Illinois General Assembly - Full Text of HB4404
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Full Text of HB4404  100th General Assembly

HB4404ham001 100TH GENERAL ASSEMBLY

Rep. Margo McDermed

Filed: 3/23/2018

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 4404

2    AMENDMENT NO. ______. Amend House Bill 4404 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Residential Mortgage License Act of 1987 is
5amended by changing Section 1-4 as follows:
 
6    (205 ILCS 635/1-4)
7    Sec. 1-4. Definitions. The following words and phrases have
8the meanings given to them in this Section:
9        (a) "Residential real property" or "residential real
10    estate" shall mean any real property located in Illinois,
11    upon which is constructed or intended to be constructed a
12    dwelling. Those terms include a manufactured home as
13    defined in subdivision (53) of Section 9-102 of the Uniform
14    Commercial Code which is real property as defined in
15    Section 5-35 of the Conveyance and Encumbrance of
16    Manufactured Homes as Real Property and Severance Act.

 

 

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1        (b) "Making a residential mortgage loan" or "funding a
2    residential mortgage loan" shall mean for compensation or
3    gain, either directly or indirectly, advancing funds or
4    making a commitment to advance funds to a loan applicant
5    for a residential mortgage loan.
6        (c) "Soliciting, processing, placing, or negotiating a
7    residential mortgage loan" shall mean for compensation or
8    gain, either directly or indirectly, accepting or offering
9    to accept an application for a residential mortgage loan,
10    assisting or offering to assist in the processing of an
11    application for a residential mortgage loan on behalf of a
12    borrower, or negotiating or offering to negotiate the terms
13    or conditions of a residential mortgage loan with a lender
14    on behalf of a borrower including, but not limited to, the
15    submission of credit packages for the approval of lenders,
16    the preparation of residential mortgage loan closing
17    documents, including a closing in the name of a broker.
18    Entities solely engaged in loan processing do not need to
19    obtain a mortgage license.
20        (d) "Exempt person or entity" shall mean the following:
21            (1) (i) Any banking organization or foreign
22        banking corporation licensed by the Illinois
23        Commissioner of Banks and Real Estate or the United
24        States Comptroller of the Currency to transact
25        business in this State; (ii) any national bank,
26        federally chartered savings and loan association,

 

 

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1        federal savings bank, federal credit union; (iii)
2        (blank); (iv) any bank, savings and loan association,
3        savings bank, or credit union organized under the laws
4        of this or any other state; (v) any Illinois Consumer
5        Installment Loan Act licensee; (vi) any insurance
6        company authorized to transact business in this State;
7        (vii) any entity engaged solely in commercial mortgage
8        lending; (viii) any service corporation of a savings
9        and loan association or savings bank organized under
10        the laws of this State or the service corporation of a
11        federally chartered savings and loan association or
12        savings bank having its principal place of business in
13        this State, other than a service corporation licensed
14        or entitled to reciprocity under the Real Estate
15        License Act of 2000; or (ix) any first tier subsidiary
16        of a bank, the charter of which is issued under the
17        Illinois Banking Act by the Illinois Commissioner of
18        Banks and Real Estate, or the first tier subsidiary of
19        a bank chartered by the United States Comptroller of
20        the Currency and that has its principal place of
21        business in this State, provided that the first tier
22        subsidiary is regularly examined by the Illinois
23        Commissioner of Banks and Real Estate or the
24        Comptroller of the Currency, or a consumer compliance
25        examination is regularly conducted by the Federal
26        Reserve Board.

 

 

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1            (1.5) Any employee of a person or entity mentioned
2        in item (1) of this subsection, when acting for such
3        person or entity, or any registered mortgage loan
4        originator when acting for an entity described in
5        subsection (tt) of this Section.
6            (1.8) Any person or entity that does not originate
7        mortgage loans in the ordinary course of business, but
8        makes or acquires residential mortgage loans with his
9        or her own funds for his or her or its own investment
10        without intent to make, acquire, or resell more than 3
11        residential mortgage loans in any one calendar year.
12            (2) (Blank).
13            (3) Any person employed by a licensee to assist in
14        the performance of the residential mortgage licensee's
15        activities regulated by this Act who is compensated in
16        any manner by only one licensee.
17            (4) (Blank).
18            (5) Any individual, corporation, partnership, or
19        other entity that originates, services, or brokers
20        residential mortgage loans, as these activities are
21        defined in this Act, and who or which receives no
22        compensation for those activities, subject to the
23        Commissioner's regulations and the federal Secure and
24        Fair Enforcement for Mortgage Licensing Act of 2008 and
25        the rules promulgated under that Act with regard to the
26        nature and amount of compensation.

