09 Aug Illinois Legislative Update
The Illinois legislature recently amended its laws governing residential mortgage licensing. Except as discussed in this memorandum, House Bill 4521 was effective August 3, 2012.
“Servicing” includes management of third-party entities acting on behalf of a residential mortgage licensee for the collection of delinquent payments and the use by the third-party entities of the licensee’s servicing records or information, including their use in foreclosure.
“Loan modification” means, for compensation or gain, either directly or indirectly offering or negotiating on behalf of a borrower or homeowner to adjust the terms of a residential mortgage loan in a manner not provided for in the original or previously modified mortgage loan.
“Mortgage loan originator” includes an individual engaged in loan modification activities. A mortgage loan originator engaged in loan modification activities must report those activities to the Department of Financial and Professional Regulation (the “Department”) in the manner provided by the Department; however, the Department cannot impose a fee for reporting, nor require any additional qualifications to engage in those activities beyond those provided for mortgage loan originators.
“Short sale facilitation” means, for compensation or gain, either directly or indirectly offering or negotiating on behalf of a borrower or homeowner to facilitate the sale of residential real estate subject to one or more residential mortgage loans or debts constituting liens on the property from which the proceeds from selling the residential real estate will fall short of the amount owed and the lien holders are contacted to agree to release their lien on the residential real estate and accept less than the full amount owed on the debt.
The payment, in certified funds, of investigation and application fees due to the Secretary of the Department of Financial and Professional Regulation (the “Secretary”) for obtaining a license and renewing it is $2,700 (previously $2,043).
Applicants for a residential mortgage license must apply in a form prescribed by the Director. Each form’s content will be as set forth by the Director of the Division of Banking of the Department of Financial and Professional Regulation (the “Director”) by rule, regulation, instruction or procedure and may be changed or updated as the Director deems necessary. The Director is authorized to establish relationships or contracts with the Nationwide Mortgage Licensing System and Registry (“NMLSR”) or other entities designated by the NMLSR to collect and maintain records and process transaction fees or other fees related to licensees or other persons.
In connection with a license application, the applicant may be required, at a minimum, to furnish to the NMLSR information concerning the applicant’s identity, including:
- Fingerprints for submission to the Federal Bureau of Investigation or any governmental agency or entity authorized to receive the information for an Illinois, national, and international criminal history background check; and
- Personal history and experience in a form prescribed by the NMLSR, including the submission of authorization for the NMLSR and the Director to obtain:
- An independent credit report obtained from a consumer reporting agency; and
- Information related to any administrative, civil, or criminal findings by any governmental jurisdiction.
The Director may use the NMLSR as a channeling agent for requesting information from and distributing information to the Department of Justice, any governmental agency and any source so directed by the Director.
Each application for a license or for a license renewal must be accompanied by statements that the applicant will not charge or collect advance payments from borrowers or homeowners for engaging in loan modification and that the applicant will not structure activities or contracts to evade the law.
A compilation financial statement provided by a licensee who only brokers residential mortgage loans no longer needs to be prepared by an independent certified public accountant.
Upon finding a violation creating grounds for the denial of a license, the Commissioner may impose a fine not to exceed $25,000 for each offense. However, if the separate offense is fraud, misrepresentation, deceit or negligence in any mortgage financing transaction, then the fine may not exceed $75,000 for each offense.
A licensee who files a report with the Department that another licensee is engaged in one or more violations will not be the subject of disciplinary action by the Department, unless the Department determines, by a preponderance of the evidence available to the Department, that the reporting person knowingly and willingly participated in the violation that was reported.
It is unlawful for any individual who holds a mortgage loan originator license to provide short sale facilitation services unless he or she holds a license under the Illinois Real Estate License Act of 2000.
The Director may fine a mortgage loan originator up to $3,000 for each day for each violation committed if the mortgage loan originator directly or indirectly employs any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person. If a mortgage loan originator engages in a pattern of directly or indirectly employing any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person, the fine may not exceed $6,000 for each day for each violation committed.
It is a violation for a mortgage loan originator to collect, charge, or attempt to collect or charge an advance fee for a loan modification. It is also a violation for a mortgage loan originator to structure activities or contracts to evade the law.
Beginning January 1, 2013, a violation of the Residential Real Property Disclosure Act will constitute a business offense and subject the violating party to a penalty of $1,000 for each offense.
Any person or entity that does not originate mortgage loans in the ordinary course of business, but makes or acquires residential mortgage loans with his or her own funds for his or her or its own investment without intent to make, acquire, or resell more than 3 residential mortgage loans in any one calendar year is exempt from licensing under the Residential Mortgage License Act of 1987.
Noncompliance with the predatory lending database program is a ground upon which the Commissioner may take disciplinary action. Noncompliance with the predatory lending database program by a mortgage banking licensee or licensed mortgage loan originator is a violation of the Residential Mortgage License Act of 1987. If the violation is committed by a title insurance company, title agent, or escrow agent, it will constitute a violation of the Title Insurance Act. If the violation is by a housing counselor, it must be referred to the Department of Housing and Urban Development (“HUD”).
As part of the predatory lending database program, the broker or originator must submit for inclusion in the predatory lending database, for each loan for which the originator takes an application, income and expense information, which includes the total monthly consumer debt.