Full Text of SB0515 95th General Assembly
SB0515 95TH GENERAL ASSEMBLY
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95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008 SB0515
Introduced 2/8/2007, by Sen. Terry Link SYNOPSIS AS INTRODUCED: |
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205 ILCS 635/1-4 |
from Ch. 17, par. 2321-4 |
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Amends the Residential Mortgage License Act of 1987. Provides that certain loan originators that are now exempt shall be subject to registration. Provides that an employee of a loan originator is exempt from registration.
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A BILL FOR
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SB0515 |
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LRB095 04902 MJR 24967 b |
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| AN ACT concerning regulation.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Residential Mortgage License Act of 1987 is | 5 |
| amended by changing Section 1-4 as follows:
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| (205 ILCS 635/1-4) (from Ch. 17, par. 2321-4)
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| Sec. 1-4. Definitions.
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| (a) "Residential real property" or "residential real | 9 |
| estate" shall mean
real property located in this State improved | 10 |
| by a one-to-four family
dwelling used or occupied, wholly or | 11 |
| partly, as the home or residence of
one or more persons and may | 12 |
| refer, subject to regulations of the
Commissioner, to | 13 |
| unimproved real property upon which those kinds dwellings
are | 14 |
| to be constructed.
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| (b) "Making a residential mortgage loan" or "funding a | 16 |
| residential mortgage
loan" shall mean for compensation or gain, | 17 |
| either directly or indirectly,
advancing funds or making a | 18 |
| commitment to advance funds to a loan applicant
for a | 19 |
| residential mortgage loan.
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| (c) "Soliciting, processing, placing, or negotiating a | 21 |
| residential
mortgage loan" shall mean for compensation or gain, | 22 |
| either directly or
indirectly, accepting or offering to accept | 23 |
| an application for a
residential mortgage loan, assisting or |
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| offering to assist in the
processing of an application for a | 2 |
| residential mortgage loan on behalf of a
borrower, or | 3 |
| negotiating or offering to negotiate the terms or conditions
of | 4 |
| a residential mortgage loan with a lender on behalf of a | 5 |
| borrower
including, but not limited to, the submission of | 6 |
| credit packages for the
approval of lenders, the preparation of | 7 |
| residential mortgage loan closing
documents, including a | 8 |
| closing in the name of a broker.
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| (d) "Exempt person or entity" shall mean the following:
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| (1) (i) Any banking organization or foreign banking | 11 |
| corporation
licensed by the Illinois Commissioner of Banks | 12 |
| and Real Estate or the
United States Comptroller of the | 13 |
| Currency to transact business in this
State; (ii) any | 14 |
| national bank, federally chartered savings and loan
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| association, federal savings bank, federal credit union; | 16 |
| (iii) any pension
trust, bank trust, or bank trust company; | 17 |
| (iv) any bank, savings and loan
association, savings bank, | 18 |
| or credit union organized under the laws of this
or any | 19 |
| other state; (v) any Illinois Consumer Installment Loan Act | 20 |
| licensee;
(vi) any insurance company authorized to | 21 |
| transact business in this State;
(vii) any entity engaged | 22 |
| solely in commercial mortgage lending; (viii) any
service | 23 |
| corporation of a savings and loan association or savings | 24 |
| bank organized
under the laws of this State or the service | 25 |
| corporation of a federally
chartered savings and loan | 26 |
| association or savings bank having
its principal place of |
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| business in this State, other than a service
corporation | 2 |
| licensed or entitled to reciprocity under the Real Estate
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| License Act of 2000; or (ix) any first tier subsidiary of a
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| bank, the charter of which is issued under the Illinois | 5 |
| Banking Act
by the Illinois Commissioner of Banks and Real | 6 |
| Estate,
or the first tier subsidiary of a bank chartered by | 7 |
| the United States
Comptroller of the Currency and that has | 8 |
| its principal place of business
in this State, provided | 9 |
| that the first tier subsidiary is regularly
examined by the | 10 |
| Illinois Commissioner of Banks and Real Estate
or the | 11 |
| Comptroller of the Currency, or a consumer compliance | 12 |
| examination is
regularly conducted by the Federal Reserve | 13 |
| Board. However, loan originators, as defined in this | 14 |
| Section, shall be subject to registration pursuant to | 15 |
| Section 7-1 of this Act, except for those entities listed | 16 |
| in items (ii), (vii), and (viii), but only as to a service | 17 |
| corporation of a federally chartered savings and loan | 18 |
| association or savings bank having its principal place of | 19 |
| business in this State, and item (ix), but only as to any | 20 |
| first tier subsidiary of a bank chartered by the United | 21 |
| States Comptroller of the Currency and that has its | 22 |
| principal place of business in this State (provided that | 23 |
| the first tier subsidiary is regularly examined by the | 24 |
| Comptroller of the Currency or a consumer compliance | 25 |
| examination is regularly conducted by the Federal Reserve | 26 |
| Board). An employee of a loan originator mentioned in this |
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| subdivision (1) is not subject to the requirements of | 2 |
| Section 7-1 of this Act.
