STATE OF ILLINOIS

Is a license required? The State of Illinois does not require license to perform loan modifications, however it does require a license for anyone who brokers a mortgage.
State specific loan modification law? Yes.There are no laws which specifically mention loan modifications, but there is the Mortgage Rescue Fraud Act, which into effect January 1, 2007 (attached as Schedule A).

 

The act is aimed at protecting the owners of distressed properties, as defined in 765 ILCS 940/5, “owners of residential real property consisting of one to 6 family dwelling units that is in foreclosure or at risk of loss due to nonpayment of taxes, or whose owner is more than 30 days delinquent on any loan that is secured by the property”.

 

The act applies to distressed property consultants as defined in 765 ILCS 940/5, anyone who offers or advertises a wide variety of services to a distressed property owner. The act requires a written contract and a notice in the act be given to clients of distressed property consultants. The act has certain other notice requirements and also allows the distressed property owner to rescind certain sorts of agreements.

Advantages of becoming a licensed Mortgage Broker? None.As stated in the Residential Mortgage License Act of 1987, licensed individuals are subject to the act. (attached as Schedule B).205 ILCS 635/1-3 states that “(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.”

 

Penalties for operating in the state without a license: A fine no greater than $25,000 per violation of the Residential Mortgage License Act of 1987, which includes performing services without a license as well as other things such as advertising.
Is an advanced fee permitted?   No.765 ILCS 940/10 includes a form that distressed property consultants must be give to an individual of a distressed property, the form states that “(name) or anyone working for him or her CANNOT: (1) Take any money from you or ask you for money until (name) has completely finished doing everything he or she said he or she would do.”

765 ILCS 940/50 also lists a number of financial transactions that a distressed property consultant is forbidden to be involved in.

Is a written agreement required? Yes. 

765 ILCS 940/10 states that a distressed property consultant contract must be in writing and must fully disclose the exact nature of the distressed property consultant’s services and the total amount and terms of compensation.

Other noteworthy information? None.
Illinois Compiled Statutes Ctrl + Click HereMortgage Rescue Fraud Act:Ctrl + Click Here

Residential Mortgage License Act of 1987:

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Schedule A

PROPERTY
(765 ILCS 940/) Mortgage Rescue Fraud Act.

(765 ILCS 940/1)
Sec. 1. Short title. This Act may be cited as the Mortgage Rescue Fraud Act.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/5)
Sec. 5. Definitions. As used in this Act:
“Distressed property” means residential real property consisting of one to 6 family dwelling units that is in foreclosure or at risk of loss due to nonpayment of taxes, or whose owner is more than 30 days delinquent on any loan that is secured by the property.
“Distressed property consultant” means any person who, directly or indirectly, for compensation from the owner, makes any solicitation, representation, or offer to perform or who, for compensation from the owner, performs any service that the person represents will in any manner do any of the following:
(1) stop or postpone the foreclosure sale or stop or
postpone the loss of the home due to nonpayment of taxes;
(2) obtain any forbearance from any beneficiary or
mortgagee, or relief with respect to a tax sale of the property;
(3) assist the owner to exercise any right of
reinstatement or right of redemption;
(4) obtain any extension of the period within which
the owner may reinstate the owner’s rights with respect to the property;
(5) obtain any waiver of an acceleration clause
contained in any promissory note or contract secured by a mortgage on a distressed property or contained in the mortgage;
(6) assist the owner in foreclosure, loan default, or
post‑tax sale redemption period to obtain a loan or advance of funds;
(7) avoid or ameliorate the impairment of the owner’s
credit resulting from the recording of a notice of default or the conduct of a foreclosure sale or tax sale; or
(8) save the owner’s residence from foreclosure or
save the owner from loss of home due to nonpayment of taxes.
A “distressed property consultant” does not include any
of the following:
(1) a person or the person’s authorized agent acting
under the express authority or written approval of the Department of Housing and Urban Development;
(2) a person who holds or is owed an obligation
secured by a lien on any distressed property, or a person acting under the express authorization or written approval of such person, when the person performs services in connection with the obligation or lien, if the obligation or lien did not arise as the result of or as part of a proposed distressed property conveyance;
(3) banks, savings banks, savings and loan
associations, credit unions, and insurance companies organized, chartered, or holding a certificate of authority to do business under the laws of this State or any other state or under the laws of the United States;
(4) attorneys licensed in Illinois engaged in the
practice of law;
(5) a Department of Housing and Urban Development
approved mortgagee and any subsidiary or affiliate of these persons or entities, and any agent or employee of these persons or entities, while engaged in the business of these persons or entities;
(6) a 501(c)(3) nonprofit agency or organization,
doing business for no less than 5 years, that offers counseling or advice to an owner of a distressed property, if they do not contract for services with for‑profit lenders or distressed property purchasers, or any person who structures or plans such a transaction;
(7) (blank);
(8) licensees of the Consumer Installment Loan Act
who are authorized to make loans secured by real property; or
(9) licensees of the Real Estate License Act of 2000
when providing licensed activities.
“Distressed property purchaser” means any person who
acquires any interest in fee in a distressed property or a beneficial interest in a trust holding title to a distressed property while allowing the owner to possess, occupy, or retain any present or future interest in fee in the property, or any person who participates in a joint venture or joint enterprise involving a distressed property conveyance. “Distressed property purchaser” does not mean any person who acquires distressed property at a short sale or any person acting in participation with any person who acquires distressed property at a short sale, if that person does not promise to convey an interest in fee back to the owner or does not give the owner an option to purchase the property at a later date.
“Distressed property conveyance” means a transaction in
which an owner of a distressed property transfers an interest in fee in the distressed property or in which the holder of all or some part of the beneficial interest in a trust holding title to a distressed property transfers that interest; the acquirer of the property allows the owner of the distressed property to occupy the property; and the acquirer of the property or a person acting in participation with the acquirer of the property conveys or promises to convey an interest in fee back to the owner or gives the owner an option to purchase the property at a later date.
“Person” means any individual, partnership, corporation,
limited liability company, association, or other group or entity, however organized.
“Service” means, without limitation, any of the following:
(1) debt, budget, or financial counseling of any type;
(2) receiving money for the purpose of distributing
it to creditors in payment or partial payment of any obligation secured by a lien on a distressed property;
(3) contacting creditors on behalf of an owner of a
residence that is distressed property;
(4) arranging or attempting to arrange for an
extension of the period within which the owner of a distressed property may cure the owner’s default and reinstate his or her obligation;
(5) arranging or attempting to arrange for any delay
or postponement of the time of sale of the distressed property;
(6) advising the filing of any document or assisting
in any manner in the preparation of any document for filing with any court; or
(7) giving any advice, explanation, or instruction to
an owner of a distressed property that in any manner relates to the cure of a default or forfeiture or to the postponement or avoidance of sale of the distressed property.
(Source: P.A. 94‑822, eff. 1‑1‑07; 95‑691, eff. 6‑1‑08; 95‑1047, eff. 4‑6‑09.)

 

(765 ILCS 940/7)
Sec. 7. Residential Mortgage License Act of 1987 licensees. Licensees of the Residential Mortgage License Act of 1987 are exempt from the requirements of Sections 10, 15, 20, 50(a)(4), 50(a)(5), 50(a)(6), and 50(a)(7). Licensees are also exempt from the requirements of Section 50(a)(2) and Section 70 for any transaction resulting in the origination of a new mortgage loan extinguishing the existing mortgage loan.
(Source: P.A. 95‑1047, eff. 4‑6‑09.)

 

(765 ILCS 940/10)
Sec. 10. Distressed property consultant contract terms.
(a) A distressed property consultant contract must be in writing and must fully disclose the exact nature of the distressed property consultant’s services and the total amount and terms of compensation.
(b) The following notice, printed in at least 12‑point boldface type and completed with the name of the distressed property consultant, must be printed immediately above the statement required by subsection (c) of this Section:

“NOTICE REQUIRED BY ILLINOIS LAW

………………………….(Name) or anyone working

for him or her CANNOT:
(1) Take any money from you or ask you for money
until …………………………………. (Name) has completely finished doing everything he or she said he or she would do; or
(2) Ask you to sign or have you sign any lien,
mortgage, or deed.”
(c) A distressed property consultant contract must be
written in the same language as principally used by the distressed property consultant to describe his or her services or to negotiate the contract, must be dated and signed by the owner, and must contain in immediate proximity to the space reserved for the owner’s signature a conspicuous statement in a size equal to at least 12‑point boldface type, as follows:
“You, the owner, may cancel this transaction at any
time until after the distressed property consultant has fully performed each and every service the distressed property consultant contracted to perform or represented he or she would perform. See the attached notice of cancellation form for an explanation of this right.”
(d) A distressed property contract must contain on the
first page, in a type size no smaller than that generally used in the body of the document, each of the following:
(1) the name and address of the distressed property
consultant to which the notice of cancellation is to be mailed; and
(2) the date the owner signed the contract.
(e) A distressed property consultant contract must be
accompanied by a completed form in duplicate, captioned “NOTICE OF CANCELLATION,” which must be attached to the contract, must be easily detachable, and must contain, in at least 12‑point boldface type, the following statement written in the same language as used in the contract:

“NOTICE OF CANCELLATION

……………………….

