SB1089 Engrossed

LRB096 07163 AJO 17249 b






1
 AN ACT concerning civil law.


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 
 


 






SB1089 Engrossed
- 2 -
LRB096 07163 AJO 17249 b





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 
 


 






SB1089 Engrossed
- 3 -
LRB096 07163 AJO 17249 b





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 
 


 






SB1089 Engrossed
- 4 -
LRB096 07163 AJO 17249 b





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.
Until the inception 
19
date, none of the duties, obligations, contingencies, or 
20
consequences of or from the program shall be imposed. The 
21
program shall apply to all mortgage applications that are 
22
governed by this Article and that are made or taken on or after 
23
the inception of the program.

24
 (b) The database created under this program shall be 
25
maintained and administered by the Department. The database 
26
shall be designed to allow brokers, originators, counselors, 
 


 






SB1089 Engrossed
- 5 -
LRB096 07163 AJO 17249 b





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

26
counseling standards in Section 73
and shall issue to the 
 


 






SB1089 Engrossed
- 6 -
LRB096 07163 AJO 17249 b





1
borrower and the broker or originator a new determination of 
2
whether re-counseling
is recommended for the borrower based on 
3
the information re-submitted by the broker or originator. The 
4
Department shall require re-counseling if the loan terms have 
5
been modified to meet another counseling standard in Section 
6
73, or if the broker has increased the interest rate by more 
7
than 200 basis points.

8
 (d) If the Department recommends counseling for the 
9
borrower under subsection (c), then the Department shall notify 
10
the borrower of all participating HUD-certified counseling 
11
agencies located within the State and direct the borrower to 
12
interview with a counselor associated with one of those 
13
agencies. Within 10 days after receipt of the notice of 
14
HUD-certified counseling agencies, the borrower shall select 
15
one of those agencies and shall engage in an interview with a 
16
counselor associated with that agency. Within 7 days after 
17
interviewing the borrower, the counselor must submit to the 
18
predatory lending database all of the information required 
19
under Section 74 and any other information required by the 
20
Department by rule. Reasonable and customary costs not to 
21
exceed $300
associated with counseling provided under the 
22
program shall be paid by the broker or originator. The 
23
Department shall annually calculate to the nearest dollar an 
24
adjusted rate for inflation. A counselor shall not recommend or 
25
suggest that a borrower contact any specific mortgage 
26
origination company, financial institution, or entity that 
 


 






SB1089 Engrossed
- 7 -
LRB096 07163 AJO 17249 b





1
deals in mortgage finance to obtain a loan, another quote, or 
2
for any other reason related to the specific mortgage 
3
transaction; however, a counselor may suggest that the borrower 
4
seek an opinion or a quote from another mortgage origination 
5
company, financial institution, or entity that deals in 
6
mortgage finance. A counselor or housing counseling agency that

7
in good faith provides counseling shall not be liable to a 
8
broker or originator or borrower for civil damages, except for 
9
willful or wanton misconduct on the part of the counselor in 
10
providing the counseling.
11
 (e) The broker or originator and the borrower may not take 
12
any legally binding action concerning the loan transaction 
13
until the later of the following:
14
  (1) the Department issues a determination not to 
15
 recommend HUD-certified
counseling for the borrower in 
16
 accordance with subsection (c); or
17
  (2) the Department issues a determination that 
18
 HUD-certified
counseling is recommended for the borrower 
19
 and the counselor submits all required information to the 
20
 database in accordance with subsection (d).

21
 (f) Within 10 days after closing, the title insurance 
22
company or closing agent must submit to the predatory lending 
23
database all of the information required under Section 76 and 
24
any other information required by the Department by rule.
25
 (g) The title insurance company or closing agent shall 
26
attach to the mortgage a certificate of
compliance with the 
 


 






SB1089 Engrossed
- 8 -
LRB096 07163 AJO 17249 b





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


 






SB1089 Engrossed
- 9 -
LRB096 07163 AJO 17249 b





1
the release of database information. The Department may use the 
2
information in the database without the consent of the 
3
borrower: (i) for the purposes of administering and enforcing 
4
the program; (ii) to provide relevant information to a 
5
counselor providing counseling to a borrower under the program; 
6
or (iii) to the appropriate law enforcement agency or the 
7
applicable administrative agency if the database information 
8
demonstrates criminal, fraudulent, or otherwise illegal 
9
activity.

10
 (i) Nothing in this Article is intended to prevent a 
11
borrower from making his or her own decision as to whether to 
12
proceed with a transaction.

13
 (j) Any person who violates any provision of this Article 
14
commits an unlawful practice within the meaning of the Consumer 
15
Fraud and Deceptive Business Practices Act.

16
 (k) During the existence of the program, the Department 
17
shall submit semi-annual reports to the Governor and to the 
18
General Assembly by May 1 and November 1 of each year detailing 
19
its findings regarding the program. The report shall include at 
20
least the following information for each reporting period:
21
  (1) the number of loans registered with the program;
22
  (2) the number of borrowers receiving counseling;
23
  (3) the number of loans closed;
24
  (4) the number of loans requiring counseling for each 
25
 of the standards set forth in Section 73;
26
  (5) the number of loans requiring counseling where the 
 


 






SB1089 Engrossed
- 10 -
LRB096 07163 AJO 17249 b





1
 mortgage originator changed the loan terms subsequent to 
2
 counseling.


3
(Source: P.A. 94-280, eff. 1-1-06; 94-1029, eff. 7-14-06; 
4