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| (1.5) Any employee of a person or entity mentioned in
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| subdivision
item (1) of this subsection (d) .
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| (2) Any person or entity that does not originate
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| mortgage loans in the ordinary course of
business making or | 7 |
| acquiring residential mortgage loans
with his or her or its | 8 |
| own funds for his or her or its own investment
without | 9 |
| intent to
make, acquire, or resell more than 10 residential | 10 |
| mortgage loans in
any one calendar year.
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| (3) Any person employed by a licensee to assist in the | 12 |
| performance of
the activities regulated by this Act who is | 13 |
| compensated in any manner by
only one licensee.
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| (4) Any person licensed pursuant to the Real Estate
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| License Act of
2000, who engages only in the taking of | 16 |
| applications and credit
and
appraisal information to | 17 |
| forward to a licensee or an exempt entity under this
Act | 18 |
| and who is compensated by either a licensee or an exempt | 19 |
| entity under this
Act, but is not compensated by either the | 20 |
| buyer (applicant) or the seller.
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| (5) Any individual, corporation, partnership, or other | 22 |
| entity that
originates, services, or brokers residential | 23 |
| mortgage loans, as these
activities are defined in this | 24 |
| Act, and who or which receives no
compensation for those | 25 |
| activities, subject to the Commissioner's
regulations with | 26 |
| regard to the nature and amount of compensation.
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| (6) A person who prepares supporting documentation for | 2 |
| a residential
mortgage loan application taken by a licensee | 3 |
| and performs ministerial
functions pursuant to specific | 4 |
| instructions of the licensee who neither
requires nor | 5 |
| permits the preparer to exercise his or her discretion or
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| judgment; provided that this activity is engaged in | 7 |
| pursuant to a binding,
written agreement between the | 8 |
| licensee and the preparer that:
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| (A) holds the licensee fully accountable for the | 10 |
| preparer's action; and
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| (B) otherwise meets the requirements of this | 12 |
| Section and this Act, does
not undermine the purposes | 13 |
| of this Act, and is approved by the
Commissioner.
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| (e) "Licensee" or "residential mortgage licensee" shall | 15 |
| mean a person,
partnership, association, corporation, or any | 16 |
| other entity who or which is
licensed pursuant to this Act to | 17 |
| engage in the activities regulated by
this Act.
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| (f) "Mortgage loan" "residential mortgage loan" or "home
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| mortgage loan" shall mean a loan to or for the benefit of any
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| natural person made primarily for personal, family, or | 21 |
| household use,
primarily secured by either a mortgage on | 22 |
| residential real property or
certificates of stock or other | 23 |
| evidence of ownership interests in and
proprietary leases from, | 24 |
| corporations, partnerships, or limited
liability companies | 25 |
| formed for the purpose
of cooperative ownership of residential | 26 |
| real property, all located in Illinois.
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| (g) "Lender" shall mean any person, partnership, | 2 |
| association,
corporation, or any other entity who either lends | 3 |
| or invests money in
residential mortgage loans.
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| (h) "Ultimate equitable owner" shall mean a person who, | 5 |
| directly
or indirectly, owns or controls an ownership interest | 6 |
| in a corporation,
foreign corporation, alien business | 7 |
| organization, trust, or any other form
of business organization | 8 |
| regardless of whether the person owns or controls
the ownership | 9 |
| interest through one or more persons or one or more proxies,
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| powers of attorney, nominees, corporations, associations, | 11 |
| partnerships,
trusts, joint stock companies, or other entities | 12 |
| or devices, or any
combination thereof.
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| (i) "Residential mortgage financing transaction" shall | 14 |
| mean the negotiation,
acquisition, sale, or arrangement for or | 15 |
| the offer to negotiate, acquire,
sell, or arrange for, a | 16 |
| residential mortgage loan or residential mortgage
loan | 17 |
| commitment.
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| (j) "Personal residence address" shall mean a street | 19 |
| address and shall
not include a post office box number.
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| (k) "Residential mortgage loan commitment" shall mean a | 21 |
| contract for
residential mortgage loan financing.
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| (l) "Party to a residential mortgage financing | 23 |
| transaction" shall mean a
borrower, lender, or loan broker in a | 24 |
| residential mortgage financing
transaction.
