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90_SB0497eng
205 ILCS 635/1-3 from Ch. 17, par. 2321-3
205 ILCS 635/1-4 from Ch. 17, par. 2321-4
205 ILCS 635/4-1 from Ch. 17, par. 2324-1
205 ILCS 635/4-2 from Ch. 17, par. 2324-2
205 ILCS 635/4-8 from Ch. 17, par. 2324-8
205 ILCS 635/4-10 from Ch. 17, par. 2324-10
Amends the Residential Mortgage License Act of 1987.
Provides that examinations of licensees shall be conducted
for cause rather than merely on a periodic basis. Abolishes
the exemption for licensees under the Real Estate License Act
of 1983. Requires an entity to either have a physical
presence in Illinois or not originate mortgage loans in its
ordinary course of business to qualify for exemption related
to volume of business. Provides that default rate provisions
apply only to licensees that service, fund, or make credit
decisions regarding mortgage loans. Prohibits the limitation
of fees. Requires the Commissioner of Banks and Real Estate
to maintain a registry of employees of licensees.
LRB9001616JSgc
SB497 Engrossed LRB9001616JSgc
1 AN ACT to amend the Residential Mortgage License Act of
2 1987 by changing Section 1-4.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Residential Mortgage License Act of 1987
6 is amended by changing Section 1-4 as follows:
7 (205 ILCS 635/1-4) (from Ch. 17, par. 2321-4)
8 Sec. 1-4. Definitions.
9 (a) "Residential real property" or "residential real
10 estate" shall mean real property located in this State
11 improved by a one-to-four family dwelling used or occupied,
12 wholly or partly, as the home or residence of one or more
13 persons and may refer, subject to regulations of the
14 Commissioner, to unimproved real property upon which those
15 kinds dwellings are to be constructed.
16 (b) "Making a residential mortgage loan" or "funding a
17 residential mortgage loan" shall mean for compensation or
18 gain, either directly or indirectly, advancing funds or
19 making a commitment to advance funds to a loan applicant for
20 a residential mortgage loan.
21 (c) "Soliciting, processing, placing, or negotiating a
22 residential mortgage loan" shall mean for compensation or
23 gain, either directly or indirectly, accepting or offering to
24 accept an application for a residential mortgage loan,
25 assisting or offering to assist in the processing of an
26 application for a residential mortgage loan on behalf of a
27 borrower, or negotiating or offering to negotiate the terms
28 or conditions of a residential mortgage loan with a lender on
29 behalf of a borrower including, but not limited to, the
30 submission of credit packages for the approval of lenders,
31 the preparation of residential mortgage loan closing
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1 documents, including a closing in the name of a broker.
2 (d) "Exempt entity" shall mean the following:
3 (1) (i) Any banking organization or foreign banking
4 corporation licensed by the Illinois Commissioner of
5 Banks and Real Estate or the United States Comptroller of
6 the Currency to transact business in this State; (ii) any
7 national bank, federally chartered savings and loan
8 association, federal savings bank, federal credit union;
9 (iii) any pension trust, bank trust, or bank trust
10 company; (iv) any savings and loan association, savings
11 bank, or credit union organized under the laws of this or
12 any other state; (v) any Illinois Consumer Installment
13 Loan Act licensee; (vi) any insurance company authorized
14 to transact business in this State; (vii) any entity
15 engaged solely in commercial mortgage lending; (viii) any
16 service corporation of a savings and loan association or
17 savings bank organized under the laws of this State or
18 the service corporation of a federally chartered savings
19 and loan association or savings bank having its principal
20 place of business in this State, other than a service
21 corporation licensed or entitled to reciprocity under the
22 Real Estate License Act of 1983; or (ix) any first tier
23 subsidiary of a bank, the charter of which is issued
24 under the Illinois Banking Act by the Illinois
25 Commissioner of Banks and Real Estate, or the first tier
26 subsidiary of a bank chartered by the United States
27 Comptroller of the Currency and that has its principal
28 place of business in this State, provided that the first
29 tier subsidiary is regularly examined by the Illinois
30 Commissioner of Banks and Real Estate or the Comptroller
31 of the Currency, or a consumer compliance examination is
32 regularly conducted by the Federal Reserve Board.
33 (2) Any person or entity that either (i) has a
34 physical presence in Illinois or (ii) does not originate
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1 mortgage loans in the ordinary course of business making
2 or acquiring residential mortgage loans with his or her
3 or its own funds for his or her or its own investment
4 without intent to make, acquire, or resell more than 10
5 residential mortgage loans in any one calendar year.
6 (3) Any person employed by a licensee to assist in
7 the performance of the activities regulated by this Act
8 who is compensated in any manner by only one licensee.
