Public Act 90-0772 of the 90th General Assembly
Public Act 90-0772
SB497 Enrolled LRB9001616JSgc
AN ACT to amend the Residential Mortgage License Act of
1987 by changing Sections 1-4, 3-2, 3-4, and 6-2 and
repealing Section 3-10.
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 1-4, 3-2, 3-4, and 6-2 as
follows:
(205 ILCS 635/1-4) (from Ch. 17, par. 2321-4)
Sec. 1-4. Definitions.
(a) "Residential real property" or "residential real
estate" shall mean real property located in this State
improved by a one-to-four family dwelling used or occupied,
wholly or partly, as the home or residence of one or more
persons and may refer, subject to regulations of the
Commissioner, to unimproved real property upon which those
kinds dwellings are to be constructed.
(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 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 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 1983; 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.
(2) Any person or entity that either (i) has a
physical presence in Illinois or (ii) does not originate
mortgage loans in the ordinary course of business making
or acquiring residential mortgage loans with his or her
or its own funds for his or her or its own investment
without intent to make, acquire, or resell more than 10
residential mortgage loans in any one calendar year.
(3) Any person employed by a licensee to assist in
the performance of the activities regulated by this Act
who is compensated in any manner by only one licensee.
(4) Any person licensed pursuant to the Real Estate
License Act of 1983, who engages only in the taking of
applications and credit and appraisal information to
forward to a licensee or an exempt entity under this Act
and who is compensated by either a licensee or an exempt
entity under this Act, but is not compensated by either
the buyer (applicant) or the seller.
(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 with regard to the nature and
amount of compensation.
(6) A person who prepares supporting documentation
for a residential mortgage loan application taken by a
licensee and performs ministerial functions pursuant to
specific instructions of the licensee who neither
requires nor permits the preparer to exercise his or her
discretion or judgment; provided that this activity is
engaged in pursuant to a binding, written agreement
between the licensee and the preparer that:
(A) holds the licensee fully accountable for
the preparer's action; and
(B) otherwise meets the requirements of this
Section and this Act, does not undermine the
purposes of this Act, and is approved by the
Commissioner.
(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 a loan to or for the benefit of any
natural person made primarily for personal, family, or
household use, primarily secured by either a mortgage on
residential real property or certificates of stock or other
evidence of ownership interests in and proprietary leases
from, corporations, partnerships, or limited liability
companies formed for the purpose of cooperative ownership of
residential real property, all located in Illinois.
(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 or a person authorized by the Commissioner,
the Office of Banks and Real Estate Act, or this Act to act
in the Commissioner's stead .
(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 office 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 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.
(Source: P.A. 89-355, eff. 8-17-95; 89-508, eff. 7-3-96.)
(205 ILCS 635/3-2) (from Ch. 17, par. 2323-2)
Sec. 3-2. Annual audit.
(a) At the licensee's fiscal year-end, but in no case
more than 12 months after the last audit conducted pursuant
to this Section, except as otherwise provided in this
Section, it shall be mandatory for each residential mortgage
licensee to cause its books and accounts to be audited by a
certified public accountant not connected with such licensee.
The books and records of all licensees under this Act shall
be maintained on an accrual basis. The audit must be
sufficiently comprehensive in scope to permit the expression
of an opinion on the financial statements, which must be
prepared in accordance with generally accepted accounting
principles, and must be performed in accordance with
generally accepted auditing standards. Notwithstanding the
requirements of this subsection, a licensee that is a first
tier subsidiary may submit audited consolidated financial
statements of its parent as long as the consolidated
statements are supported by consolidating statements. The
licensee's chief financial officer shall attest to the
licensee's financial statements disclosed in the
consolidating statements.
(b) As used herein, the term "expression of opinion"
includes either (1) an unqualified opinion, (2) a qualified
opinion, (3) a disclaimer of opinion, or (4) an adverse
opinion.
(c) If a qualified or adverse opinion is expressed or if
an opinion is disclaimed, the reasons therefore must be fully
explained. An opinion, qualified as to a scope limitation,
shall not be acceptable.
(d) The most recent audit report shall be filed with the
Commissioner at the time of the annual license renewal
payment within 90 days of the audit date. The report filed
with the Commissioner shall be certified by the certified
public accountant conducting the audit. The Commissioner may
promulgate rules regarding late audit reports.
(e) If any licensee required to make an audit shall fail
to cause an audit to be made, the Commissioner shall cause
the same to be made by a certified public accountant at the
licensee's expense. The Commissioner shall select such
certified public accountant by advertising for bids or by
such other fair and impartial means as he or she establishes
by regulation.
(f) In lieu of the audit required by this Section, the
Commissioner may accept any audit made in conformance with
the audit requirements of the U.S. Department of Housing and
Urban Development.