 

 

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1            (6) (Blank).
2        (e) "Licensee" or "residential mortgage licensee"
3    shall mean a person, partnership, association,
4    corporation, or any other entity who or which is licensed
5    pursuant to this Act to engage in the activities regulated
6    by this Act.
7        (f) "Mortgage loan" "residential mortgage loan" or
8    "home mortgage loan" shall mean any loan primarily for
9    personal, family, or household use that is secured by a
10    mortgage, deed of trust, or other equivalent consensual
11    security interest on a dwelling as defined in Section
12    103(v) of the federal Truth in Lending Act, or residential
13    real estate upon which is constructed or intended to be
14    constructed a dwelling.
15        (g) "Lender" shall mean any person, partnership,
16    association, corporation, or any other entity who either
17    lends or invests money in residential mortgage loans.
18        (h) "Ultimate equitable owner" shall mean a person who,
19    directly or indirectly, owns or controls an ownership
20    interest in a corporation, foreign corporation, alien
21    business organization, trust, or any other form of business
22    organization regardless of whether the person owns or
23    controls the ownership interest through one or more persons
24    or one or more proxies, powers of attorney, nominees,
25    corporations, associations, partnerships, trusts, joint
26    stock companies, or other entities or devices, or any

 

 

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1    combination thereof.
2        (i) "Residential mortgage financing transaction" shall
3    mean the negotiation, acquisition, sale, or arrangement
4    for or the offer to negotiate, acquire, sell, or arrange
5    for, a residential mortgage loan or residential mortgage
6    loan commitment.
7        (j) "Personal residence address" shall mean a street
8    address and shall not include a post office box number.
9        (k) "Residential mortgage loan commitment" shall mean
10    a contract for residential mortgage loan financing.
11        (l) "Party to a residential mortgage financing
12    transaction" shall mean a borrower, lender, or loan broker
13    in a residential mortgage financing transaction.
14        (m) "Payments" shall mean payment of all or any of the
15    following: principal, interest and escrow reserves for
16    taxes, insurance and other related reserves, and
17    reimbursement for lender advances.
18        (n) "Commissioner" shall mean the Commissioner of
19    Banks and Real Estate, except that, beginning on April 6,
20    2009 (the effective date of Public Act 95-1047), all
21    references in this Act to the Commissioner of Banks and
22    Real Estate are deemed, in appropriate contexts, to be
23    references to the Secretary of Financial and Professional
24    Regulation, or his or her designee, including the Director
25    of the Division of Banking of the Department of Financial
26    and Professional Regulation.

 

 

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1        (n-1) "Director" shall mean the Director of the
2    Division of Banking of the Department of Financial and
3    Professional Regulation, except that, beginning on July
4    31, 2009 (the effective date of Public Act 96-112), all
5    references in this Act to the Director are deemed, in
6    appropriate contexts, to be the Secretary of Financial and
7    Professional Regulation, or his or her designee, including
8    the Director of the Division of Banking of the Department
9    of Financial and Professional Regulation.
10        (o) "Loan brokering", "brokering", or "brokerage
11    service" shall mean the act of helping to obtain from
12    another entity, for a borrower, a loan secured by
13    residential real estate situated in Illinois or assisting a
14    borrower in obtaining a loan secured by residential real
15    estate situated in Illinois in return for consideration to
16    be paid by either the borrower or the lender including, but
17    not limited to, contracting for the delivery of residential
18    mortgage loans to a third party lender and soliciting,
19    processing, placing, or negotiating residential mortgage
20    loans.
21        (p) "Loan broker" or "broker" shall mean a person,
22    partnership, association, corporation, or limited
23    liability company, other than those persons, partnerships,
24    associations, corporations, or limited liability companies
25    exempted from licensing pursuant to Section 1-4,
26    subsection (d), of this Act, who performs the activities

 

 

