HB5542eng 100TH GENERAL ASSEMBLY

HB5542 Engrossed LRB100 17500 XWW 32669 b

AN ACT concerning regulation.

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

Section 5. The Residential Mortgage License Act of 1987 is amended by changing Sections 2-2, 2-4, 4-8, 4-8.3, and 5-9 as follows:

(205 ILCS 635/2-2)

Sec. 2-2. Application process; investigation; fee.

(a) The Secretary shall issue a license upon completion of all of the following:

(1) The filing of an application for license with the Director or the Nationwide Mortgage Licensing System and Registry as approved by the Director.

(2) The filing with the Secretary of a listing of judgments entered against, and bankruptcy petitions by, the license applicant for the preceding 10 years.

(3) The payment, in certified funds, of investigation and application fees, the total of which shall be in an amount equal to $2,700 annually.

(4) Except for a broker applying to renew a license, the filing of an audited balance sheet including all footnotes prepared by a certified public accountant in accordance with generally accepted accounting principles and generally accepted auditing standards which evidences that the applicant meets the net worth requirements of Section 3-5. Notwithstanding the requirements of this subsection, an applicant that is a subsidiary may submit audited consolidated financial statements of its parent, intermediary parent, or ultimate parent as long as the consolidated statements are supported by consolidating statements which include the applicant's financial statement. If the consolidating statements are unaudited, the applicant's chief financial officer shall attest to the applicant's financial statements disclosed in the consolidating statements.

(5) The filing of proof satisfactory to the Secretary Commissioner that the applicant, the members thereof if the applicant is a partnership or association, the members or managers thereof that retain any authority or responsibility under the operating agreement if the applicant is a limited liability company, or the officers thereof if the applicant is a corporation have 3 years experience preceding application in real estate finance. Instead of this requirement, the applicant and the applicant's officers or members, as applicable, may satisfactorily complete a program of education in real estate finance and fair lending, as approved by the Secretary Commissioner, prior to receiving the initial license. The Secretary Commissioner shall adopt promulgate rules regarding proof of experience requirements and educational requirements and the satisfactory completion of those requirements. The Secretary Commissioner may establish by rule a list of duly licensed professionals and others who may be exempt from this requirement.

(6) An investigation of the application averments required by Section 2-4, which investigation must allow the Secretary Commissioner to issue positive findings stating that the financial responsibility, experience, character, and general fitness of the license applicant and of the members thereof if the license applicant is a partnership or association, of the officers and directors thereof if the license applicant is a corporation, and of the managers and members that retain any authority or responsibility under the operating agreement if the license applicant is a limited liability company are such as to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly and efficiently within the purpose of this Act. If the Secretary Commissioner shall not so find, he or she shall not issue such license, and he or she shall notify the license applicant of the denial.

The Secretary Commissioner may impose conditions on a license if the Secretary Commissioner determines that the conditions are necessary or appropriate. These conditions shall be imposed in writing and shall continue in effect for the period prescribed by the Secretary Commissioner.

(b) All licenses shall be issued to the license applicant.

Upon receipt of such license, a residential mortgage licensee shall be authorized to engage in the business regulated by this Act. Such license shall remain in full force and effect until it expires without renewal, is surrendered by the licensee or revoked or suspended as hereinafter provided.

(Source: P.A. 98-1081, eff. 1-1-15; 99-15, eff. 1-1-16.)

(205 ILCS 635/2-4) (from Ch. 17, par. 2322-4)

Sec. 2-4. Prohibited acts and practices for licensees. Averments of Licensee. It is a violation of this Act for a licensee subject to this Act to Each application for license shall be accompanied by the following averments stating that the applicant:

(a) fail to Will maintain at least one full service office within the State of Illinois if required to do so pursuant to Section 3-4 of this Act;

(b) fail to Will maintain staff reasonably adequate to meet the requirements of Section 3-4 of this Act;

(c) fail to Will keep and maintain for 36 months the same written records as required by the federal Equal Credit Opportunity Act, and any other information required by regulations of the Secretary Commissioner regarding any home mortgage in the course of the conduct of its residential mortgage business;

(d) fail to Will file with the Secretary Commissioner or Nationwide Mortgage Licensing System and Registry as applicable, when due, any report or reports which it is required to file under any of the provisions of this Act;

(e) engage Will not engage, whether as principal or agent, in the practice of rejecting residential mortgage applications without reasonable cause, or varying terms or application procedures without reasonable cause, for home mortgages on real estate within any specific geographic area from the terms or procedures generally provided by the licensee within other geographic areas of the State;

(f) engage Will not engage in fraudulent home mortgage underwriting practices;