9 (4) Any person licensed pursuant to the Real Estate
10 License Act of 1983, who engages only in the taking of
11 applications and credit and appraisal information to
12 forward to a licensee or an exempt entity under this Act
13 and who is compensated by either a licensee or an exempt
14 entity under this Act, but is not compensated by either
15 the buyer (applicant) or the seller.
16 (5) Any individual, corporation, partnership, or
17 other entity that originates, services, or brokers
18 residential mortgage loans, as these activities are
19 defined in this Act, and who or which receives no
20 compensation for those activities, subject to the
21 Commissioner's regulations with regard to the nature and
22 amount of compensation.
23 (6) A person who prepares supporting documentation
24 for a residential mortgage loan application taken by a
25 licensee and performs ministerial functions pursuant to
26 specific instructions of the licensee who neither
27 requires nor permits the preparer to exercise his or her
28 discretion or judgment; provided that this activity is
29 engaged in pursuant to a binding, written agreement
30 between the licensee and the preparer that:
31 (A) holds the licensee fully accountable for
32 the preparer's action; and
33 (B) otherwise meets the requirements of this
34 Section and this Act, does not undermine the
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1 purposes of this Act, and is approved by the
2 Commissioner.
3 (e) "Licensee" or "residential mortgage licensee" shall
4 mean a person, partnership, association, corporation, or any
5 other entity who or which is licensed pursuant to this Act to
6 engage in the activities regulated by this Act.
7 (f) "Mortgage loan" "residential mortgage loan" or "home
8 mortgage loan" shall mean a loan to or for the benefit of any
9 natural person made primarily for personal, family, or
10 household use, primarily secured by either a mortgage on
11 residential real property or certificates of stock or other
12 evidence of ownership interests in and proprietary leases
13 from, corporations, partnerships, or limited liability
14 companies formed for the purpose of cooperative ownership of
15 residential real property, all located in Illinois.
16 (g) "Lender" shall mean any person, partnership,
17 association, corporation, or any other entity who either
18 lends or invests money in residential mortgage loans.
19 (h) "Ultimate equitable owner" shall mean a person who,
20 directly or indirectly, owns or controls an ownership
21 interest in a corporation, foreign corporation, alien
22 business organization, trust, or any other form of business
23 organization regardless of whether the person owns or
24 controls the ownership interest through one or more persons
25 or one or more proxies, powers of attorney, nominees,
26 corporations, associations, partnerships, trusts, joint stock
27 companies, or other entities or devices, or any combination
28 thereof.
29 (i) "Residential mortgage financing transaction" shall
30 mean the negotiation, acquisition, sale, or arrangement for
31 or the offer to negotiate, acquire, sell, or arrange for, a
32 residential mortgage loan or residential mortgage loan
33 commitment.
34 (j) "Personal residence address" shall mean a street
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1 address and shall not include a post office box number.
2 (k) "Residential mortgage loan commitment" shall mean a
3 contract for residential mortgage loan financing.
4 (l) "Party to a residential mortgage financing
5 transaction" shall mean a borrower, lender, or loan broker in
6 a residential mortgage financing transaction.
7 (m) "Payments" shall mean payment of all or any of the
8 following: principal, interest and escrow reserves for taxes,
9 insurance and other related reserves, and reimbursement for
10 lender advances.
11 (n) "Commissioner" shall mean the Commissioner of Banks
12 and Real Estate or a person authorized by the Commissioner,
13 the Office of Banks and Real Estate Act, or this Act to act
14 in the Commissioner's stead .
15 (o) "Loan brokering", "brokering", or "brokerage
16 service" shall mean the act of helping to obtain from another
17 entity, for a borrower, a loan secured by residential real
18 estate situated in Illinois or assisting a borrower in
19 obtaining a loan secured by residential real estate situated
20 in Illinois in return for consideration to be paid by either
21 the borrower or the lender including, but not limited to,
22 contracting for the delivery of residential mortgage loans to
23 a third party lender and soliciting, processing, placing, or
24 negotiating residential mortgage loans.
25 (p) "Loan broker" or "broker" shall mean a person,
26 partnership, association, corporation, or limited liability
27 company, other than those persons, partnerships,
28 associations, corporations, or limited liability companies
29 exempted from licensing pursuant to Section 1-4, subsection
30 (d), of this Act, who performs the activities described in
31 subsections (c) and (o) of this Section.
32 (q) "Servicing" shall mean the collection or remittance
33 for or the right or obligation to collect or remit for any
34 lender, noteowner, noteholder, or for a licensee's own
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1 account, of payments, interests, principal, and trust items
2 such as hazard insurance and taxes on a residential mortgage
3 loan in accordance with the terms of the residential mortgage
4 loan; and includes loan payment follow-up, delinquency loan
5 follow-up, loan analysis and any notifications to the
6 borrower that are necessary to enable the borrower to keep
7 the loan current and in good standing.