(Enter date of transaction)

You may cancel this transaction, without

any penalty or obligation, at any time until after the distressed property consultant has fully performed each and every service the distressed property consultant contracted to perform or represented he or she would perform.
To cancel this transaction, mail or deliver a signed and
dated copy of this cancellation notice, or any other written notice to:
………………(Name of distressed property consultant)
at ………………………(Address of distressed property consultant’s place of business)
I hereby cancel this transaction on ……………(Date)
……………………………….(Owner’s signature)”.
(f) The distressed property consultant shall provide the
owner with a copy of a distressed property consultant contract and the attached notice of cancellation immediately upon execution of the contract.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/15)
Sec. 15. Rescission of distressed property consultant contract.
(a) In addition to any other legal right to rescind a contract, an owner has the right to cancel a distressed property consultant contract at any time until after the distressed property consultant has fully performed each service the distressed property consultant contracted to perform or represented he or she would perform.
(b) Cancellation occurs when the owner gives written notice of cancellation to the distressed property consultant at the address specified in the distressed property consultant contract.
(c) Notice of cancellation, if given by mail, is effective when deposited in the mail properly addressed with postage prepaid. Notice by certified mail, return receipt requested, addressed to the address specified in the distressed property consultant contract, shall be conclusive proof of notice of service.
(d) Notice of cancellation given by the owner need not take the particular form as provided with the distressed property consultant contract and, however expressed, is effective if it indicates the intention of the owner not to be bound by the contract.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/20)
Sec. 20. Waiver of a distressed property consultant contract.
(a) Any waiver by an owner of the provisions of Section 10 or 15 is void and unenforceable as contrary to public policy.
(b) Any attempt by a distressed property consultant to induce an owner to waive the owner’s rights is a violation of the Act.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/25)
Sec. 25. Distressed property conveyance contract. A distressed property purchaser shall enter into every distressed property conveyance in the form of a written contract. Every distressed property conveyance contract must be written in letters of a size equal to at least 12‑point boldface type, in the same language principally used by the owner of the distressed property to negotiate the sale of the distressed property, must be fully completed, signed, and dated by the owner of the distressed property and the distressed property purchaser, and must be witnessed and acknowledged by a notary public, before the execution of any instrument of conveyance of the distressed property.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/30)
Sec. 30. Distressed property conveyance contract terms.
Every contract required by Section 25 must contain the entire
agreement of the parties, be fully assignable, and survive delivery of any instrument of conveyance of the distressed property. Every lease entered into pursuant to a contract required by Section 25 is terminable at will by the distressed property owner, without liability. Every contract required by Section 25 must include the following terms:
(1) the name, business address, and the telephone
number of the distressed property purchaser;
(2) the address of the distressed property;
(3) the total consideration to be given by the
distressed property purchaser or tax lien payor in connection with or incident to the sale;
(4) a complete description of the terms of payment or
other consideration including, but not limited to, any services of any nature that the distressed property purchaser represents he or she will perform for the owner of the distressed property before or after the sale;
(5) a complete description of the terms of any
related agreement designed to allow the owner of the distressed property to remain in the home such as a rental agreement, repurchase agreement, contract for deed, or lease with option to buy;
(6) a notice of cancellation as provided in this
Section;
(7) the following notice in at least 12‑point
boldface type, if the contract is printed, or in capital letters, if the contract is typed, and completed with the name of the distressed property purchaser, immediately above the statement required by this Section:

“NOTICE REQUIRED BY ILLINOIS LAW

Until your right to cancel this contract has ended,

………………(Name) or anyone working for ……………….(Name) CANNOT ask you to sign or have you sign any deed or any other document. You are urged to have this contract reviewed by an attorney of your choice within 5 business days of signing it.”; and
(8) if title to the distressed property will be
transferred in the conveyance transaction, the following notice in at least 14‑point boldface type if the contract is printed, or in capital letters if the contract is typed, and completed with the name of the distressed property purchaser, immediately above the statement required by this Section:

“NOTICE REQUIRED BY ILLINOIS LAW

As part of this transaction, you are giving up title

to your home.”.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/35)
Sec. 35. Cancellation of a distressed property conveyance contract.
(a) In addition to any other right of rescission, the owner of the distressed property has the right to cancel any contract with a distressed property purchaser until midnight of the fifth business day following the day on which the owner of the distressed property signs a contract that complies with Sections 25 and 30 or until 8:00 a.m. on the last day of the period during which the owner of the distressed property has a right of redemption under the Illinois Mortgage Foreclosure Law or the Property Tax Code, whichever occurs first.
(b) Cancellation occurs when the owner of the distressed property delivers, by any means, written notice of cancellation to the address specified in the distressed property conveyance contract.
(c) A notice of cancellation given by the owner of the distressed property need not take the particular form as provided with the distressed property conveyance contract.
(d) Within 10 days following receipt of a notice of cancellation given in accordance with this Section, the distressed property purchaser shall return, without condition, any original contract and any other documents signed by the owner of the distressed property.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/40)
Sec. 40. Notice of cancellation of a distressed property conveyance contract.
(a) The contract must contain in immediate proximity to the space reserved for the owner of the distressed property’s signature a conspicuous statement in a size equal to at least 12‑point boldface type, if the contract is printed, or in capital letters, if the contract is typed, as follows:
“You may cancel this contract for the sale of your
house, without any penalty or obligation, at any time before …………………………..(Date and time of day). See the attached notice of cancellation form for an explanation of this right.”
The distressed property purchaser shall accurately
enter the date and time of day on which the cancellation right ends.
(b) The contract must be accompanied by a completed form in duplicate, captioned “NOTICE OF CANCELLATION” in a size equal to a 12‑point boldface type, if the contract is printed, or in capital letters, if the contract is typed, followed by a space in which the distressed property purchaser shall enter the date on which the owner of the distressed property executes any contract. This form must be attached to the contract, must be easily detachable, and must contain in at least 12‑point type, if the contract is printed, or in capital letters, if the contract is typed, the following statement written in the same language as used in the contract:

“NOTICE OF CANCELLATION

………………………

(Enter date contract signed)