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1    described in subsections (c), (o), and (yy) of this
2    Section.
3        (q) "Servicing" shall mean the collection or
4    remittance for or the right or obligation to collect or
5    remit for any lender, noteowner, noteholder, or for a
6    licensee's own account, of payments, interests, principal,
7    and trust items such as hazard insurance and taxes on a
8    residential mortgage loan in accordance with the terms of
9    the residential mortgage loan; and includes loan payment
10    follow-up, delinquency loan follow-up, loan analysis and
11    any notifications to the borrower that are necessary to
12    enable the borrower to keep the loan current and in good
13    standing. "Servicing" includes management of third-party
14    entities acting on behalf of a residential mortgage
15    licensee for the collection of delinquent payments and the
16    use by such third-party entities of said licensee's
17    servicing records or information, including their use in
18    foreclosure.
19        (r) "Full service office" shall mean an office,
20    provided by the licensee and not subleased from the
21    licensee's employees, and staff in Illinois reasonably
22    adequate to handle efficiently communications, questions,
23    and other matters relating to any application for, or an
24    existing home mortgage secured by residential real estate
25    situated in Illinois with respect to which the licensee is
26    brokering, funding originating, purchasing, or servicing.

 

 

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1    The management and operation of each full service office
2    must include observance of good business practices such as
3    proper signage; adequate, organized, and accurate books
4    and records; ample phone lines, hours of business, staff
5    training and supervision, and provision for a mechanism to
6    resolve consumer inquiries, complaints, and problems. The
7    Commissioner shall issue regulations with regard to these
8    requirements and shall include an evaluation of compliance
9    with this Section in his or her periodic examination of
10    each licensee.
11        (s) "Purchasing" shall mean the purchase of
12    conventional or government-insured mortgage loans secured
13    by residential real estate situated in Illinois from either
14    the lender or from the secondary market.
15        (t) "Borrower" shall mean the person or persons who
16    seek the services of a loan broker, originator, or lender.
17        (u) "Originating" shall mean the issuing of
18    commitments for and funding of residential mortgage loans.
19        (v) "Loan brokerage agreement" shall mean a written
20    agreement in which a broker or loan broker agrees to do
21    either of the following:
22            (1) obtain a residential mortgage loan for the
23        borrower or assist the borrower in obtaining a
24        residential mortgage loan; or
25            (2) consider making a residential mortgage loan to
26        the borrower.

 

 

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1        (w) "Advertisement" shall mean the attempt by
2    publication, dissemination, or circulation to induce,
3    directly or indirectly, any person to enter into a
4    residential mortgage loan agreement or residential
5    mortgage loan brokerage agreement relative to a mortgage
6    secured by residential real estate situated in Illinois.
7        (x) "Residential Mortgage Board" shall mean the
8    Residential Mortgage Board created in Section 1-5 of this
9    Act.
10        (y) "Government-insured mortgage loan" shall mean any
11    mortgage loan made on the security of residential real
12    estate insured by the Department of Housing and Urban
13    Development or Farmers Home Loan Administration, or
14    guaranteed by the Veterans Administration.
15        (z) "Annual audit" shall mean a certified audit of the
16    licensee's books and records and systems of internal
17    control performed by a certified public accountant in
18    accordance with generally accepted accounting principles
19    and generally accepted auditing standards.
20        (aa) "Financial institution" shall mean a savings and
21    loan association, savings bank, credit union, or a bank
22    organized under the laws of Illinois or a savings and loan
23    association, savings bank, credit union or a bank organized
24    under the laws of the United States and headquartered in
25    Illinois.
26        (bb) "Escrow agent" shall mean a third party,

 

 

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1    individual or entity charged with the fiduciary obligation
2    for holding escrow funds on a residential mortgage loan
3    pending final payout of those funds in accordance with the
4    terms of the residential mortgage loan.
5        (cc) "Net worth" shall have the meaning ascribed
6    thereto in Section 3-5 of this Act.
7        (dd) "Affiliate" shall mean:
8            (1) any entity that directly controls or is
9        controlled by the licensee and any other company that
10        is directly affecting activities regulated by this Act
11        that is controlled by the company that controls the
12        licensee;
13            (2) any entity:
14                (A) that is controlled, directly or
15            indirectly, by a trust or otherwise, by or for the
16            benefit of shareholders who beneficially or
17            otherwise control, directly or indirectly, by
18            trust or otherwise, the licensee or any company
19            that controls the licensee; or
20                (B) a majority of the directors or trustees of
21            which constitute a majority of the persons holding
22            any such office with the licensee or any company
23            that controls the licensee;
24            (3) any company, including a real estate
25        investment trust, that is sponsored and advised on a
26        contractual basis by the licensee or any subsidiary or

