Secretary Commissioner. The Secretary
3Commissioner may immediately appeal to the court of
4jurisdiction the disclosure of such confidential supervisory
5information and seek a stay of the subpoena pending the outcome
6of the appeal. Reports required of licensees by the Secretary
7Commissioner under this Act and results of examinations
8performed by the Secretary Commissioner under this Act shall be
9the property of only the Secretary Commissioner, but may be
10shared with the licensee. Access under this Act to the books
11and records of each licensee shall be limited to the Secretary
12Commissioner and his agents as provided in this Act and to the
13licensee and its authorized agents and designees. No other
14person shall have access to the books and records of a licensee
15under this Act. Any person upon whom a demand for production of
16confidential supervisory information is made, whether by
17subpoena, order, or other judicial or administrative process,
18must withhold production of the confidential supervisory
19information and must notify the Secretary Commissioner of the
20demand, at which time the Secretary Commissioner is authorized
21to intervene for the purpose of enforcing the limitations of
22this Section or seeking the withdrawal or termination of the
23attempt to compel production of the confidential supervisory
24information. The Secretary Commissioner may impose any
25conditions and limitations on the disclosure of confidential
26supervisory information that are necessary to protect the

 

 

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1confidentiality of such information. Except as authorized by
2the Secretary Commissioner, no person obtaining access to
3confidential supervisory information may make a copy of the
4confidential supervisory information. The Secretary
5Commissioner may condition a decision to disclose confidential
6supervisory information on entry of a protective order by the
7court or administrative tribunal presiding in the particular
8case or on a written agreement of confidentiality. In a case in
9which a protective order or agreement has already been entered
10between parties other than the Secretary Commissioner, the
11Secretary Commissioner may nevertheless condition approval for
12release of confidential supervisory information upon the
13inclusion of additional or amended provisions in the protective
14order. The Secretary Commissioner may authorize a party who
15obtained the records for use in one case to provide them to
16another party in another case, subject to any conditions that
17the Secretary Commissioner may impose on either or both
18parties. The requestor shall promptly notify other parties to a
19case of the release of confidential supervisory information
20obtained and, upon entry of a protective order, shall provide
21copies of confidential supervisory information to the other
22parties.
23    (f) The Secretary Commissioner, deputy commissioners, and
24employees of the Office of Banks and Real Estate shall be
25subject to the restrictions provided in Section 2.5 of the
26Division of Banking Act including, without limitation, the

 

 

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1restrictions on (i) owning shares of stock or holding any other
2equity interest in an entity regulated under this Act or in any
3corporation or company that owns or controls an entity
4regulated under this Act; (ii) being an officer, director,
5employee, or agent of an entity regulated under this Act; and
6(iii) obtaining a loan or accepting a gratuity from an entity
7regulated under this Act.
8    (g) After the initial examination for those licensees whose
9only mortgage activity is servicing fewer than 1,000 Illinois
10residential loans, the examination required in subsection (a)
11may be waived upon submission of a letter from the licensee's
12independent certified auditor that the licensee serviced fewer
13than 1,000 Illinois residential loans during the year in which
14the audit was performed.
15    (h) An exempt entity under subsection (a-1) of Section 1-3
16of this Act shall cooperate with the Secretary in the
17examination and investigation of its sponsored and licensed
18mortgage loan originators at a frequency determined by the
19Secretary. The exempt entity under subsection (a-1) of Section
201-3 of this Act shall cooperate with the Secretary in providing
21mortgage loan originator documents and access to mortgage loan
22originator offices for the purposes of examination and
23investigation. The activities of the exempt entity shall not
24relieve a mortgage loan originator of his or her individual
25requirements under Section 7-15 of this Act. An exempt entity
26under subsection (a-1) of Section 1-3 of this Act shall pay to

 

 

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1the Department any examination fees invoiced by the Secretary
2for examination of its sponsored mortgage loan originators. The
3Secretary shall have the authority to make oral or written
4inquiries regarding the management of an exempt entity under
5subsection (a-1) of Section 1-3 of this Act and it shall be the
6duty of the exempt entity to promptly reply by telephone, in
7writing, or other means to the inquiry.
8(Source: P.A. 96-112, eff. 7-31-09; 96-1365, eff. 7-28-10.)
 
9    (205 ILCS 635/7-15 new)
10    Sec. 7-15. Examination and investigation of certain
11mortgage loan originators. The activities requiring a licensee
12of a mortgage loan originator that are sponsored by an exempt
13entity under subsection (a-1) of Section 1-3 of this Act are
14subject to examination and investigation by the Secretary.
15Mortgage loan originators sponsored by an exempt entity shall
16keep and maintain records of his or her loan activities for a
17period of 36 months and shall produce records on demand by the
18Secretary. The records shall include a loan log or loan
19production log as approved by the Secretary and any loan
20application entered, prepared, or created through or from the
21mortgage loan originator's activities. Mortgage loan
22originators sponsored by an exempt entity shall provide access,
23upon the Secretary's demand, to his or her offices for the
24purposes of the Department's examination and investigation.
25The Secretary shall determine the manner and frequency at which

 

 

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1the Department shall conduct examinations of the mortgage loan
2originators. Mortgage loan originators sponsored by an exempt
3entity shall cooperate at all times with the Department
4pursuant to requirements of this Section and shall be subject
5to penalties under Section 7-11 of this Act for failure to
6comply.
 
7    Section 99. Effective date. This Act takes effect upon
8becoming law.