HB0868 94TH GENERAL ASSEMBLY

LRB094 03453 LCB 34340 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB0868

Introduced 2/2/2005, by Rep. Angelo Saviano

SYNOPSIS AS INTRODUCED:

New Act

Creates the Mortgage Lender's Closing Duties Act. Prohibits residential mortgage lenders and investors who receive notice of the time, date, and location of a closing from failing to provide the escrow closer with the necessary loan documents and funds. Imposes fines for violations of the Act and prohibits lenders and investors from passing on those fines as lending fees. Applies to the closing of owner occupied real property for one to 4 families.

A BILL FOR

AN ACT concerning mortgage lenders.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Mortgage Lender's Closing Duties Act.

Section 5. Definitions. As used in this Act:

"Residential real estate", "lender", "borrower", "mortgage loan", "residential mortgage loan", "loan broker", "loan originator", "loan originating", "residential mortgage loan commitment", and "escrow agent" are defined as in the Residential Mortgage License Act of 1987.

"Loan package" refers to any and all documentation tendered by a lender reasonably necessary to effectuate the escrow closing, the execution of which by the borrower shall permit the immediate disbursement of mortgage loan proceeds.

"Escrow closing" refers to the process of accepting escrow funds and a loan package by an escrow agent on a residential mortgage loan and the final disbursement of those funds, along with the borrower's down payment, if any, and the acceptance of documents from the seller of the residential real property sufficient to transfer title (legal or equitable) to the subject property to the borrower; and the simultaneous transfer of the balance of such funds as may be due to the seller, or as the seller and borrower may direct, and the delivery of the documents from the seller to the borrower, including, if applicable, the placing for recording of the deed or other document intended to place the borrower in title to the subject residential real property.

"Investor" refers to the entity that invests money in residential mortgage loans, or ultimately provides funding necessary to close a residential mortgage financing transaction.

"Funding" and "good funds" refer to the monetary consideration provided by a lender incident to and simultaneous with the closing of a "residential mortgage financing transaction", as that term is defined and used in the Residential Mortgage License Act of 1987, and shall consist of cash, a cashier's check or checks, a certified check or checks, a money order or money orders, or the electronic transfer to the escrow agent of such cash, cashier's check or checks, certified check or checks, or money order or orders, but shall not include a bank draft or drafts or the electronic transfer to the escrow agent of a bank draft or drafts, nor any other form of funding containing conditions precedent to the negotiation of that funding.

"Firm written commitment for financing" means a non-contingent written agreement to lend to a borrower good funds secured by a mortgage against a specific parcel of residential real property and which shall, at a minimum, state the amount of the loan, the rate of interest per annum, the annual percentage rate, and any loan origination and loan discount fees, and shall be subject to only the following conditions:

(1) no material changes in the borrower's financial condition;

(2) the lien of the mortgage being insured by a licensed title insurance company as the first and paramount lien against the residential real property;

(3) matters of survey;

(4) homeowner's insurance satisfactory to the lender; and

(5) the mortgage being funded by a date certain.

Section 10. Provision of loan documents. No lender or investor who has issued a firm written commitment for mortgage loan financing, upon receiving reasonable notice prior to the closing from the buyer, the seller, or the escrow closing company of the date, time, and location of the closing of the purchase and sale of 1-4 family, owner-occupied residential real estate, shall fail to provide to the escrow closer the mortgage loan documents or loan package at the time, date, and place for the closing for execution by the borrower and reasonably sought by that lender as a precondition to the disbursement of mortgage loan proceeds.

Section 15. Provision of loan funds. No lender or investor who has issued a firm written commitment for mortgage loan financing, upon receiving reasonable notice from the buyer, the seller, or the escrow closing company of the date, time, and location of the closing of the purchase and sale of 1-4 family, owner-occupied residential real estate, shall fail to provide to the escrow closer the necessary funding for the mortgage loan in the form of "good funds" at the time, date, and place for the closing for use by the borrower incident to the purchase and sale transaction. Incident to the funding of that mortgage loan, any lender intending to utilize an electronic transfer of funding shall first secure any necessary wire transfer instructions from the escrow closer and shall advise the borrower or the borrower's designee in writing of its intention to transfer the funding for the transaction via electronic means and shall institute that electronic transfer in sufficient time so that the necessary funding will be received by the escrow closer prior to the time and date of the escrow closing.

Section 20. Fees to cover lender's fines prohibited. No lender or investor who has issued a firm written commitment for mortgage loan financing, upon receiving reasonable notice from the buyer, the seller, or the escrow closing company of the date, time, and location of the closing of the purchase and sale of 1-4 family, owner-occupied residential real estate, shall charge or attempt to charge to the borrower a fee or anything of value to offset such costs as may be incurred by it as a result of the violation by the lender of any Section of this Act.

Section 25. Notice to investor. A notice of closing as described in this Act that is provided to a loan originator or loan broker shall be deemed to constitute notice to any investor.

Section 30. Violations. A loan originator or loan broker and an investor who violate this Act shall be jointly and severally liable to the borrower for the greater of actual damages incurred by the borrower on account of the violation or violations or $1,000 per occurrence, plus reasonable attorney's fees.

Section 35. Exemption. This Act does not apply to an exempt entity as defined in the Residential Mortgage License Act of 1987.