Public Act 097-0143
 
SB1603 EnrolledLRB097 09201 CEL 49336 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 1-3 and 1-4 as follows:
 
    (205 ILCS 635/1-3)  (from Ch. 17, par. 2321-3)
    Sec. 1-3. Necessity for License; Scope of Act. 
    (a) No person, partnership, association, corporation or 
other entity
shall engage in the business of brokering, 
funding, originating, servicing
or purchasing of residential 
mortgage loans without first obtaining a
license from the 
Commissioner in accordance with the licensing procedure

provided in this Article I and such regulations as may be 
promulgated by
the Commissioner.  The licensing provisions of 
this Section shall not apply
to any entity engaged solely in 
commercial mortgage lending or
to any person, partnership 
association, corporation or other entity
exempted pursuant to 
Section 1-4, subsection (d), of this Act or in accordance
with 
regulations promulgated by the Commissioner hereunder. No 
provision of this Act shall apply to an exempt person or entity 
as defined in items (1) and (1.5) of subsection (d) of Section 
1-4 of this Act. Notwithstanding anything to the contrary in 
the preceding sentence, an individual acting as a mortgage loan 
originator who is not employed by and acting for an entity 
described in item (1) of subsection (tt) of Section 1-4 of this 
Act shall be subject to the mortgage loan originator licensing 
requirements of Article VII of this Act.
    Effective January 1, 2011, no provision of this Act shall 
apply to an exempt person or entity as defined in item (1.8) of 
subsection (d) of Section 1-4 of this Act. Notwithstanding 
anything to the contrary in the preceding sentence, an 
individual acting as a mortgage loan originator who is not 
employed by and acting for an entity described in item (1) of 
subsection (tt) of Section 1-4 of this Act shall be subject to 
the mortgage loan originator licensing requirements of Article 
VII of this Act, and provided that an individual acting as a 
mortgage loan originator under item (1.8) of subsection (d) of 
Section 1-4 of this Act shall be further subject to a 
determination by the U.S. Department of Housing and Urban 
Development through final rulemaking or other authorized 
agency determination under the federal Secure and Fair 
Enforcement for Mortgage Licensing Act of 2008. 
    (b) No person, partnership, association, corporation, or 
other entity
except a licensee under this Act or an entity 
exempt from licensing
pursuant to Section 1-4, subsection (d), 
of this Act shall do any business
under any name or title, or 
circulate or use any advertising or make any
representation or 
give any information to any person, which indicates or

reasonably implies activity within the scope
of this Act.
    (c) The Commissioner may, through the Attorney General, 
request the circuit
court of either Cook or Sangamon County to 
issue an injunction to restrain
any person from violating or 
continuing to violate any of the foregoing
provisions of this 
Section.
    (d) When the Commissioner has reasonable cause to believe 
that any
entity which has not submitted an application for 
licensure is conducting
any of the activities described in 
subsection (a) hereof, the Commissioner
shall have the power to 
examine all books and records of the entity and any
additional 
documentation necessary in order to determine whether such

entity should become licensed under this Act.
    (d-1) The Commissioner may issue orders against any person 
if the Commissioner has reasonable cause to believe that an 
unsafe, unsound, or unlawful practice has occurred, is 
occurring, or is about to occur, if any person has violated, is 
violating, or is about to violate any law, rule, or written 
agreement with the Commissioner, or for the purposes of 
administering the provisions of this Act and any rule adopted 
in accordance with this Act.