You may cancel this contract for the sale of your home,

without any penalty or obligation, at any time before ………………..(enter date and time of day). To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice to …………………..(Name of purchaser) at ………………………………………. (Street address of purchaser’s place of business) NOT LATER THAN ………………………….. (Enter date and time of day).
I hereby cancel this transaction on
…………… (Date) ……………………………………….. (Seller’s signature)”.
(c) The distressed property purchaser shall provide the owner of the distressed property with a copy of the contract and the attached notice of cancellation immediately at the time the contract is executed by all parties.
(d) The distressed property purchaser shall record the contract with the recorder of deeds in the county where the distressed property is located within 10 days of its execution, provided the contract has not been canceled.
(e) The 5 business days during which the owner of the distressed property may cancel the contract shall not begin to run until all parties to the contract have executed the contract and the distressed property purchaser has complied with all the requirements of this Section.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/45)
Sec. 45. Waiver of a distressed property conveyance contract. Any waiver of the provisions of Sections 35 and 40 are void and unenforceable as contrary to public policy, except that a consumer may waive the 5‑day right to cancel provided in Section 35 if the property is subject to a foreclosure sale within the 5 business days and the owner of the distressed property agrees to waive his or her right to cancel in a handwritten statement that is signed by all parties holding title to the distressed property.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/50)
Sec. 50. Violations.
(a) It is a violation for a distressed property consultant to:
(1) claim, demand, charge, collect, or receive any
compensation until after the distressed property consultant has fully performed each service the distressed property consultant contracted to perform or represented he or she would perform;
(2) claim, demand, charge, collect, or receive any
fee, interest, or any other compensation that does not comport with Section 70;
(3) take a wage assignment, a lien of any type on
real or personal property, or other security to secure the payment of compensation. Any such security is void and unenforceable;
(4) receive any consideration from any third party in
connection with services rendered to an owner unless the consideration is first fully disclosed to the owner;
(5) acquire any interest, directly or indirectly, or
by means of a subsidiary or affiliate in a distressed property from an owner with whom the distressed property consultant has contracted;
(6) take any power of attorney from an owner for any
purpose, except to inspect documents as provided by law; or
(7) induce or attempt to induce an owner to enter a
contract that does not comply in all respects with Sections 10 and 15 of this Act.
(b) A distressed property purchaser, in the
course of a distressed property conveyance, shall not:
(1) enter into, or attempt to enter into, a
distressed property conveyance unless the distressed property purchaser verifies and can demonstrate that the owner of the distressed property has a reasonable ability to pay for the subsequent conveyance of an interest back to the owner of the distressed property and to make monthly or any other required payments due prior to that time;
(2) fail to make a payment to the owner of the
distressed property at the time the title is conveyed so that the owner of the distressed property has received consideration in an amount of at least 82% of the property’s fair market value, or, in the alternative, fail to pay the owner of the distressed property no more than the costs necessary to extinguish all of the existing obligations on the distressed property, as set forth in subdivision (b)(10) of Section 45, provided that the owner’s costs to repurchase the distressed property pursuant to the terms of the distressed property conveyance contract do not exceed 125% of the distressed property purchaser’s costs to purchase the property. If an owner is unable to repurchase the property pursuant to the terms of the distressed property conveyance contract, the distressed property purchaser shall not fail to make a payment to the owner of the distressed property so that the owner of the distressed property has received consideration in an amount of at least 82% of the property’s fair market value at the time of conveyance or at the expiration of the owner’s option to repurchase.
(3) enter into repurchase or lease terms as part of
the subsequent conveyance that are unfair or commercially unreasonable, or engage in any other unfair conduct;
(4) represent, directly or indirectly, that the
distressed property purchaser is acting as an advisor or a consultant, or in any other manner represent that the distressed property purchaser is acting on behalf of the homeowner, or the distressed property purchaser is assisting the owner of the distressed property to “save the house”, “buy time”, or do anything couched in substantially similar language;
(5) misrepresent the distressed property purchaser’s
status as to licensure or certification;
(6) do any of the following until after the time
during which the owner of a distressed property may cancel the transaction:
(A) accept from the owner of the distressed
property an execution of any instrument of conveyance of any interest in the distressed property;
(B) induce the owner of the distressed property
to execute an instrument of conveyance of any interest in the distressed property; or
(C) record with the county recorder of deeds any
document signed by the owner of the distressed property, including but not limited to any instrument of conveyance;
(7) fail to reconvey title to the distressed property
when the terms of the conveyance contract have been fulfilled;
(8) induce the owner of the distressed property to
execute a quit claim deed when entering into a distressed property conveyance;
(9) enter into a distressed property conveyance where
any party to the transaction is represented by power of attorney;
(10) fail to extinguish all liens encumbering the
distressed property, immediately following the conveyance of the distressed property, or fail to assume all liability with respect to the lien in foreclosure and prior liens that will not be extinguished by such foreclosure, which assumption shall be accomplished without violations of the terms and conditions of the lien being assumed. Nothing herein shall preclude a lender from enforcing any provision in a contract that is not otherwise prohibited by law;
(11) fail to complete a distressed property
conveyance before a notary in the offices of a title company licensed by the Department of Financial and Professional Regulation, before an agent of such a title company, a notary in the office of a bank, or a licensed attorney where the notary is employed; or
(12) cause the property to be conveyed or encumbered
without the knowledge or permission of the distressed property owner, or in any way frustrate the ability of the distressed property owner to complete the conveyance back to the distressed property owner.
(c) There is a rebuttable presumption that an appraisal
by a person licensed or certified by an agency of this State or the federal government is an accurate determination of the fair market value of the property.
(d) “Consideration” in item (2) of subsection (b) means
any payment or thing of value provided to the owner of the distressed property, including reasonable costs paid to independent third parties necessary to complete the distressed property conveyance or payment of money to satisfy a debt or legal obligation of the owner of the distressed property.
“Consideration” shall not include amounts
imputed as a downpayment or fee to the distressed property purchaser, or a person acting in participation with the distressed property purchaser.
(e) An evaluation of “reasonable ability to pay” under
subsection (b)(1) of this Section 50 shall include debt to income ratio, fair market value of the distressed property, and the distressed property owner’s payment history. There is a rebuttable presumption that the distressed property purchaser has not verified reasonable payment ability if the distressed property purchaser has not obtained documents of assets, liabilities, and income, other than a statement by the owner of the distressed property.
(Source: P.A. 94‑822, eff. 1‑1‑07; 95‑1047, eff. 4‑6‑09.)

 

(765 ILCS 940/55)
Sec. 55. Civil remedies.
(a) A violation of any of the provisions of this Act constitutes an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act. All remedies, penalties, and authority granted to the Attorney General or State’s Attorney by the Consumer Fraud and Deceptive Business Practices Act shall be available to him or her for the enforcement of this Act.
(b) A consumer who suffers loss by reason of any violation of any provision of this Act may bring a civil action in accordance with the Consumer Fraud and Deceptive Business Practices Act to enforce that provision. All remedies and rights granted to a consumer by the Consumer Fraud and Deceptive Business Practices Act shall be available to the consumer bringing such an action. The remedies and rights provided for in this Act are not exclusive, but cumulative, and all other applicable claims, including, but not limited to, those brought under the doctrine of equitable mortgage, are specifically preserved.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/60)
Sec. 60. Criminal mortgage rescue fraud. A person commits the offense of criminal mortgage rescue fraud when he or she intentionally violates any provision enumerated in Section 50 of this Act.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/65)
Sec. 65. Criminal penalties. A person who commits the offense of criminal mortgage rescue fraud is guilty of a Class 2 felony.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

 

(765 ILCS 940/70)
Sec. 70. Distressed property consultant compensation. In transactions that reduce the existing payment on a homeowner’s mortgage loan for a period of no less than 5 years, a distressed property consultant shall not claim, demand, charge, collect, or receive any fee, interest, or any other compensation that exceeds the lesser of the homeowner’s:
(1) existing monthly principal and interest mortgage
payment; or
(2) total net savings derived from the lowered
monthly principal and interest mortgage payment over the succeeding 12 months.
For all other transactions, a distressed property consultant shall not claim, demand, charge, collect, or receive any fee, interest, or any other compensation for any reason that exceeds 50% of the owner’s existing monthly principal and interest mortgage payments.
(Source: P.A. 95‑1047, eff. 4‑6‑09.)

 

(765 ILCS 940/300)
Sec. 300. (Amendatory provisions; text omitted).
(Source: P.A. 94‑822, eff. 1‑1‑07; text omitted.)

 

(765 ILCS 940/999)
Sec. 999. Effective date. This Act takes effect January 1, 2007.
(Source: P.A. 94‑822, eff. 1‑1‑07.)

Schedule B

FINANCIAL REGULATION
(205 ILCS 635/) Residential Mortgage License Act of 1987.

Article I – General ProvisionsArticle II – Licensing Procedure

Article III – Operations, Capitalization, Insurance

Article IV – Supervision

Article V – Lending Procedures

Article VI – Enforcement Powers

Article VII – Registration Of Loan Originators
(205 ILCS 635/Art. I heading)

ARTICLE I

GENERAL PROVISIONS

 

(205 ILCS 635/1‑1) (from Ch. 17, par. 2321‑1)
Sec. 1‑1. This Act shall be known and may be cited as the “Residential Mortgage License Act of 1987”.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/1‑2) (from Ch. 17, par. 2321‑2)
Sec. 1‑2. Purpose of Act and Policy Statement. (a) The origination, funding, purchasing and brokering of residential mortgage loans and the type of entities involved in residential mortgage lending have undergone significant changes in recent years, due in part to developments in the general economy, specifically interest rate volatility, the sophistication of the national secondary market for mortgage loans and the market for mortgage backed securities. The recent trend toward deregulation in the financial services industry has accelerated the evolution of residential mortgage lending, dramatically increasing the types of mortgage loans offered and the manner in which they are advertised and marketed to consumers. Depository institutions, traditionally the major source of residential mortgage financing for individuals, now compete for capital and customers with mortgage bankers and other financial service organizations. Residential mortgage lenders of every type have increasingly relied on nonfinancial intermediaries, such as mortgage brokers, to find customers. These developments have raised questions as to whether all entities engaging in this banking function operate under appropriate regulatory scrutiny and as to whether all residential mortgage lenders are conducting their business in the best interests of Illinois homeowners and potential homeowners.
(b) The activities of lenders and their offering of financing for residential real property have a direct and immediate impact upon the housing industry, the neighborhoods and communities of this State, its homeowners and potential homeowners. The General Assembly finds that it is essential for the protection of the citizens of this State and the stability of the State’s economy that reasonable standards governing the business practices of residential mortgage lenders and their agents be imposed. The General Assembly further finds that the obligations of lenders and their agents to consumers in connection with making, soliciting, processing, placing or negotiating of residential mortgage loans are such as to warrant the uniform regulation of the residential mortgage lending process, including the application, solicitation, making and servicing of residential mortgage loans. The purpose of this Act is to protect Illinois consumers seeking residential mortgage loans and to ensure that the residential mortgage lending industry is operating fairly, honestly and efficiently, free from deceptive and anti‑competitive practices. The purpose of this Act is to regulate residential mortgage lending to benefit our citizens by ensuring availability of residential mortgage funding, to benefit responsible providers of residential mortgage loans and services, and to avoid requirements inconsistent with legitimate and responsible business practices in the residential mortgage lending industry.
(Source: P.A. 85‑735.)