(g) With respect to licensees who solely broker
residential mortgage loans, instead of the audit required by
this Section, the Commissioner may accept compilation
financial statements prepared at least every 12 months, and
the compilation financial statement shall be submitted at the
time of the annual license renewal payment no later than 90
days after the compilation date. If a licensee under this
Section fails to file a compilation as required, the
Commissioner shall cause an audit of the licensee's books and
accounts to be made by a certified public accountant at the
licensee's expense. The Commissioner shall select the
certified public accountant by advertising for bids or by
such other fair and impartial means as he or she establishes
by rule. A licensee who files false or misleading
compilation financial statements is guilty of a business
offense and shall be fined not less than $5,000.
(h) The workpapers of the certified public accountants
employed by each licensee for purposes of this Section are to
be made available to the Commissioner or the Commissioner's
designee upon request and may be reproduced by the
Commissioner or the Commissioner's designee to enable to the
Commissioner to carry out the purposes of this Act.
(i) Notwithstanding any other provision of this Section,
if a licensee relying on subsection (g) of this Section
causes its books to be audited at any other time or causes
its financial statements to be reviewed, a complete copy of
the audited or reviewed financial statements shall be
delivered to the Commissioner at the time of the annual
license renewal payment following receipt by the licensee of
the audited or reviewed financial statements within 10 days
of the date on which the financial statements were delivered
to the licensee. All workpapers shall be made available to
the Commissioner upon request. The financial statements and
workpapers may be reproduced by the Commissioner or the
Commissioner's designee to carry out the purposes of this
Act.
(Source: P.A. 89-74, eff. 6-30-95; 89-355, eff. 8-17-95.)
(205 ILCS 635/3-4) (from Ch. 17, par. 2323-4)
Sec. 3-4. Office and staff within the State.
(a) A licensee whose principal place of business is
located in the State of Illinois shall maintain, in the State
of Illinois, at least one full service office with staff
reasonably adequate to handle efficiently communications,
questions, and all other matters relating to any application
for a home mortgage or an existing home mortgage with respect
to which such licensee is performing services, regardless of
kind, for any borrower or lender, note owner or holder, or
for himself or herself while engaged in the residential
mortgage business.
(b) In lieu of maintaining a full service office in the
State of Illinois, a licensee whose principal place of
business is located outside the State of Illinois must submit
a certified audit as required in Section 3-2 of this Act
evidencing a minimum net worth of $100,000, which must be
maintained at all times, and shall submit and maintain a
fidelity bond in the amount of $100,000. Notwithstanding the
requirements of subsection (a) of this Section, upon
application of the licensee, the Commissioner may waive the
requirements of subsection (a) upon receipt of a notarized
affidavit stating that:
(1) the licensee does not solicit, with respect to
activity licensable under this Act, in any manner or
amount, Illinois consumers seeking residential mortgages;
(2) the licensee does not originate or broker
residential mortgage loans;
(3) the licensee has no unresolved complaints under
Section 4-6 of this Act;
(4) the licensee's principal place of business is
not within this State; and
(5) the licensee is in compliance with this Act.
(c) No waiver granted under subsection (b) of this
Section shall run longer than the term of the license in
effect when the waiver was granted. Upon renewal of the
license, the waiver may be renewed upon application as
provided in subsection (b).
(Source: P.A. 89-355, eff. 8-17-95; 90-301, eff. 8-1-97.)
(205 ILCS 635/6-2) (from Ch. 17, par. 2326-2)
Sec. 6-2. Removal and prohibition. Upon making any one or
more of the following findings, the Commissioner may issue a
notice of intent to issue an order of removal or prohibition,
or an order of removal and prohibition, which order may
remove a named person, persons, or entity or entities from
participating in the affairs of one or more licensees and may
be permanent or for a specific shorter period of time. The
findings required under this Section may be any one or more
of the following:
(1) A finding that the party or entity subject to
the order has been convicted of a crime involving
material financial loss to a licensee, a federally
insured depository institution, a government sponsored
enterprise, a Federal Home Loan Bank, a Federal Reserve
Bank, or any other person.
(2) A finding that the person or entity subject to
the order has submitted or caused to be submitted any
document that contains multiple willful and material
misstatements of facts, and that includes the signature
of the person or entity specified in the Commissioner's
order, or that is notarized, certified, verified or is in
any other way attested to, as to its veracity. An
application for licensure or license renewal may be
considered such a document.
(3) Conviction of a business offense under
subsection (e) of Section 1-3 or subsection (g) of
Section 3-2.
(4) A finding prepared by a hearing officer
pursuant to a hearing held under Section 4-1(n) of this
Act that the person subject to the order, while an
employee of a licensee, has knowingly submitted or caused
to be submitted any document that contains willful and
material misstatement of facts and which is used in
connection with any licensable activity as defined in
Section 1-3(a) of this Act.
This Section is prospective and shall apply to actions or
conduct performed or commenced by a person or entity on or
after September 15, 1992.
Any notice of intent or order issued under this Section
is subject to administrative and judicial review under
Section 4-12.
(Source: P.A. 89-355, eff. 8-17-95.)
(205 ILCS 635/3-10 rep.)
Section 10. The Residential Mortgage License Act of 1987
is amended by repealing Section 3-10.