    (e) Any person, partnership, association, corporation or 
other entity
who violates any provision of this Section commits 
a business offense and
shall be fined an amount not to exceed 
$25,000.
    (f) Each person, partnership, association, corporation or 
other entity
conducting activities regulated by this Act shall 
be issued one license.
Each office, place of business or 
location at which a residential mortgage
licensee conducts any 
part of his or her business must
be recorded with the 
Commissioner pursuant to Section 2-8 of this Act.
    (g) Licensees under this Act shall solicit, broker, fund, 
originate,
service and purchase residential mortgage loans 
only in conformity with the
provisions of this Act and such 
rules and regulations as may be promulgated
by the 
Commissioner.
    (h) This Act applies to all entities doing business in 
Illinois as
residential mortgage bankers, as defined by "An Act 
to provide for the
regulation of mortgage bankers", approved 
September 15, 1977, as amended,
regardless of whether licensed 
under that or any prior Act.  Any existing
residential mortgage 
lender or residential mortgage broker in Illinois
whether or 
not previously licensed, must operate in accordance with this 
Act.
    (i) This Act is a successor Act to and a continuance of the 
regulation
of residential mortgage bankers provided in, "An Act 
to provide for the
regulation of mortgage bankers", approved 
September 15, 1977, as amended.
    Entities and persons subject to the predecessor Act shall 
be subject to
this Act from and after its effective date.
(Source: P.A. 96-112, eff. 7-31-09; 96-1216, eff. 1-1-11.)
 
    (205 ILCS 635/1-4)
    Sec. 1-4. Definitions. 
    (a) "Residential real property" or "residential real 
estate" shall mean any real property located in Illinois, upon 
which is constructed or intended to be constructed a dwelling.
    (b) "Making a residential mortgage loan" or "funding a 
residential mortgage
loan" shall mean for compensation or gain, 
either directly or indirectly,
advancing funds or making a 
commitment to advance funds to a loan applicant
for a 
residential mortgage loan.
    (c) "Soliciting, processing, placing, or negotiating a 
residential
mortgage loan" shall mean for compensation or gain, 
either directly or
indirectly, accepting or offering to accept 
an application for a
residential mortgage loan, assisting or 
offering to assist in the
processing of an application for a 
residential mortgage loan on behalf of a
borrower, or 
negotiating or offering to negotiate the terms or conditions
of 
a residential mortgage loan with a lender on behalf of a 
borrower
including, but not limited to, the submission of 
credit packages for the
approval of lenders, the preparation of 
residential mortgage loan closing
documents, including a 
closing in the name of a broker.
    (d) "Exempt person or entity" shall mean the following:
        (1) (i) Any banking organization or foreign banking 
    corporation
licensed by the Illinois Commissioner of Banks 
    and Real Estate or the
United States Comptroller of the 
    Currency to transact business in this
State; (ii) any 
    national bank, federally chartered savings and loan

    association, federal savings bank, federal credit union; 
    (iii) any pension
trust, bank trust, or bank trust company; 
    (iv) any bank, savings and loan
association, savings bank, 
    or credit union organized under the laws of this
or any 
    other state; (v) any Illinois Consumer Installment Loan Act 
    licensee;
(vi) any insurance company authorized to 
    transact business in this State;
(vii) any entity engaged 
    solely in commercial mortgage lending; (viii) any
service 
    corporation of a savings and loan association or savings 
    bank organized
under the laws of this State or the service 
    corporation of a federally
chartered savings and loan 
    association or savings bank having
its principal place of 
    business in this State, other than a service
corporation 
    licensed or entitled to reciprocity under the Real Estate

    License Act of 2000; or (ix) any first tier subsidiary of a

    bank, the charter of which is issued under the Illinois 
    Banking Act
by the Illinois Commissioner of Banks and Real 
    Estate,
or the first tier subsidiary of a bank chartered by 
    the United States
Comptroller of the Currency and that has 
    its principal place of business
in this State, provided 
    that the first tier subsidiary is regularly
examined by the 
    Illinois Commissioner of Banks and Real Estate
or the 
    Comptroller of the Currency, or a consumer compliance 
    examination is
regularly conducted by the Federal Reserve 
    Board.
        (1.5) Any employee of a person or entity mentioned in