(g) make Will not make payment, whether directly or indirectly, of any kind to any in house or fee appraiser of any government or private money lending agency with which an application for a home mortgage has been filed for the purpose of influencing the independent judgment of the appraiser with respect to the value of any real estate which is to be covered by such home mortgage;

(h) fail to file Has filed tax returns (State and Federal) for the past 3 years or filed with the Secretary Commissioner an accountant's or attorney's statement as to why no return was filed;

(i) engage Will not engage in any discrimination or redlining activities prohibited by Section 3-8 of this Act;

(j) knowingly Will not knowingly make any false promises likely to influence or persuade, or pursue a course of misrepresentation and false promises through agents, solicitors, advertising or otherwise;

(k) knowingly Will not knowingly misrepresent, circumvent or conceal, through whatever subterfuge or device, any of the material particulars or the nature thereof, regarding a transaction to which it is a party to the injury of another party thereto;

(l) fail to Will disburse funds in accordance with its agreements;

(m) commit Has not committed a crime against the law of this State, any other state or of the United States, involving moral turpitude, fraudulent or dishonest dealing, and that no final judgment has been entered against it in a civil action upon grounds of fraud, misrepresentation or deceit which has not been previously reported to the Secretary Commissioner;

(n) fail to Will account or deliver to the owner upon request any personal property such as money, fund, deposit, check, draft, mortgage, other document or thing of value which it is not in law or equity entitled to retain under the circumstances;

(o) engage Has not engaged in any conduct which would be cause for denial of a license;

(p) become Has not become insolvent;

(q) submit Has not submitted an application for a license under this Act which contains a material misstatement;

(r) demonstrate Has not demonstrated by course of conduct, negligence or incompetence in performing any act for which it is required to hold a license under this Act;

(s) fail to Will advise the Secretary Commissioner in writing, or the Nationwide Mortgage Licensing System and Registry, as applicable, of any changes to the information submitted on the most recent application for license or averments of record within 30 days of said change. The written notice must be signed in the same form as the application for license being amended;

(t) fail to Will comply with the provisions of this Act, or with any lawful order, rule or regulation made or issued under the provisions of this Act;

(u) fail to Will submit to periodic examination by the Secretary Commissioner as required by this Act;

(v) fail to Will advise the Secretary Commissioner in writing of judgments entered against, and bankruptcy petitions by, the license applicant within 5 days of occurrence;

(w) fail to Will advise the Secretary Commissioner in writing within 30 days of any request made to a licensee under this Act to repurchase a loan in a manner that completely and clearly identifies to whom the request was made, the loans involved, and the reason therefor;

(x) fail to Will advise the Secretary Commissioner in writing within 30 days of any request from any entity to repurchase a loan in a manner that completely and clearly identifies to whom the request was made, the loans involved, and the reason for the request;

(y) fail to Will at all times act in a manner consistent with subsections (a) and (b) of Section 1-2 of this Act;

(z) knowingly Will not knowingly hire or employ a loan originator who is not registered, or mortgage loan originator who is not licensed, with the Secretary Commissioner as required under Section 7-1 or Section 7-1A, as applicable, of this Act;

(aa) charge Will not charge or collect advance payments from borrowers or homeowners for engaging in loan modification; or and

(bb) structure Will not structure activities or contracts to evade provisions of this Act.

A licensee who fails to fulfill obligations of an averment, to comply with this Section averments made, or otherwise violates any of the provisions of averments made under this Section shall be subject to the penalties in Section 4-5 of this Act.

(Source: P.A. 97-891, eff. 8-3-12; 98-1081, eff. 1-1-15.)

(205 ILCS 635/4-8) (from Ch. 17, par. 2324-8)

Sec. 4-8. Delinquency; examination.

(a) (Blank). The Commissioner shall obtain from the U.S. Department of Housing and Urban Development that Department's loan delinquency data.

(b) The Secretary Commissioner shall conduct as part of an examination of each licensee a review of the licensee's loan delinquency data.

This subsection shall not be construed as a limitation of the Secretary's Commissioner's examination authority under Section 4-2 of this Act or as otherwise provided in this Act. The Secretary Commissioner may require a licensee to provide loan delinquency data as the Secretary Commissioner deems necessary for the proper enforcement of the Act.

(c) The purpose of the examination under subsection (b) shall be to determine whether the loan delinquency data of the licensee has resulted from practices which deviate from sound and accepted mortgage underwriting practices, including, but not limited to, credit fraud, appraisal fraud, and property inspection fraud. For the purpose of conducting this examination, the Secretary Commissioner may accept materials prepared for the U.S. Department of Housing and Urban Development. At the conclusion of the examination, the Secretary Commissioner shall make his or her findings available to the Residential Mortgage Board.