 

(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.
(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. 93‑1018, eff. 1‑1‑05.)

 

(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 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.
(2) Any person or entity that 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 2000, 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, except that beginning on the effective date of this amendatory Act of the 95th General Assembly, 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.
(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.
(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.
(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) “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.)

 

(205 ILCS 635/1‑5) (from Ch. 17, par. 2321‑5)
Sec. 1‑5. Residential Mortgage Board.
(a) Board composition, compensation. There is created the Residential Mortgage Board composed of 5 members appointed by the Commissioner of Banks and Real Estate. The majority of persons on the Board shall have no financial interest in any residential mortgage business and one member shall be a representative of the Mortgage Banking Trade Association and one member shall be a representative of the Mortgage Broker Trade Association. Members of the Board serving on the effective date of this amendatory Act of 1996 shall continue to serve their unexpired terms as members of the Residential Mortgage Board. Thereafter, on or before January 15 of each year, the Commissioner shall appoint one or more board members, as shall be necessary to maintain a 5 member Board, whose terms shall be for 3 years commencing February 1 of the year in which they are respectively appointed.
If a vacancy occurs on the Residential Mortgage Board, the Commissioner shall within 60 days appoint a new member who shall hold office for the remainder of the vacated term.
The Board shall meet at the call of the chairman, who along with a Secretary, shall be selected by the Board from among its members.
The members of the Board serve at the pleasure of the Commissioner.
(b) Duties of Board. The Residential Mortgage Board shall assist the Commissioner by:
(1) submitting recommendations to the Commissioner
for the efficient administration of this Act; and
(2) performing other duties as are prescribed by the
Commissioner.
(c) Conflict of interest declarations. Each member of the Residential Mortgage Board shall file annually, no later than February 1, with the Commissioner a statement of his or her current business transactions or other affiliations with any licensee under this Act. The Commissioner may adopt rules to avoid conflicts of interest on the part of members of the Residential Mortgage Board in connection with their position on the Board.
(Source: P.A. 93‑1018, eff. 1‑1‑05.)

 

(205 ILCS 635/Art. II heading)

ARTICLE II

LICENSING PROCEDURE

 

(205 ILCS 635/2‑1) (from Ch. 17, par. 2322‑1)
Sec. 2‑1. Licensee Name.
(a) No person, partnership, association, corporation, limited liability company, or other entity engaged in the business regulated by this Act shall operate such business under a name other than the real names of the individuals conducting such business, an assumed corporate name pursuant to the Business Corporation Act of 1983, an assumed limited liability company name pursuant to the Limited Liability Company Act, or an assumed business name pursuant to the Assumed Business Name Act.
(b) A knowing violation of this Section constitutes an unlawful practice within the meaning of this Act, and in addition to the administrative relief available under this Act, may be prosecuted for the commission of a Class A misdemeanor. A person who is convicted of a second or subsequent violation of this Section is guilty of a Class 4 felony.
(Source: P.A. 89‑355, eff. 8‑17‑95.)

 

(205 ILCS 635/2‑2) (from Ch. 17, par. 2322‑2)
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.
(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 $2,043 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 principles which evidences that the applicant meets the net worth requirements of Section 3‑5.
(5) The filing of proof satisfactory to the
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 Commissioner, prior to receiving the initial license. The Commissioner shall promulgate rules regarding proof of experience requirements and educational requirements and the satisfactory completion of those requirements. The 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 averments required by
Section 2‑4, which investigation must allow the 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 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 Commissioner may impose conditions on a license if
the 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 Commissioner.
(b) All licenses shall be issued in duplicate with one copy being transmitted to the license applicant and the second being retained with the Commissioner.
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. 95‑1047, eff. 4‑6‑09.)

 

(205 ILCS 635/2‑3) (from Ch. 17, par. 2322‑3)
Sec. 2‑3. Application form.
(a) Application for a residential mortgage license must be made in accordance with Section 2‑6. The application shall be in writing, under oath, and on a form obtained from and prescribed by the Commissioner.
(b) The application shall contain the name and complete business and residential address or addresses of the license applicant. If the license applicant is a partnership, association, corporation or other form of business organization, the application shall contain the names and complete business and residential addresses of each member, director and principal officer thereof. Such application shall also include a description of the activities of the license applicant, in such detail and for such periods, as the Commissioner may require, including all of the following:
(1) An affirmation of financial solvency noting such
capitalization requirements as may be required by the Commissioner, and access to such credit as may be required by the Commissioner.
(2) An affirmation that the license applicant or its
members, directors or principals as may be appropriate, are at least 18 years of age.
(3) Information as to the character, fitness,
financial and business responsibility, background, experience, and criminal record of any (i) person, entity, or ultimate equitable owner that owns or controls, directly or indirectly, 10% or more of any class of stock of the license applicant; (ii) person, entity, or ultimate equitable owner that is not a depository institution, as defined in Section 1007.50 of the Savings Bank Act, that lends, provides, or infuses, directly or indirectly, in any way, funds to or into a license applicant, in an amount equal to or more than 10% of the license applicant’s net worth; (iii) person, entity, or ultimate equitable owner that controls, directly or indirectly, the election of 25% or more of the members of the board of directors of a license applicant; or (iv) person, entity, or ultimate equitable owner that the Commissioner finds influences management of the license applicant.
(4) Upon written request by the licensee and
notwithstanding the provisions of paragraphs (1), (2), and (3) of this subsection, the Commissioner may permit the licensee to omit all or part of the information required by those paragraphs if, in lieu of the omitted information, the licensee submits an affidavit stating that the information submitted on the licensee’s previous renewal application is still true and accurate. The Commissioner may promulgate rules prescribing the form and content of the affidavit that are necessary to accomplish the purposes of this Section.
(5) Such other information as required by
regulations of the Commissioner.
(Source: P.A. 89‑355, eff. 8‑17‑95.)

 

(205 ILCS 635/2‑4) (from Ch. 17, par. 2322‑4)
Sec. 2‑4. Averments of Licensee. Each application for license or for the renewal of a license shall be accompanied by the following averments stating that the applicant:
(a) Will maintain at least one full service office
within the State of Illinois pursuant to Section 3‑4 of this Act;
(b) Will maintain staff reasonably adequate to meet
the requirements of Section 3‑4 of this Act;
(c) 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 Commissioner regarding any home mortgage in the course of the conduct of its residential mortgage business;
(d) Will file with the Commissioner, when due, any
report or reports which it is required to file under any of the provisions of this Act;
(e) 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) Will not engage in fraudulent home mortgage
underwriting practices;
(g) 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) Has filed tax returns (State and Federal) for
the past 3 years or filed with the Commissioner an accountant’s or attorney’s statement as to why no return was filed;
(i) Will not engage in any discrimination or
redlining activities prohibited by Section 3‑8 of this Act;
(j) 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) 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) Will disburse funds in accordance with its
agreements;
(m) 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 Commissioner;
(n) Will account or deliver to any person any
personal property such as money, fund, deposit, check, draft, mortgage, other document or thing of value, which has come into its possession, and which is not its property, or which it is not in law or equity entitled to retain under the circumstances, at the time which has been agreed upon or is required by law, or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery;
(o) Has not engaged in any conduct which would be
cause for denial of a license;
(p) Has not become insolvent;
(q) Has not submitted an application for a license
under this Act which contains a material misstatement;
(r) 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) Will advise the Commissioner in writing of any
changes to the information submitted on the most recent application for license within 30 days of said change. The written notice must be signed in the same form as the application for license being amended;
(t) 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) Will submit to periodic examination by the
Commissioner as required by this Act;
(v) Will advise the Commissioner in writing of
judgments entered against, and bankruptcy petitions by, the license applicant within 5 days of occurrence;
(w) Will advise the Commissioner in writing within
30 days when the license applicant requests a licensee under this Act to repurchase a loan, and the circumstances therefor;
(x) Will advise the Commissioner in writing within
30 days when the license applicant is requested by another entity to repurchase a loan, and the circumstances therefor;
(y) Will at all times act in a manner consistent
with subsections (a) and (b) of Section 1‑2 of this Act; and
(z) Will not knowingly hire or employ a loan
originator who is not registered with the Commissioner as required under Section 7‑1 of this Act.
A licensee who fails to fulfill obligations of an averment, to comply with averments made, or otherwise violates any of the averments made under this Section shall be subject to the penalties in Section 4‑5 of this Act.
(Source: P.A. 95‑331, eff. 8‑21‑07.)