    item (1) of this subsection, when acting for such person or 
    entity, or any registered mortgage loan originator when 
    acting for an entity described in subsection (tt) of this 
    Section.
        (1.8) Any person or entity that does not originate 
    mortgage loans in the ordinary course of business, but 
    makes or acquires residential mortgage loans with his or 
    her own funds for his or her or its own investment without 
    intent to make, acquire, or resell more than 3 residential 
    mortgage loans in any one calendar year. 
        (2) (Blank).
        (3) Any person employed by a licensee to assist in the 
    performance of
the residential mortgage licensee's 
    activities regulated by this Act who is compensated in any 
    manner by
only one licensee.
        (4) (Blank).
        (5) Any individual, corporation, partnership, or other 
    entity that
originates, services, or brokers residential 
    mortgage loans, as these
activities are defined in this 
    Act, and who or which receives no
compensation for those 
    activities, subject to the Commissioner's
regulations and 
    the federal Secure and Fair Enforcement for Mortgage 
    Licensing Act of 2008 and the rules promulgated under that 
    Act with regard to the nature and amount of compensation.
        (6) (Blank).
    (e) "Licensee" or "residential mortgage licensee" shall 
mean a person,
partnership, association, corporation, or any 
other entity who or which is
licensed pursuant to this Act to 
engage in the activities regulated by
this Act.
    (f) "Mortgage loan" "residential mortgage loan" or "home

mortgage loan" shall mean any loan primarily for personal, 
family, or household use that is secured by a mortgage, deed of 
trust, or other equivalent consensual security interest on a 
dwelling as defined in Section 103(v) of the federal Truth in 
Lending Act, or residential real estate upon which is 
constructed or intended to be constructed a dwelling.
    (g) "Lender" shall mean any person, partnership, 
association,
corporation, or any other entity who either lends 
or invests money in
residential mortgage loans.
    (h) "Ultimate equitable owner" shall mean a person who, 
directly
or indirectly, owns or controls an ownership interest 
in a corporation,
foreign corporation, alien business 
organization, trust, or any other form
of business organization 
regardless of whether the person owns or controls
the ownership 
interest through one or more persons or one or more proxies,

powers of attorney, nominees, corporations, associations, 
partnerships,
trusts, joint stock companies, or other entities 
or devices, or any
combination thereof.
    (i) "Residential mortgage financing transaction" shall 
mean the negotiation,
acquisition, sale, or arrangement for or 
the offer to negotiate, acquire,
sell, or arrange for, a 
residential mortgage loan or residential mortgage
loan 
commitment.
    (j) "Personal residence address" shall mean a street 
address and shall
not include a post office box number.
    (k) "Residential mortgage loan commitment" shall mean a 
contract for
residential mortgage loan financing.
    (l) "Party to a residential mortgage financing 
transaction" shall mean a
borrower, lender, or loan broker in a 
residential mortgage financing
transaction.
    (m) "Payments" shall mean payment of all or any of the 
following:
principal, interest and escrow reserves for taxes, 
insurance and other related
reserves, and reimbursement for 
lender advances.
    (n) "Commissioner" shall mean the Commissioner of Banks and 
Real Estate, except that, beginning on April 6, 2009 (the 
effective date of Public Act 95-1047), all references in this 
Act to the Commissioner of Banks and Real Estate are deemed, in 
appropriate contexts, to be references to the Secretary of 
Financial and Professional Regulation, or his or her designee, 
including the Director of the Division of Banking of the 
Department of Financial and Professional Regulation.
    (n-1) "Director" shall mean the Director of the Division of 
Banking of the Department of Financial and Professional 
Regulation, except that, beginning on July 31, 2009 (the 
effective date of Public Act 96-112), all references in this 
Act to the Director are deemed, in appropriate contexts, to be 
the Secretary of Financial and Professional Regulation, or his 
or her designee, including the Director of the Division of 
Banking of the Department of Financial and Professional 
Regulation. 
    (o) "Loan brokering", "brokering", or "brokerage service" 
shall mean the act
of helping to obtain from another entity, 
for a borrower, a loan secured by
residential real estate 
situated in Illinois or assisting a borrower in
obtaining a 
loan secured by residential real estate situated in Illinois in