 

 

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1        affiliate of the licensee.
2        (ee) "First tier subsidiary" shall be defined by
3    regulation incorporating the comparable definitions used
4    by the Office of the Comptroller of the Currency and the
5    Illinois Commissioner of Banks and Real Estate.
6        (ff) "Gross delinquency rate" means the quotient
7    determined by dividing (1) the sum of (i) the number of
8    government-insured residential mortgage loans funded or
9    purchased by a licensee in the preceding calendar year that
10    are delinquent and (ii) the number of conventional
11    residential mortgage loans funded or purchased by the
12    licensee in the preceding calendar year that are delinquent
13    by (2) the sum of (i) the number of government-insured
14    residential mortgage loans funded or purchased by the
15    licensee in the preceding calendar year and (ii) the number
16    of conventional residential mortgage loans funded or
17    purchased by the licensee in the preceding calendar year.
18        (gg) "Delinquency rate factor" means the factor set by
19    rule of the Commissioner that is multiplied by the average
20    gross delinquency rate of licensees, determined annually
21    for the immediately preceding calendar year, for the
22    purpose of determining which licensees shall be examined by
23    the Commissioner pursuant to subsection (b) of Section 4-8
24    of this Act.
25        (hh) "Loan originator" means any natural person who,
26    for compensation or in the expectation of compensation,

 

 

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1    either directly or indirectly makes, offers to make,
2    solicits, places, or negotiates a residential mortgage
3    loan. This definition applies only to Section 7-1 of this
4    Act.
5        (ii) "Confidential supervisory information" means any
6    report of examination, visitation, or investigation
7    prepared by the Commissioner under this Act, any report of
8    examination visitation, or investigation prepared by the
9    state regulatory authority of another state that examines a
10    licensee, any document or record prepared or obtained in
11    connection with or relating to any examination,
12    visitation, or investigation, and any record prepared or
13    obtained by the Commissioner to the extent that the record
14    summarizes or contains information derived from any
15    report, document, or record described in this subsection.
16    "Confidential supervisory information" does not include
17    any information or record routinely prepared by a licensee
18    and maintained in the ordinary course of business or any
19    information or record that is required to be made publicly
20    available pursuant to State or federal law or rule.
21        (jj) "Mortgage loan originator" means an individual
22    who for compensation or gain or in the expectation of
23    compensation or gain:
24            (i) takes a residential mortgage loan application;
25        or
26            (ii) offers or negotiates terms of a residential

 

 

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1        mortgage loan.
2        "Mortgage loan originator" includes an individual
3    engaged in loan modification activities as defined in
4    subsection (yy) of this Section. A mortgage loan originator
5    engaged in loan modification activities shall report those
6    activities to the Department of Financial and Professional
7    Regulation in the manner provided by the Department;
8    however, the Department shall not impose a fee for
9    reporting, nor require any additional qualifications to
10    engage in those activities beyond those provided pursuant
11    to this Act for mortgage loan originators.
12        "Mortgage loan originator" does not include an
13    individual engaged solely as a loan processor or
14    underwriter except as otherwise provided in subsection (d)
15    of Section 7-1A of this Act.
16        "Mortgage loan originator" does not include a person or
17    entity that only performs real estate brokerage activities
18    and is licensed in accordance with the Real Estate License
19    Act of 2000, unless the person or entity is compensated by
20    a lender, a mortgage broker, or other mortgage loan
21    originator, or by any agent of that lender, mortgage
22    broker, or other mortgage loan originator.
23        "Mortgage loan originator" does not include a person or
24    entity solely involved in extensions of credit relating to
25    timeshare plans, as that term is defined in Section
26    101(53D) of Title 11, United States Code.

 

 

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1        (kk) "Depository institution" has the same meaning as
2    in Section 3 of the Federal Deposit Insurance Act, and
3    includes any credit union.
4        (ll) "Dwelling" means a residential structure or
5    mobile home which contains one to 4 family housing units,
6    or individual units of condominiums or cooperatives.
7        (mm) "Immediate family member" means a spouse, child,
8    sibling, parent, grandparent, or grandchild, and includes
9    step-parents, step-children, step-siblings, or adoptive
10    relationships.
11        (nn) "Individual" means a natural person.
12        (oo) "Loan processor or underwriter" means an
13    individual who performs clerical or support duties as an
14    employee at the direction of and subject to the supervision
15    and instruction of a person licensed, or exempt from
16    licensing, under this Act. "Clerical or support duties"
17    includes subsequent to the receipt of an application:
18            (i) the receipt, collection, distribution, and
19        analysis of information common for the processing or
20        underwriting of a residential mortgage loan; and
21            (ii) communicating with a consumer to obtain the
22        information necessary for the processing or
23        underwriting of a loan, to the extent that the
24        communication does not include offering or negotiating
25        loan rates or terms, or counseling consumers about
26        residential mortgage loan rates or terms. An