8 (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,
14 purchasing, or servicing. The management and operation of
15 each full service office must include observance of good
16 business practices such as adequate, organized, and accurate
17 books and records; ample phone lines, hours of business,
18 staff training and supervision, and provision for a mechanism
19 to resolve consumer inquiries, complaints, and problems. The
20 Commissioner shall issue regulations with regard to these
21 requirements and shall include an evaluation of compliance
22 with this Section in his or her periodic examination of each
23 licensee.
24 (s) "Purchasing" shall mean the purchase of conventional
25 or government-insured mortgage loans secured by residential
26 real estate situated in Illinois from either the lender or
27 from the secondary market.
28 (t) "Borrower" shall mean the person or persons who seek
29 the services of a loan broker, originator, or lender.
30 (u) "Originating" shall mean the issuing of commitments
31 for and funding of residential mortgage loans.
32 (v) "Loan brokerage agreement" shall mean a written
33 agreement in which a broker or loan broker agrees to do
34 either of the following:
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1 (1) obtain a residential mortgage loan for the
2 borrower or assist the borrower in obtaining a
3 residential mortgage loan; or
4 (2) consider making a residential mortgage loan to
5 the borrower.
6 (w) "Advertisement" shall mean the attempt by
7 publication, dissemination, or circulation to induce,
8 directly or indirectly, any person to enter into a
9 residential mortgage loan agreement or residential mortgage
10 loan brokerage agreement relative to a mortgage secured by
11 residential real estate situated in Illinois.
12 (x) "Residential Mortgage Board" shall mean the
13 Residential Mortgage Board created in Section 1-5 of this
14 Act.
15 (y) "Government-insured mortgage loan" shall mean any
16 mortgage loan made on the security of residential real estate
17 insured by the Department of Housing and Urban Development or
18 Farmers Home Loan Administration, or guaranteed by the
19 Veterans Administration.
20 (z) "Annual audit" shall mean a certified audit of the
21 licensee's books and records and systems of internal control
22 performed by a certified public accountant in accordance with
23 generally accepted accounting principles and generally
24 accepted auditing standards.
25 (aa) "Financial institution" shall mean a savings and
26 loan association, savings bank, credit union, or a bank
27 organized under the laws of Illinois or a savings and loan
28 association, savings bank, credit union or a bank organized
29 under the laws of the United States and headquartered in
30 Illinois.
31 (bb) "Escrow agent" shall mean a third party, individual
32 or entity charged with the fiduciary obligation for holding
33 escrow funds on a residential mortgage loan pending final
34 payout of those funds in accordance with the terms of the
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1 residential mortgage loan.
2 (cc) "Net worth" shall have the meaning ascribed thereto
3 in Section 3-5 of this Act.
4 (dd) "Affiliate" shall mean:
5 (1) any entity that directly controls or is
6 controlled by the licensee and any other company that is
7 directly affecting activities regulated by this Act that
8 is controlled by the company that controls the licensee;
9 (2) any entity:
10 (A) that is controlled, directly or
11 indirectly, by a trust or otherwise, by or for the
12 benefit of shareholders who beneficially or
13 otherwise control, directly or indirectly, by trust
14 or otherwise, the licensee or any company that
15 controls the licensee; or
16 (B) a majority of the directors or trustees of
17 which constitute a majority of the persons holding
18 any such office with the licensee or any company
19 that controls the licensee;
20 (3) any company, including a real estate investment
21 trust, that is sponsored and advised on a contractual
22 basis by the licensee or any subsidiary or affiliate of
23 the licensee.
24 The Commissioner may define by rule and regulation any
25 terms used in this Act for the efficient and clear
26 administration of this Act.
27 (ee) "First tier subsidiary" shall be defined by
28 regulation incorporating the comparable definitions used by
29 the Office of the Comptroller of the Currency and the
30 Illinois Commissioner of Banks and Real Estate.
31 (ff) "Gross delinquency rate" means the quotient
32 determined by dividing (1) the sum of (i) the number of
33 government-insured residential mortgage loans funded or
34 purchased by a licensee in the preceding calendar year that
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1 are delinquent and (ii) the number of conventional
2 residential mortgage loans funded or purchased by the
3 licensee in the preceding calendar year that are delinquent
4 by (2) the sum of (i) the number of government-insured
5 residential mortgage loans funded or purchased by the
6 licensee in the preceding calendar year and (ii) the number
7 of conventional residential mortgage loans funded or
8 purchased by the licensee in the preceding calendar year.
9 (gg) "Delinquency rate factor" means the factor set by
10 rule of the Commissioner that is multiplied by the average
11 gross delinquency rate of licensees, determined annually for
12 the immediately preceding calendar year, for the purpose of
13 determining which licensees shall be examined by the
14 Commissioner pursuant to subsection (b) of Section 4-8 of
15 this Act.
16 (Source: P.A. 89-355, eff. 8-17-95; 89-508, eff. 7-3-96.)