return for consideration to be paid by either the borrower or 
the lender
including, but not limited to, contracting for the 
delivery of residential
mortgage loans to a third party lender 
and soliciting, processing, placing,
or negotiating 
residential mortgage loans.
    (p) "Loan broker" or "broker" shall mean a person, 
partnership,
association, corporation, or limited liability 
company, other than
those persons, partnerships,
associations, 
corporations, or limited liability companies exempted
from 
licensing pursuant to Section
1-4, subsection (d), of this Act, 
who performs the activities described
in subsections (c) and 
(o) of this Section.
    (q) "Servicing" shall mean the collection or remittance for 
or the
right or obligation to collect or remit for any lender, 
noteowner,
noteholder, or for a licensee's own account, of 
payments, interests,
principal, and trust items such as hazard 
insurance and taxes on a
residential mortgage loan in 
accordance with the terms of the residential
mortgage loan; and 
includes loan payment follow-up, delinquency loan
follow-up, 
loan analysis and any notifications to the borrower that are

necessary to enable the borrower to keep the loan current and 
in good standing.
    (r) "Full service office" shall mean an office, provided by 
the licensee and not subleased from the licensee's employees, 
and staff in Illinois
reasonably adequate to handle efficiently 
communications, questions, and
other matters relating to any 
application for, or an existing home mortgage
secured by 
residential real estate situated in Illinois
with respect to 
which the licensee is brokering, funding originating,

purchasing, or servicing.  The management and operation of each 
full service
office must include observance of good business 
practices such as proper signage; adequate,
organized, and 
accurate books and records; ample phone lines, hours of

business, staff training and supervision, and provision for a 
mechanism to
resolve consumer inquiries, complaints, and 
problems.  The Commissioner
shall issue regulations with regard 
to these requirements and shall include
an evaluation of 
compliance with this Section in his or her periodic
examination 
of each licensee.
    (s) "Purchasing" shall mean the purchase of conventional or

government-insured mortgage loans secured by residential real 
estate
situated in Illinois from either the lender or from the 
secondary market.
    (t) "Borrower" shall mean the person or persons who seek 
the services of
a loan broker, originator, or lender.
    (u) "Originating" shall mean the issuing of commitments for 
and funding of
residential mortgage loans.
    (v) "Loan brokerage agreement" shall mean a written 
agreement in which a
broker or loan broker agrees to do either 
of the following:
        (1) obtain a residential mortgage loan for the borrower 
    or assist the
borrower in obtaining a residential mortgage 
    loan; or
        (2) consider making a residential mortgage loan to the 
    borrower.
    (w) "Advertisement" shall mean the attempt by publication,

dissemination, or circulation to induce, directly or 
indirectly,
any person to enter into a residential mortgage 
loan agreement or
residential mortgage loan brokerage 
agreement relative to a
mortgage secured by residential real 
estate situated in Illinois.
    (x) "Residential Mortgage Board" shall mean the 
Residential Mortgage
Board created in Section 1-5 of this Act.
    (y) "Government-insured mortgage loan" shall mean any 
mortgage loan made
on the security of residential real estate 
insured by the Department of
Housing and Urban Development or 
Farmers Home Loan Administration, or
guaranteed by the Veterans 
Administration.
    (z) "Annual audit" shall mean a certified audit of the 
licensee's books and
records and systems of internal control 
performed by a certified public
accountant in accordance with 
generally accepted accounting principles
and generally 
accepted auditing standards.
    (aa) "Financial institution" shall mean a savings and loan