 

 

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1        individual engaging solely in loan processor or
2        underwriter activities shall not represent to the
3        public, through advertising or other means of
4        communicating or providing information, including the
5        use of business cards, stationery, brochures, signs,
6        rate lists, or other promotional items, that the
7        individual can or will perform any of the activities of
8        a mortgage loan originator.
9        (pp) "Nationwide Mortgage Licensing System and
10    Registry" means a mortgage licensing system developed and
11    maintained by the Conference of State Bank Supervisors and
12    the American Association of Residential Mortgage
13    Regulators for the licensing and registration of licensed
14    mortgage loan originators.
15        (qq) "Nontraditional mortgage product" means any
16    mortgage product other than a 30-year fixed rate mortgage.
17        (rr) "Person" means a natural person, corporation,
18    company, limited liability company, partnership, or
19    association.
20        (ss) "Real estate brokerage activity" means any
21    activity that involves offering or providing real estate
22    brokerage services to the public, including:
23            (1) acting as a real estate agent or real estate
24        broker for a buyer, seller, lessor, or lessee of real
25        property;
26            (2) bringing together parties interested in the

 

 

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1        sale, purchase, lease, rental, or exchange of real
2        property;
3            (3) negotiating, on behalf of any party, any
4        portion of a contract relating to the sale, purchase,
5        lease, rental, or exchange of real property, other than
6        in connection with providing financing with respect to
7        any such transaction;
8            (4) engaging in any activity for which a person
9        engaged in the activity is required to be registered or
10        licensed as a real estate agent or real estate broker
11        under any applicable law; or
12            (5) offering to engage in any activity, or act in
13        any capacity, described in this subsection (ss).
14        (tt) "Registered mortgage loan originator" means any
15    individual that:
16            (1) meets the definition of mortgage loan
17        originator and is an employee of:
18                (A) a depository institution;
19                (B) a subsidiary that is:
20                    (i) owned and controlled by a depository
21                institution; and
22                    (ii) regulated by a federal banking
23                agency; or
24                (C) an institution regulated by the Farm
25            Credit Administration; and
26            (2) is registered with, and maintains a unique

 

 

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1        identifier through, the Nationwide Mortgage Licensing
2        System and Registry.
3        (uu) "Unique identifier" means a number or other
4    identifier assigned by protocols established by the
5    Nationwide Mortgage Licensing System and Registry.
6        (vv) "Residential mortgage license" means a license
7    issued pursuant to Section 1-3, 2-2, or 2-6 of this Act.
8        (ww) "Mortgage loan originator license" means a
9    license issued pursuant to Section 7-1A, 7-3, or 7-6 of
10    this Act.
11        (xx) "Secretary" means the Secretary of the Department
12    of Financial and Professional Regulation, or a person
13    authorized by the Secretary or by this Act to act in the
14    Secretary's stead.
15        (yy) "Loan modification" means, for compensation or
16    gain, either directly or indirectly offering or
17    negotiating on behalf of a borrower or homeowner to adjust
18    the terms of a residential mortgage loan in a manner not
19    provided for in the original or previously modified
20    mortgage loan.
21        (zz) "Short sale facilitation" means, for compensation
22    or gain, either directly or indirectly offering or
23    negotiating on behalf of a borrower or homeowner to
24    facilitate the sale of residential real estate subject to
25    one or more residential mortgage loans or debts
26    constituting liens on the property in which the proceeds

 

 

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1    from selling the residential real estate will fall short of
2    the amount owed and the lien holders are contacted to agree
3    to release their lien on the residential real estate and
4    accept less than the full amount owed on the debt.
5    The Commissioner may define by rule and regulation any
6terms used in this Act for the efficient and clear
7administration of this Act.
8(Source: P.A. 98-749, eff. 7-16-14; 98-1081, eff. 1-1-15;
999-78, eff. 7-20-15.)".