 

(205 ILCS 635/2‑5) (from Ch. 17, par. 2322‑5)
Sec. 2‑5. Refusal to Issue License. The Commissioner shall refuse to license or renew a license if:
(1) it is determined that the applicant is not in
compliance with any provisions of the Act; or
(2) there is substantial continuity between the
applicant and any violator of this Act; or
(3) the Commissioner cannot make the findings
specified in Section 2‑2, subsection (a), of this Act.
(Source: P.A. 86‑137; 87‑642.)

 

(205 ILCS 635/2‑6) (from Ch. 17, par. 2322‑6)
Sec. 2‑6. License issuance and renewal; fee.
(a) Beginning July 1, 2003, licenses shall be renewed every year on the anniversary of the date of issuance of the original license. Properly completed renewal application forms and filing fees must be received by the Secretary 60 days prior to the renewal date.
(b) It shall be the responsibility of each licensee to accomplish renewal of its license; failure of the licensee to receive renewal forms absent a request sent by certified mail for such forms will not waive said responsibility. Failure by a licensee to submit a properly completed renewal application form and fees in a timely fashion, absent a written extension from the Secretary, will result in the assessment of additional fees, as follows:
(1) A fee of $567.50 will be assessed to the
licensee 30 days after the proper renewal date and $1,135 each month thereafter, until the license is either renewed or expires pursuant to Section 2‑6, subsections (c) and (d), of this Act.
(2) Such fee will be assessed without prior notice
to the licensee, but will be assessed only in cases wherein the Secretary has in his or her possession documentation of the licensee’s continuing activity for which the unrenewed license was issued.
(c) A license which is not renewed by the date required in this Section shall automatically become inactive. No activity regulated by this Act shall be conducted by the licensee when a license becomes inactive. The Commissioner may require the licensee to provide a plan for the disposition of any residential mortgage loans not closed or funded when the license becomes inactive. The Commissioner may allow a licensee with an inactive license to conduct activities regulated by this Act for the sole purpose of assisting borrowers in the closing or funding of loans for which the loan application was taken from a borrower while the license was active. An inactive license may be reactivated by the Commissioner upon payment of the renewal fee, and payment of a reactivation fee equal to the renewal fee.
(d) A license which is not renewed within one year of becoming inactive shall expire.
(e) A licensee ceasing an activity or activities regulated by this Act and desiring to no longer be licensed shall so inform the Commissioner in writing and, at the same time, convey the license and all other symbols or indicia of licensure. The licensee shall include a plan for the withdrawal from regulated business, including a timetable for the disposition of the business. Upon receipt of such written notice, the Commissioner shall issue a certified statement canceling the license.
(Source: P.A. 95‑1047, eff. 4‑6‑09.)

 

(205 ILCS 635/2‑7) (from Ch. 17, par. 2322‑7)
Sec. 2‑7. Waiver of licensing fee. The Commissioner may waive the licensing fee upon receipt of:
(a) an application for a residential mortgage license in Illinois,
(b) an addendum requesting waiver of the fee stating the grounds in support of such waiver, including but not limited to, not for profit status, bankruptcy or the showing of undue hardship, and
(c) in case of an out‑of‑state servicer of loans in Illinois, the following documentation is required:
(1) A verification that the firm services only 100
or fewer loans secured by residential real estate situated in Illinois;
(2) An agreement not to originate, purchase or
acquire additional servicing of loans secured by residential real estate situated in Illinois;
(3) An agreement to maintain a dedicated toll free
(800) number for exclusive use by the licensee’s Illinois customers;
(4) An agreement to provide a written notice at
least annually to the licensee’s Illinois customers advising them of the dedicated toll free (800) number; and to furnish the Commissioner with a copy of such written notice.
A request for waiver of the filing fee must be submitted each year in conjunction with the license renewal procedure.
(Source: P.A. 90‑301, eff. 8‑1‑97.)

 

(205 ILCS 635/2‑8) (from Ch. 17, par. 2322‑8)
Sec. 2‑8. Additional Full‑service Offices.
(a) A licensee may apply for authority to open and maintain additional full‑service offices by:
(1) Giving the Commissioner prior notice of its intention in such form as shall be prescribed by the Commissioner.
(2) Payment of a fee to be established by regulation.
(b) Upon receipt of the notice and fee required in subsection (a) above, the Commissioner shall issue a certificate for the additional full‑service office.
(c) The certificate shall be conspicuously posted in the respective additional full‑service offices.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/2‑9) (from Ch. 17, par. 2322‑9)
Sec. 2‑9. Posting of license. The license of a licensee whose home office is within the State of Illinois or of an out‑of‑state licensee shall be conspicuously posted in every office of the licensee located in Illinois. Out‑of‑state licensees without an Illinois office shall produce the license upon request. Licensees originating loans on the Internet shall post on their Internet web site their license number and the address and telephone number of the Commissioner. The license shall state the full name and address of the licensee. The license shall not be transferable or assignable. A separate certificate shall be issued for posting in each full service Illinois office.
(Source: P.A. 91‑586, eff. 8‑14‑99.)

 

(205 ILCS 635/2‑11) (from Ch. 17, par. 2322‑11)
Sec. 2‑11. Miscellaneous fees. In addition to any license fee collected under this Act, the Commissioner shall by rule and regulation establish a schedule to apply to assessment and collection of necessary contingent and miscellaneous fees.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/Art. III heading)

ARTICLE III

OPERATIONS, CAPITALIZATION, INSURANCE

 

(205 ILCS 635/3‑1) (from Ch. 17, par. 2323‑1)
Sec. 3‑1. Bonds of licensees.
(a) Every licensee, with respect to any person appointed or elected to any position requiring the receipt of payment, management, or use of money belonging to a residential mortgage licensee engaged in the activities of originating, servicing, or purchasing mortgage loans or whose duties permit him or her to have access to or custody of any of its money or securities or custody of any money or securities belonging to third parties or whose duties permit him or her regularly to make entries in the books or other records of a licensee, shall, before assuming his or her duties, maintain a fidelity bond in the amount of $100,000 by some fidelity insurance company licensed to do business in this State.
(b) Each bond shall be for any loss the licensee may sustain in money or other property through the commission of any dishonest or criminal act or omission by any person required to be bonded, whether committed alone or in concert with another. The bond shall be in the form and amount approved by the Commissioner who may at any time require one or more additional bonds. A true copy of every bond, including all riders and endorsements executed subsequent to the effective date of the bond, shall be filed at all times with the Commissioner. Each bond shall provide that a cancellation thereof shall not become effective unless and until 30 days notice in writing first shall have been given to the Commissioner unless he or she shall have approved the cancellation earlier. If the Commissioner believes the licensee’s business is being conducted in an unsafe manner due to the lack of bonds or the inadequacy of bonds, he or she may proceed against the licensee as provided for in Section 4‑5.
(c) All licensees shall maintain a bond in accordance with this subsection. Each bond shall be for the recovery of expenses, fines, or fees due to or levied by the Commissioner in accordance with this Act. The bond shall be payable when the licensee fails to comply with any provisions of this Act and shall be in the form of a surety or licensure bond in the amount and form as prescribed by the Commissioner pursuant to rules and regulations. The bond shall be payable to the Office of Banks and Real Estate and shall be issued by some insurance company authorized to do business in this State. A copy of the bond, including any and all riders and endorsements executed subsequent to the effective date of the bond, shall be placed on file with the Office of Banks and Real Estate within 10 days of the execution thereof.
(d) The Commissioner may promulgate rules with respect to bonding requirements for residential mortgage licensees that are reasonable and necessary to accomplish the purposes of this Act.
(Source: P.A. 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 within 90 days after the end of the licensee’s fiscal year. 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 or compilation financial statement required by this Section, a licensee shall submit and 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 as defined in subsection (o) of Section 1‑4, 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 must be prepared by an independent certified public accountant licensed under the Illinois Public Accounting Act or by an equivalent state licensing law with full disclosure in accordance with generally accepted accounting principals and must be submitted within 90 days after the end of the licensee’s fiscal year. 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. 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. 93‑561, eff. 1‑1‑04; 93‑1018, eff. 1‑1‑05.)

 

(205 ILCS 635/3‑3) (from Ch. 17, par. 2323‑3)
Sec. 3‑3. Advertising. In addition to such other rules, regulations and policies as the Commissioner may promulgate to effectuate the purpose of this Act, the Commissioner shall prescribe regulations governing the advertising of mortgage loans, including without limitation, the following requirements:
(a) Advertising for loans transacted under this Act may not be false, misleading or deceptive. No entity whose activities are regulated under this Act may advertise in any manner so as to indicate or imply that its interest rates or charges for loans are in any way “recommended”, “approved”, “set” or “established” by the State or by this Act. The Commissioner may issue a cease and desist order for any violation of this Section.
(b) All advertisements by a licensee shall contain the name and an office address of such entity, which shall conform to a name and address on record with the Commissioner.
(c) No licensee shall advertise its services in Illinois in any media, whether print or electronic, without the words “Illinois Residential Mortgage Licensee”.
(Source: P.A. 87‑1098.)