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| (m) "Payments" shall mean payment of all or any of the | 26 |
| following:
principal, interest and escrow reserves for taxes, |
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| insurance and other related
reserves, and reimbursement for | 2 |
| lender advances.
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| (n) "Commissioner" shall mean the Commissioner of Banks and | 4 |
| Real Estate
or a person authorized by the Commissioner, the | 5 |
| Office of Banks and Real Estate
Act, or this Act to act in the | 6 |
| Commissioner's stead.
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| (o) "Loan brokering", "brokering", or "brokerage service" | 8 |
| shall mean the act
of helping to obtain from another entity, | 9 |
| for a borrower, a loan secured by
residential real estate | 10 |
| situated in Illinois or assisting a borrower in
obtaining a | 11 |
| loan secured by residential real estate situated in Illinois in
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| return for consideration to be paid by either the borrower or | 13 |
| the lender
including, but not limited to, contracting for the | 14 |
| delivery of residential
mortgage loans to a third party lender | 15 |
| and soliciting, processing, placing,
or negotiating | 16 |
| residential mortgage loans.
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| (p) "Loan broker" or "broker" shall mean a person, | 18 |
| partnership,
association, corporation, or limited liability | 19 |
| company, other than
those persons, partnerships,
associations, | 20 |
| corporations, or limited liability companies exempted
from | 21 |
| licensing pursuant to Section
1-4, subsection (d), of this Act, | 22 |
| who performs the activities described
in subsections (c) and | 23 |
| (o) of this Section.
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| (q) "Servicing" shall mean the collection or remittance for | 25 |
| or the
right or obligation to collect or remit for any lender, | 26 |
| noteowner,
noteholder, or for a licensee's own account, of |
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| payments, interests,
principal, and trust items such as hazard | 2 |
| insurance and taxes on a
residential mortgage loan in | 3 |
| accordance with the terms of the residential
mortgage loan; and | 4 |
| includes loan payment follow-up, delinquency loan
follow-up, | 5 |
| loan analysis and any notifications to the borrower that are
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| necessary to enable the borrower to keep the loan current and | 7 |
| in good standing.
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| (r) "Full service office" shall mean office and staff in | 9 |
| Illinois
reasonably adequate to handle efficiently | 10 |
| communications, questions, and
other matters relating to any | 11 |
| application for, or an existing home mortgage
secured by | 12 |
| residential real estate situated in Illinois
with respect to | 13 |
| which the licensee is brokering, funding originating,
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| purchasing, or servicing. The management and operation of each | 15 |
| full service
office must include observance of good business | 16 |
| practices such as adequate,
organized, and accurate books and | 17 |
| records; ample phone lines, hours of
business, staff training | 18 |
| and supervision, and provision for a mechanism to
resolve | 19 |
| consumer inquiries, complaints, and problems. The Commissioner
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| shall issue regulations with regard to these requirements and | 21 |
| shall include
an evaluation of compliance with this Section in | 22 |
| his or her periodic
examination of each licensee.
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| (s) "Purchasing" shall mean the purchase of conventional or
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| government-insured mortgage loans secured by residential real | 25 |
| estate
situated in Illinois from either the lender or from the | 26 |
| secondary market.
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| (t) "Borrower" shall mean the person or persons who seek | 2 |
| the services of
a loan broker, originator, or lender.
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| (u) "Originating" shall mean the issuing of commitments for | 4 |
| and funding of
residential mortgage loans.
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| (v) "Loan brokerage agreement" shall mean a written | 6 |
| agreement in which a
broker or loan broker agrees to do either | 7 |
| of the following:
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| (1) obtain a residential mortgage loan for the borrower | 9 |
| or assist the
borrower in obtaining a residential mortgage | 10 |
| loan; or
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| (2) consider making a residential mortgage loan to the | 12 |
| borrower.
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| (w) "Advertisement" shall mean the attempt by publication,
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| dissemination, or circulation to induce, directly or | 15 |
| indirectly,
any person to enter into a residential mortgage | 16 |
| loan agreement or
residential mortgage loan brokerage | 17 |
| agreement relative to a
mortgage secured by residential real | 18 |
| estate situated in Illinois.
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| (x) "Residential Mortgage Board" shall mean the | 20 |
| Residential Mortgage
Board created in Section 1-5 of this Act.
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| (y) "Government-insured mortgage loan" shall mean any | 22 |
| mortgage loan made
on the security of residential real estate | 23 |
| insured by the Department of
Housing and Urban Development or | 24 |
| Farmers Home Loan Administration, or
guaranteed by the Veterans | 25 |
| Administration.