(d) The Secretary Commissioner, at his or her discretion, may hold public hearings, or at the direction of the Residential Mortgage Board, shall hold public hearings. Such testimony shall be by a homeowner or mortgagor or his agent, whose residential interest is affected by the activities of the residential mortgage licensee subject to such hearing. At such public hearing, a witness may present testimony on his or her behalf concerning only his or her home, or home mortgage or a witness may authorize a third party to appear on his or her behalf. The testimony shall be restricted to information and comments related to a specific residence or specific residential mortgage application or applications for a residential mortgage or residential loan transaction. The testimony must be preceded by either a letter of complaint or a completed consumer complaint form prescribed by the Secretary Commissioner.

(e) The Secretary Commissioner shall, at the conclusion of the public hearings, release his or her findings and shall also make public any action taken with respect to the licensee. The Secretary Commissioner shall also give full consideration to the findings of this examination whenever reapplication is made by the licensee for a new license under this Act.

(f) A licensee that is examined pursuant to subsection (b) shall submit to the Secretary Commissioner a plan which shall be designed to reduce that licensee's loan delinquencies. The plan shall be implemented by the licensee as approved by the Secretary Commissioner. A licensee that is examined pursuant to subsection (b) shall report monthly, for a one year period, one, 2, and 3 month loan delinquencies.

(g) Whenever the Secretary Commissioner finds that a licensee's loan delinquencies on insured mortgages is unusually high within a particular geographic area, he or she shall require that licensee to submit such information as is necessary to determine whether that licensee's practices have constituted credit fraud, appraisal fraud or property inspection fraud. The Secretary Commissioner shall promulgate such rules as are necessary to determine whether any licensee's loan delinquencies are unusually high within a particular area.

(Source: P.A. 99-15, eff. 1-1-16.)

(205 ILCS 635/4-8.3)

Sec. 4-8.3. Annual report of mortgage brokerage and servicing activity. On or before March 1 of each year or the date selected for Mortgage Call Reports under Section 4-9.1 of this Act, each licensee shall file a report with the Secretary Commissioner that discloses shall disclose such information as the Secretary Commissioner requires. A licensee filing a Mortgage Call Report is not required to file an annual report. Exempt entities as defined in subsection (d) of Section 1-4 shall not file the annual report of mortgage and servicing activity required by this Section.

(Source: P.A. 96-112, eff. 7-31-09.)

(205 ILCS 635/5-9)

Sec. 5-9. Notice of change in loan terms.

(a) No licensee may fail to do either of the following:

(1) Provide timely notice to the borrower of any material change in the terms of the residential mortgage loan prior to the closing of the loan. For purposes of this Section, a "material change means" any of the following:

(A) A change in the type of loan being offered, such as a fixed or variable rate loan or a loan with a balloon payment.

(B) A change in the term of the loan, as reflected in the number of monthly payments due before a final payment is scheduled to be made.

(C) An increase in the interest rate of more than 0.15%, or an equivalent increase in the amount of discount points charged.

(D) An increase in the regular monthly payment of principal and interest of more than 5%.

(E) A change regarding the requirement or amount of escrow of taxes or insurance.

(F) A change regarding the requirement or payment, or both, of private mortgage insurance.

(2) Timely inform the borrower if any fees payable by the borrower to the licensee increase by more than 10% or $100, whichever is greater.

(b) The disclosures required by this Section shall be deemed timely if the licensee provides the borrower with the revised information not later than 3 days after learning of the change or 24 hours before the residential mortgage loan is closed, whichever is earlier. If the licensee discloses a material change more than the 3 days after learning of the change but still 24 hours before the residential mortgage loan is closed, it will not be liable for penalties or forfeitures if the licensee cures in time for the borrower to avoid any damage.

(c) If an increase in the total amount of the fee to be paid by the borrower to the broker is not disclosed in accordance with this Section, the broker shall refund to the borrower the amount by which the fee was increased. If the fee is financed into the residential mortgage loan, the broker shall also refund to the borrower the interest charged to finance the fee.

(d) The requirements of this Section do not apply to a licensee providing a notice of change in loan terms pursuant to the federal Consumer Financial Protection Bureau's Know Before You Owe mortgage disclosure procedure pursuant to the federal Truth in Lending Act and amendments promulgated under 12 CFR 1026 and the federal Real Estate Settlement Procedures Act and amendments promulgated under 12 CFR 1024. Licensees limited to soliciting residential mortgage loan applications as approved by the Director under Title 38, Section 1050.2115(c)(1) of the Illinois Administrative Code are not required to provide the disclosures under this Section as long as the solicitor does not discuss the terms and conditions with the potential borrower.

(Source: P.A. 95-691, eff. 6-1-08.)

Section 99. Effective date. This Act takes effect upon becoming law.