 

(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 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. The location and operation of a full service office shall be in compliance with any applicable zoning laws or ordinances and home office or business regulations.
(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.
(Source: P.A. 93‑1018, eff. 1‑1‑05.)

 

(205 ILCS 635/3‑5) (from Ch. 17, par. 2323‑5)
Sec. 3‑5. Net worth requirement. A licensee that holds a license on the effective date of this amendatory Act of the 93rd General Assembly shall have and maintain a net worth of not less than $100,000; however, no later than 2 years after the effective date of this amendatory Act of the 93rd General Assembly, the licensee must maintain a net worth of not less than $150,000. A licensee that first obtains a license after the effective date of this amendatory Act of the 93rd General Assembly must have and maintain a net worth of not less than $150,000. Notwithstanding other requirements of this Section, the net worth requirement for a residential mortgage licensee whose only licensable activity is that of brokering residential mortgage loans and that holds a license on the effective date of this amendatory Act of the 93rd General Assembly shall be $35,000; however, no later than 2 years after the effective date of this amendatory Act of the 93rd General Assembly, the licensee must maintain a net worth of not less than $50,000. Such a licensee that first obtains a license after the effective date of this amendatory Act of the 93rd General Assembly must have and maintain a net worth of not less than $50,000. Net worth shall be evidenced by a balance sheet prepared by a certified public accountant in accordance with generally accepted accounting principles and generally accepted auditing standards or by the compilation financial statements authorized under subsection (g) of Section 3‑2. The Commissioner may promulgate rules with respect to net worth definitions and requirements for residential mortgage licensees as necessary to accomplish the purposes of this Act. In lieu of the net worth requirement established by this Section, the Commissioner may accept evidence of conformance by the licensee with the net worth requirements of the United States Department of Housing and Urban Development.
(Source: P.A. 93‑561, eff. 1‑1‑04.)

 

(205 ILCS 635/3‑7) (from Ch. 17, par. 2323‑7)
Sec. 3‑7. Transfer of Servicing; Notices. Whenever the servicing of a residential mortgage is transferred or sold by a licensee, notice shall be given to the mortgagor simultaneous with such transfer and shall include, at the minimum, where and to whom to address the mortgagor’s questions relating to the residential mortgage, the exact name, address and telephone number to whom at least the next 3 months payments are to be submitted and the total amount required of the mortgagor by the servicer for each of the months referred to herein.
(Source: P.A. 86‑137.)

 

(205 ILCS 635/3‑8) (from Ch. 17, par. 2323‑8)
Sec. 3‑8. Discrimination and Redlining Prohibited. (a) It shall be considered discriminatory to refuse to grant loans or to vary the terms of loans or the application procedures for loans because of:
(i) in the case of the proposed borrower, said borrower’s race, color, religion, national origin, age, gender or marital status; or
(ii) in the case of a mortgage loan, solely the geographic location of the proposed security.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/3‑9) (from Ch. 17, par. 2323‑9)
Sec. 3‑9. Escrow Funds. The Commissioner may promulgate rules with respect to placement in escrow accounts by any licensee of any money, fund, deposit, check or draft entrusted to it by any persons dealing with it as a residential mortgage licensee.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/3‑10) (from Ch. 17, par. 2323‑10)
Sec. 3‑10. (Repealed).
(Source: P.A. 90‑772, eff. 1‑1‑99. Repealed by P.A. 90‑772, eff. 1‑1‑99.)

 

(205 ILCS 635/Art. IV heading)

ARTICLE IV

SUPERVISION

 

(205 ILCS 635/4‑1) (from Ch. 17, par. 2324‑1)
Sec. 4‑1. Commissioner of Banks and Real Estate; functions, powers, and duties. The functions, powers, and duties of the Commissioner of Banks and Real Estate shall include the following:
(a) To issue or refuse to issue any license as provided by this Act;
(b) To revoke or suspend for cause any license issued under this Act;
(c) To keep records of all licenses issued under this Act;
(d) To receive, consider, investigate, and act upon complaints made by any person in connection with any residential mortgage licensee in this State;
(e) To consider and act upon any recommendations from the Residential Mortgage Board;
(f) To prescribe the forms of and receive:
(1) applications for licenses; and
(2) all reports and all books and records required
to be made by any licensee under this Act, including annual audited financial statements and annual reports of mortgage activity;
(g) To adopt rules and regulations necessary and proper for the administration of this Act;
(h) To subpoena documents and witnesses and compel their attendance and production, to administer oaths, and to require the production of any books, papers, or other materials relevant to any inquiry authorized by this Act;
(h‑1) To 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 purpose of administering the provisions of this Act and any rule adopted in accordance with the Act;
(h‑2) To address any inquiries to any licensee, or the officers thereof, in relation to its activities and conditions, or any other matter connected with its affairs, and it shall be the duty of any licensee or person so addressed, to promptly reply in writing to such inquiries. The Commissioner may also require reports from any licensee at any time the Commissioner may deem desirable;
(i) To require information with regard to any license applicant as he or she may deem desirable, with due regard to the paramount interests of the public as to the experience, background, honesty, truthfulness, integrity, and competency of the license applicant as to financial transactions involving primary or subordinate mortgage financing, and where the license applicant is an entity other than an individual, as to the honesty, truthfulness, integrity, and competency of any officer or director of the corporation, association, or other entity, or the members of a partnership;
(j) To examine the books and records of every licensee under this Act at intervals as specified in Section 4‑2;
(k) To enforce provisions of this Act;
(l) To levy fees, fines, and charges for services performed in administering this Act; the aggregate of all fees collected by the Commissioner on and after the effective date of this Act shall be paid promptly after receipt of the same, accompanied by a detailed statement thereof, into the Savings and Residential Finance Regulatory Fund; the amounts deposited into that Fund shall be used for the ordinary and contingent expenses of the Office of Banks and Real Estate. Nothing in this Act shall prevent continuing the practice of paying expenses involving salaries, retirement, social security, and State‑paid insurance of State officers by appropriation from the General Revenue Fund.
(m) To appoint examiners, supervisors, experts, and special assistants as needed to effectively and efficiently administer this Act;
(n) To conduct hearings for the purpose of:
(1) appeals of orders of the Commissioner;
(2) suspensions or revocations of licenses, or
fining of licensees;
(3) investigating:
(i) complaints against licensees; or
(ii) annual gross delinquency rates; and
(4) carrying out the purposes of this Act;
(o) To exercise exclusive visitorial power over a licensee unless otherwise authorized by this Act or as vested in the courts, or upon prior consultation with the Commissioner, a foreign residential mortgage regulator with an appropriate supervisory interest in the parent or affiliate of a licensee;
(p) To enter into cooperative agreements with state regulatory authorities of other states to provide for examination of corporate offices or branches of those states and to accept reports of such examinations;
(q) To assign an examiner or examiners to monitor the affairs of a licensee with whatever frequency the Commissioner determines appropriate and to charge the licensee for reasonable and necessary expenses of the Commissioner, if in the opinion of the Commissioner an emergency exists or appears likely to occur; and
(r) To impose civil penalties of up to $50 per day against a licensee for failing to respond to a regulatory request or reporting requirement.
(Source: P.A. 93‑1018, eff. 1‑1‑05.)

 