association, savings bank, credit union, or a bank organized 
under the
laws of Illinois or a savings and loan association, 
savings bank,
credit union or a bank organized under the laws 
of the United States and
headquartered in Illinois.
    (bb) "Escrow agent" shall mean a third party, individual or 
entity
charged with the fiduciary obligation for holding escrow 
funds on a
residential mortgage loan pending final payout of 
those funds
in accordance with the terms of the residential 
mortgage loan.
    (cc) "Net worth" shall have the meaning ascribed thereto in 
Section 3-5
of this Act.
    (dd) "Affiliate" shall mean:
        (1) any entity that directly controls or is controlled 
    by the licensee
and any other company that is directly 
    affecting activities regulated by
this Act that is 
    controlled by the company that controls the licensee;
        (2) any entity:
            (A) that is controlled, directly or indirectly, by 
        a trust or otherwise,
by or for the benefit of 
        shareholders who beneficially or otherwise
control, 
        directly or indirectly, by trust or otherwise, the 
        licensee or any
company that controls the licensee; or
            (B) a majority of the directors or trustees of 
        which constitute a
majority of the persons holding any 
        such office with the licensee or any
company that 
        controls the licensee;
        (3) any company, including a real estate investment 
    trust, that is
sponsored and advised on a contractual basis 
    by the licensee or any
subsidiary or affiliate of the 
    licensee.
    The Commissioner may define by rule and regulation any 
terms used
in this Act for the efficient and clear 
administration of this Act.
    (ee) "First tier subsidiary" shall be defined by regulation

incorporating the comparable definitions used by the Office of 
the
Comptroller of the Currency and the Illinois Commissioner 
of Banks
and Real Estate.
    (ff) "Gross delinquency rate" means the quotient 
determined by dividing
(1) the sum of (i) the number of 
government-insured residential mortgage loans
funded or 
purchased by a licensee in the preceding calendar year that are

delinquent and (ii) the number of conventional residential 
mortgage loans
funded or purchased by the licensee in the 
preceding calendar year that are
delinquent by (2) the sum of 
(i) the number of government-insured residential
mortgage 
loans funded or purchased by the licensee in the preceding 
calendar
year and (ii) the number of conventional residential 
mortgage loans funded or
purchased by the licensee in the 
preceding calendar year.
    (gg) "Delinquency rate factor" means the factor set by rule 
of the
Commissioner that is multiplied by the average gross 
delinquency rate of
licensees, determined annually for the 
immediately preceding calendar year, for
the purpose of 
determining which licensees shall be examined by the

Commissioner pursuant to subsection (b) of Section 4-8 of this 
Act.
    (hh) "Loan originator" means any natural person who, for 
compensation or in
the expectation of compensation, either 
directly or indirectly makes, offers to
make, solicits, places, 
or negotiates a residential mortgage loan. This definition 
applies only to Section 7-1 of this Act. 
    (ii) "Confidential supervisory information" means any 
report of examination, visitation, or investigation prepared 
by the Commissioner under this Act, any report of examination 
visitation, or investigation prepared by the state regulatory 
authority of another state that examines a licensee, any 
document or record prepared or obtained in connection with or 
relating to any examination, visitation, or investigation, and 
any record prepared or obtained by the Commissioner to the 
extent that the record summarizes or contains information 
derived from any report, document, or record described in this 
subsection. "Confidential supervisory information" does not 
include any information or record routinely prepared by a 
licensee and maintained in the ordinary course of business or 
any information or record that is required to be made publicly 
available pursuant to State or federal law or rule.