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| (z) "Annual audit" shall mean a certified audit of the |
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| licensee's books and
records and systems of internal control | 2 |
| performed by a certified public
accountant in accordance with | 3 |
| generally accepted accounting principles
and generally | 4 |
| accepted auditing standards.
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| (aa) "Financial institution" shall mean a savings and loan
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| association, savings bank, credit union, or a bank organized | 7 |
| under the
laws of Illinois or a savings and loan association, | 8 |
| savings bank,
credit union or a bank organized under the laws | 9 |
| of the United States and
headquartered in Illinois.
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| (bb) "Escrow agent" shall mean a third party, individual or | 11 |
| entity
charged with the fiduciary obligation for holding escrow | 12 |
| funds on a
residential mortgage loan pending final payout of | 13 |
| those funds
in accordance with the terms of the residential | 14 |
| mortgage loan.
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| (cc) "Net worth" shall have the meaning ascribed thereto in | 16 |
| Section 3-5
of this Act.
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| (dd) "Affiliate" shall mean:
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| (1) any entity that directly controls or is controlled | 19 |
| by the licensee
and any other company that is directly | 20 |
| affecting activities regulated by
this Act that is | 21 |
| controlled by the company that controls the licensee;
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| (2) any entity:
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| (A) that is controlled, directly or indirectly, by | 24 |
| a trust or otherwise,
by or for the benefit of | 25 |
| shareholders who beneficially or otherwise
control, | 26 |
| directly or indirectly, by trust or otherwise, the |
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| licensee or any
company that controls the licensee; or
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| (B) a majority of the directors or trustees of | 3 |
| which constitute a
majority of the persons holding any | 4 |
| such office with the licensee or any
company that | 5 |
| controls the licensee;
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| (3) any company, including a real estate investment | 7 |
| trust, that is
sponsored and advised on a contractual basis | 8 |
| by the licensee or any
subsidiary or affiliate of the | 9 |
| licensee.
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| The Commissioner may define by rule and regulation any | 11 |
| terms used
in this Act for the efficient and clear | 12 |
| administration of this Act.
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| (ee) "First tier subsidiary" shall be defined by regulation
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| incorporating the comparable definitions used by the Office of | 15 |
| the
Comptroller of the Currency and the Illinois Commissioner | 16 |
| of Banks
and Real Estate.
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| (ff) "Gross delinquency rate" means the quotient | 18 |
| determined by dividing
(1) the sum of (i) the number of | 19 |
| government-insured residential mortgage loans
funded or | 20 |
| purchased by a licensee in the preceding calendar year that are
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| delinquent and (ii) the number of conventional residential | 22 |
| mortgage loans
funded or purchased by the licensee in the | 23 |
| preceding calendar year that are
delinquent by (2) the sum of | 24 |
| (i) the number of government-insured residential
mortgage | 25 |
| loans funded or purchased by the licensee in the preceding | 26 |
| calendar
year and (ii) the number of conventional residential |
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| mortgage loans funded or
purchased by the licensee in the | 2 |
| preceding calendar year.
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| (gg) "Delinquency rate factor" means the factor set by rule | 4 |
| of the
Commissioner that is multiplied by the average gross | 5 |
| delinquency rate of
licensees, determined annually for the | 6 |
| immediately preceding calendar year, for
the purpose of | 7 |
| determining which licensees shall be examined by the
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| Commissioner pursuant to subsection (b) of Section 4-8 of this | 9 |
| Act.
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| (hh) "Loan originator" means any natural person who, for | 11 |
| compensation or in
the expectation of compensation, either | 12 |
| directly or indirectly makes, offers to
make, solicits, places, | 13 |
| or negotiates a residential mortgage loan.
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| (ii) "Confidential supervisory information" means any | 15 |
| report of examination, visitation, or investigation prepared | 16 |
| by the Commissioner under this Act, any report of examination | 17 |
| visitation, or investigation prepared by the state regulatory | 18 |
| authority of another state that examines a licensee, any | 19 |
| document or record prepared or obtained in connection with or | 20 |
| relating to any examination, visitation, or investigation, and | 21 |
| any record prepared or obtained by the Commissioner to the | 22 |
| extent that the record summarizes or contains information | 23 |
| derived from any report, document, or record described in this | 24 |
| subsection. "Confidential supervisory information" does not | 25 |
| include any information or record routinely prepared by a | 26 |
| licensee and maintained in the ordinary course of business or |
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| any information or record that is required to be made publicly | 2 |
| available pursuant to State or federal law or rule.
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| (Source: P.A. 93-561, eff. 1-1-04; 93-1018, eff. 1-1-05.)
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