(205 ILCS 635/4‑2) (from Ch. 17, par. 2324‑2)
Sec. 4‑2. Examination; prohibited activities.
(a) The business affairs of a licensee under this Act shall be examined for compliance with this Act as often as the Commissioner deems necessary and proper. The Commissioner shall promulgate rules with respect to the frequency and manner of examination. The Commissioner shall appoint a suitable person to perform such examination. The Commissioner and his appointees may examine the entire books, records, documents, and operations of each licensee and may examine any of the licensee’s officers, directors, employees and agents under oath.
(b) The Commissioner shall prepare a sufficiently detailed report of each licensee’s examination, shall issue a copy of such report to each licensee’s principals, officers, or directors and shall take appropriate steps to ensure correction of violations of this Act.
(c) Affiliates of a licensee shall be subject to examination by the Commissioner on the same terms as the licensee, but only when reports from, or examination of a licensee provides for documented evidence of unlawful activity between a licensee and affiliate benefiting, affecting or deriving from the activities regulated by this Act.
(d) The expenses of any examination of the licensee and affiliates shall be borne by the licensee and assessed by the Commissioner as established by regulation.
(e) Upon completion of the examination, the Commissioner shall issue a report to the licensee. All confidential supervisory information, including the examination report and the work papers of the report, shall belong to the Commissioner’s office and may not be disclosed to anyone other than the licensee, law enforcement officials or other regulatory agencies that have an appropriate regulatory interest as determined by the Commissioner, or to a party presenting a lawful subpoena to the Office of the Commissioner. The Commissioner may immediately appeal to the court of jurisdiction the disclosure of such confidential supervisory information and seek a stay of the subpoena pending the outcome of the appeal. Reports required of licensees by the Commissioner under this Act and results of examinations performed by the Commissioner under this Act shall be the property of only the Commissioner, but may be shared with the licensee. Access under this Act to the books and records of each licensee shall be limited to the Commissioner and his agents as provided in this Act and to the licensee and its authorized agents and designees. No other person shall have access to the books and records of a licensee under this Act. Any person upon whom a demand for production of confidential supervisory information is made, whether by subpoena, order, or other judicial or administrative process, must withhold production of the confidential supervisory information and must notify the Commissioner of the demand, at which time the Commissioner is authorized to intervene for the purpose of enforcing the limitations of this Section or seeking the withdrawal or termination of the attempt to compel production of the confidential supervisory information. The Commissioner may impose any conditions and limitations on the disclosure of confidential supervisory information that are necessary to protect the confidentiality of such information. Except as authorized by the Commissioner, no person obtaining access to confidential supervisory information may make a copy of the confidential supervisory information. The Commissioner may condition a decision to disclose confidential supervisory information on entry of a protective order by the court or administrative tribunal presiding in the particular case or on a written agreement of confidentiality. In a case in which a protective order or agreement has already been entered between parties other than the Commissioner, the Commissioner may nevertheless condition approval for release of confidential supervisory information upon the inclusion of additional or amended provisions in the protective order. The Commissioner may authorize a party who obtained the records for use in one case to provide them to another party in another case, subject to any conditions that the Commissioner may impose on either or both parties. The requestor shall promptly notify other parties to a case of the release of confidential supervisory information obtained and, upon entry of a protective order, shall provide copies of confidential supervisory information to the other parties.
(f) The Commissioner, deputy commissioners, and employees of the Office of Banks and Real Estate shall be subject to the restrictions provided in Section 2.5 of the Office of Banks and Real Estate Act including, without limitation, the restrictions on (i) owning shares of stock or holding any other equity interest in an entity regulated under this Act or in any corporation or company that owns or controls an entity regulated under this Act; (ii) being an officer, director, employee, or agent of an entity regulated under this Act; and (iii) obtaining a loan or accepting a gratuity from an entity regulated under this Act.
(g) After the initial examination for those licensees whose only mortgage activity is servicing fewer than 1,000 Illinois residential loans, the examination required in subsection (a) may be waived upon submission of a letter from the licensee’s independent certified auditor that the licensee serviced fewer than 1,000 Illinois residential loans during the year in which the audit was performed.
(Source: P.A. 93‑1018, eff. 1‑1‑05.)

 

(205 ILCS 635/4‑3) (from Ch. 17, par. 2324‑3)
Sec. 4‑3. Subpoena power of the Commissioner. (a) The Commissioner shall have the power to issue and to serve subpoenas and subpoenas duces tecum to compel the attendance of witnesses and the production of all books, accounts, records and other documents and materials relevant to an examination or investigation. The Commissioner or his or her duly authorized representative, shall have power to administer oaths and affirmations to any person.
(b) In the event of noncompliance with a subpoena or subpoena duces tecum issued or caused to be issued by the Commissioner, the Commissioner may petition the circuit court of the county in which the person subpoenaed resides or has its principal place of business for an order requiring the subpoenaed person to appear and testify and to produce such books, accounts, records and other documents as are specified in the subpoena duces tecum. The court may grant injunctive relief restraining the person from advertising, promoting, soliciting, entering into, offering to enter into, continuing, or completing any residential mortgage financing transaction or residential mortgage servicing transaction. The court may grant such other relief, including, but not limited to, the restraint, by injunction or appointment of a receiver, of any transfer, pledge, assignment or other disposition of the person’s assets or any concealment, alteration, destruction or other disposition of books, accounts, records or other documents and materials as the court deems appropriate, until the person has fully complied with the subpoena or subpoena duces tecum and the Commissioner has completed an investigation or examination.
(c) When it shall appear to the Commissioner that the compliance with a subpoena or subpoena duces tecum issued or caused to be issued by the Commissioner pursuant to this Section is essential to an investigation or examination, the Commissioner, in addition to the other remedies provided for herein, may apply for relief to the circuit court of the county in which the subpoenaed person resides or has its principal place of business. The court shall thereupon direct the issuance of an order against the subpoenaed person requiring sufficient bond conditioned on compliance with the subpoena or subpoena duces tecum. The court shall cause to be endorsed on the order a suitable amount of bond or payment pursuant to which the person named in the order shall be freed, having a due regard to the nature of the case.
(d) In addition, the Commissioner may seek a writ of attachment or an equivalent order from the circuit court having jurisdiction over the person who has refused to obey a subpoena, who has refused to give testimony or who has refused to produce the matters described in the subpoena duces tecum.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/4‑4) (from Ch. 17, par. 2324‑4)
Sec. 4‑4. Report Required of Licensee; False Statements; Delay; Penalties.(a) In addition to any reports required under this Act, every licensee shall file such other reports as the Commissioner shall request.
(b) Any licensee or any officer, director, employee or agent of any licensee who shall fail to file any reports required by this Act, including those under subsection (a) above, or who shall deliberately, wilfully or knowingly make, subscribe to or cause to be made any false entry with intent to deceive the Commissioner or his or her appointees or who shall purposely cause unreasonable delay in filing such reports, shall be guilty of a Class 4 Felony.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/4‑5) (from Ch. 17, par. 2324‑5)
Sec. 4‑5. Suspension, revocation of licenses; fines.
(a) Upon written notice to a licensee, the Commissioner may suspend or revoke any license issued pursuant to this Act if he or she shall make a finding of one or more of the following in the notice that:
(1) Through separate acts or an act or a course of
conduct, the licensee has violated any provisions of this Act, any rule or regulation promulgated by the Commissioner or of any other law, rule or regulation of this State or the United States.
(2) Any fact or condition exists which, if it had
existed at the time of the original application for such license would have warranted the Commissioner in refusing originally to issue such license.
(3) If a licensee is other than an individual, any
ultimate equitable owner, officer, director, or member of the licensed partnership, association, corporation, or other entity has so acted or failed to act as would be cause for suspending or revoking a license to that party as an individual.
(b) No license shall be suspended or revoked, except as provided in this Section, nor shall any licensee be fined without notice of his or her right to a hearing as provided in Section 4‑12 of this Act.
(c) The Commissioner, on good cause shown that an emergency exists, may suspend any license for a period not exceeding 180 days, pending investigation. Upon a showing that a licensee has failed to meet the experience or educational requirements of Section 2‑2 or the requirements of subsection (g) of Section 3‑2, the Commissioner shall suspend, prior to hearing as provided in Section 4‑12, the license until those requirements have been met.
(d) The provisions of subsection (e) of Section 2‑6 of this Act shall not affect a licensee’s civil or criminal liability for acts committed prior to surrender of a license.
(e) No revocation, suspension or surrender of any license shall impair or affect the obligation of any pre‑existing lawful contract between the licensee and any person.
(f) Every license issued under this Act shall remain in force and effect until the same shall have expired without renewal, have been surrendered, revoked or suspended in accordance with the provisions of this Act, but the Commissioner shall have authority to reinstate a suspended license or to issue a new license to a licensee whose license shall have been revoked if no fact or condition then exists which would have warranted the Commissioner in refusing originally to issue such license under this Act.
(g) Whenever the Commissioner shall revoke or suspend a license issued pursuant to this Act or fine a licensee under this Act, he or she shall forthwith execute in duplicate a written order to that effect. The Commissioner shall publish notice of such order in the Illinois Register and post notice of the order on an agency Internet site maintained by the Commissioner and shall forthwith serve a copy of such order upon the licensee. Any such order may be reviewed in the manner provided by Section 4‑12 of this Act.
(h) When the Commissioner finds any person in violation of the grounds set forth in subsection (i), he or she may enter an order imposing one or more of the following penalties:
(1) Revocation of license;
(2) Suspension of a license subject to reinstatement
upon satisfying all reasonable conditions the Commissioner may specify;
(3) Placement of the licensee or applicant on
probation for a period of time and subject to all reasonable conditions as the Commissioner may specify;
(4) Issuance of a reprimand;
(5) Imposition of a fine not to exceed $25,000 for
each count of separate offense; and
(6) Denial of a license.
(i) The following acts shall constitute grounds for which the disciplinary actions specified in subsection (h) above may be taken:
(1) Being convicted or found guilty, regardless of
pendency of an appeal, of a crime in any jurisdiction which involves fraud, dishonest dealing, or any other act of moral turpitude;
(2) Fraud, misrepresentation, deceit or negligence
in any mortgage financing transaction;
(3) A material or intentional misstatement of fact
on an initial or renewal application;
(4) Failure to follow the Commissioner’s regulations
with respect to placement of funds in escrow accounts;
(5) Insolvency or filing under any provision of the
Bankruptcy Code as a debtor;
(6) Failure to account or deliver to any person any
property such as any money, fund, deposit, check, draft, mortgage, or other document or thing of value, which has come into his or her hands and which is not his or her property or which he or she is not in law or equity entitled to retain, under the circumstances and at the time which has been agreed upon or is required by law or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery;
(7) Failure to disburse funds in accordance with
agreements;
(8) Any misuse, misapplication, or misappropriation
of trust funds or escrow funds;
(9) Having a license, or the equivalent, to practice
any profession or occupation revoked, suspended, or otherwise acted against, including the denial of licensure by a licensing authority of this State or another state, territory or country for fraud, dishonest dealing or any other act of moral turpitude;
(10) Failure to issue a satisfaction of mortgage
when the residential mortgage has been executed and proceeds were not disbursed to the benefit of the mortgagor and when the mortgagor has fully paid licensee’s costs and commission;
(11) Failure to comply with any order of the
Commissioner or rule made or issued under the provisions of this Act;
(12) Engaging in activities regulated by this Act
without a current, active license unless specifically exempted by this Act;
(13) Failure to pay in a timely manner any fee,
charge or fine under this Act;
(14) Failure to maintain, preserve, and keep
available for examination, all books, accounts or other documents required by the provisions of this Act and the rules of the Commissioner;
(15) Refusal to permit an investigation or
examination of the licensee’s or its affiliates’ books and records or refusal to comply with the Commissioner’s subpoena or subpoena duces tecum;
(16) A pattern of substantially underestimating the
maximum closing costs;
(17) Failure to comply with or violation of any
provision of this Act.
(j) A licensee shall be subject to the disciplinary actions specified in this Act for violations of subsection (i) by any officer, director, shareholder, joint venture, partner, ultimate equitable owner, or employee of the licensee.
(k) Such licensee shall be subject to suspension or revocation for employee actions only if there is a pattern of repeated violations by employees or the licensee has knowledge of the violations.
(l) Procedure for surrender of license:
(1) The Commissioner may, after 10 days notice by
certified mail to the licensee at the address set forth on the license, stating the contemplated action and in general the grounds therefor and the date, time and place of a hearing thereon, and after providing the licensee with a reasonable opportunity to be heard prior to such action, fine such licensee an amount not exceeding $25,000 per violation, or revoke or suspend any license issued hereunder if he or she finds that:
(i) The licensee has failed to comply with any
provision of this Act or any order, decision, finding, rule, regulation or direction of the Commissioner lawfully made pursuant to the authority of this Act; or
(ii) Any fact or condition exists which, if it
had existed at the time of the original application for the license, clearly would have warranted the Commissioner in refusing to issue the license.
(2) Any licensee may surrender a license by
delivering to the Commissioner written notice that he or she thereby surrenders such license, but surrender shall not affect the licensee’s civil or criminal liability for acts committed prior to surrender or entitle the licensee to a return of any part of the license fee.
(Source: P.A. 93‑561, eff. 1‑1‑04; 93‑1018, eff. 1‑1‑05.)