    (jj) "Mortgage loan originator" means an individual who for 
compensation or gain or in the expectation of compensation or 
gain:
        (i)  takes a residential mortgage loan application; or
        (ii)  offers or negotiates terms of a residential 
    mortgage loan.
    "Mortgage loan originator" does not include an individual 
engaged solely as a loan processor or underwriter except as 
otherwise provided in subsection (d) of Section 7-1A of this 
Act.
    "Mortgage loan originator"  does not include a person or 
entity that only performs real estate brokerage activities and 
is licensed in accordance with the Real Estate License Act of 
2000, unless the person or entity is compensated by a lender, a 
mortgage broker, or other mortgage loan originator, or by any 
agent of that lender, mortgage broker, or other mortgage loan 
originator.
    "Mortgage loan originator" does not include a person or 
entity solely involved in extensions of credit relating to 
timeshare plans, as that term is defined in Section 101(53D) of 
Title 11, United States Code.
    (kk) "Depository institution" has the same meaning as in 
Section 3 of the Federal Deposit Insurance Act, and includes 
any credit union. 
    (ll) "Dwelling" means a residential structure or mobile 
home which contains one to 4 family housing units, or 
individual units of condominiums or cooperatives. 
    (mm) "Immediate family member" means a spouse, child, 
sibling, parent, grandparent, or grandchild, and includes 
step-parents, step-children, step-siblings, or adoptive 
relationships.
    (nn) "Individual" means a natural person. 
    (oo) "Loan processor or underwriter" means an individual 
who performs clerical or support duties as an employee at the 
direction of and subject to the supervision and instruction of 
a person licensed, or exempt from licensing, under this Act. 
"Clerical or support duties" includes subsequent to the receipt 
of an application:
        (i) the receipt, collection, distribution, and 
    analysis of information common for the processing or 
    underwriting of a residential mortgage loan; and
        (ii) communicating with a consumer to obtain the 
    information necessary for the processing or underwriting 
    of a loan, to the extent that the communication does not 
    include offering or negotiating loan rates or terms, or 
    counseling consumers about residential mortgage loan rates 
    or terms. An individual engaging solely in loan processor 
    or underwriter activities shall not represent to the 
    public, through advertising or other means of 
    communicating or providing information, including the use 
    of business cards, stationery, brochures, signs, rate 
    lists, or other promotional items, that the individual can 
    or will perform any of the activities of a mortgage loan 
    originator. 
    (pp) "Nationwide Mortgage Licensing System and Registry" 
means a mortgage licensing system developed and maintained by 
the Conference of State Bank Supervisors and the American 
Association of Residential Mortgage Regulators for the 
licensing and registration of licensed mortgage loan 
originators. 
    (qq) "Nontraditional mortgage product" means any mortgage 
product other than a 30-year fixed rate mortgage.
    (rr) "Person" means a natural person, corporation, 
company, limited liability company, partnership, or 
association.
    (ss) "Real estate brokerage activity" means any activity 
that involves offering or providing real estate brokerage 
services to the public, including:
        (1)  acting as a real estate agent or real estate broker 
    for a buyer, seller, lessor, or lessee of real property;
        (2)  bringing together parties interested in the sale, 
    purchase, lease, rental, or exchange of real property;
        (3)  negotiating, on behalf of any party, any portion of 
    a contract relating to the sale, purchase, lease, rental, 
    or exchange of real property, other than in connection with 
    providing financing with respect to any such transaction;
        (4)  engaging in any activity for which a person engaged 
    in the activity is required to be registered or licensed as 
    a real estate agent or real estate broker under any 
    applicable law; or
        (5) offering to engage in any activity, or act in any 
    capacity, described in this subsection (ss). 
    (tt) "Registered mortgage loan originator" means any 
individual that:
        (1)  meets the definition of mortgage loan originator 
    and is an employee of:
            (A)  a depository institution;
            (B) a subsidiary that is:
                (i)  owned and controlled by a depository 
            institution; and
                (ii)   regulated by a federal banking agency; or
            (C)  an institution regulated by the Farm Credit 
        Administration; and
        (2)  is registered with, and maintains a unique 
    identifier through, the Nationwide Mortgage Licensing 
    System and Registry.
    (uu) "Unique identifier" means a number or other identifier 
assigned by protocols established by the Nationwide Mortgage 
Licensing System and Registry. 
    (vv) "Residential mortgage license" means a license issued 
pursuant to Section 1-3, 2-2, or 2-6 of this Act. 
    (ww) "Mortgage loan originator license" means a license 
issued pursuant to Section 7-1A, 7-3, or 7-6 of this Act. 
    (xx)  "Secretary" means the Secretary of the Department of 
Financial and Professional Regulation, or a person authorized 
by the Secretary or by this Act to act in the Secretary's 
stead. 
(Source: P.A. 95-1047, eff. 4-6-09; 96-112, eff. 7-31-09; 
96-1000, eff. 7-2-10; 96-1216, eff. 1-1-11.)
 
 
    Section 99. Effective date. This Act takes effect upon 
becoming law. 
  


Effective Date:  7/14/2011