 

(205 ILCS 635/4‑6) (from Ch. 17, par. 2324‑6)
Sec. 4‑6. Investigation of Complaints. The Commissioner shall at all times maintain staff and facilities adequate to receive, record and investigate complaints and inquiries made by any person concerning this Act and any licensees under this Act. Each licensee shall open its books, records, documents and offices wherever situated to the Commissioner or his or her appointees as needed to facilitate such investigations.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/4‑8) (from Ch. 17, par. 2324‑8)
Sec. 4‑8. Default rate; examination.
(a) The Commissioner shall obtain from the U.S. Department of Housing and Urban Development on a semi‑annual basis that Department’s default claim rates for endorsements issued by that Department.
(b) The Commissioner shall conduct an examination of each licensee having a default rate equal to or greater than 5%.
This subsection shall not be construed as a limitation of the Commissioner’s examination authority under Section 4‑2 of this Act or as otherwise provided in this Act. The Commissioner may require a licensee to provide loan default data as the 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 default rate 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 Commissioner may accept materials prepared for the U.S. Department of Housing and Urban Development. At the conclusion of the examination, the Commissioner shall make his or her findings available to the Residential Mortgage Board.
(d) The 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 Commissioner.
(e) The 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 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 Commissioner a plan which shall be designed to reduce that licensee’s default rate to a figure that is less than 5%. The plan shall be implemented by the licensee as approved by the Commissioner. A licensee that is examined pursuant to subsection (b) shall report monthly, for a one year period, one, 2, and 3 month defaults.
(g) Whenever the Commissioner finds that a licensee’s default rate 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 Commissioner shall promulgate such rules as are necessary to determine whether any licensee’s default rate is unusually high within a particular area.
(Source: P.A. 89‑355, eff. 1‑1‑96; 89‑626, eff. 8‑9‑96; 90‑301, eff. 8‑1‑97.)

 

(205 ILCS 635/4‑8.1)
Sec. 4‑8.1. Confidential information. In hearings conducted under this Act, information presented into evidence that was acquired by the licensee when serving any individual in connection with a residential mortgage, including all financial information of the individual, shall be deemed strictly confidential and shall be made available only as part of the record of a hearing under this Act or otherwise (i) when the record is required, in its entirety, for purposes of judicial review or (ii) upon the express written consent of the individual served, or in the case of his or her death or disability, the consent of his or her personal representative.
(Source: P.A. 93‑561, eff. 1‑1‑04.)

 

(205 ILCS 635/4‑8.2)
Sec. 4‑8.2. Reports of violations. Any person licensed under this Act or any other person may report to the Commissioner any information to show that a person subject to this Act is or may be in violation of this Act.
(Source: P.A. 93‑561, eff. 1‑1‑04.)

 

(205 ILCS 635/4‑8.3)
Sec. 4‑8.3. Annual report of mortgage and servicing activity. On or before March 1 of each year, each licensee, except residential mortgage brokers, shall file a report with the Commissioner that shall disclose such information as the Commissioner requires. 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. 93‑1018, eff. 1‑1‑05.)

 

(205 ILCS 635/4‑9) (from Ch. 17, par. 2324‑9)
Sec. 4‑9. (Repealed).
(Source: P.A. 89‑355, eff. 8‑17‑95. Repealed by 90‑301, eff. 8‑1‑97.)

 

(205 ILCS 635/4‑10) (from Ch. 17, par. 2324‑10)
Sec. 4‑10. Rules and Regulations of the Commissioner.
(a) In addition to such powers as may be prescribed by this Act, the Commissioner is hereby authorized and empowered to promulgate regulations consistent with the purposes of this Act, including but not limited to:
(1) Such rules and regulations in connection with the
activities of licensees as may be necessary and appropriate for the protection of consumers in this State;
(2) Such rules and regulations as may be necessary
and appropriate to define improper or fraudulent business practices in connection with the activities of licensees in making mortgage loans;
(3) Such rules and regulations as may define the
terms used in this Act and as may be necessary and appropriate to interpret and implement the provisions of this Act; and
(4) Such rules and regulations as may be necessary
for the enforcement of this Act.
(b) The Commissioner is hereby authorized and empowered to make such specific rulings, demands and findings as he or she may deem necessary for the proper conduct of the mortgage lending industry.
(c) A person or entity may make a written application to the Department for a written interpretation of this Act. The Department may then, in its sole discretion, choose to issue a written interpretation. To be valid, a written interpretation must be signed by the Secretary, or his or her designated Director of Financial and Professional Regulation, and the Department’s General Counsel. A written interpretation expires 2 years after the date that it was issued.
(d) No provision in this Act that imposes liability or establishes violations shall apply to any act taken by a person or entity in conformity with a written interpretation of this Act that is in effect at the time the act is taken, notwithstanding whether the written interpretation is later amended, rescinded, or determined by judicial or other authority to by invalid for any reason.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/4‑11) (from Ch. 17, par. 2324‑11)
Sec. 4‑11. Costs of Supervision; Examination and Investigative Fees. The expenses of administering this Act, including investigations and examinations provided for in this Act shall be borne by and assessed against entities regulated by this Act. Subject to the limitations set forth in Section 2‑2 of this Act, the Secretary shall establish fees by regulation in at least the following categories:
(1) application fees;
(2) investigation of license applicant fees;
(3) examination fees;
(4) contingent fees;
and such other categories as may be required to administer this Act.
(Source: P.A. 95‑1047, eff. 4‑6‑09.)

 

(205 ILCS 635/4‑12) (from Ch. 17, par. 2324‑12)
Sec. 4‑12. Appeal and Review. (a) Any person or entity affected by a decision of the Commissioner under any provision of this Act may obtain review of such decision within the Office of the Commissioner.
(b) The Commissioner shall, in accordance with the “Illinois Administrative Procedure Act”, promulgate rules and regulations to provide for review within the Office of the Commissioner (hereinafter referred to as “agency review”) of his or her decisions affecting the rights of entities under this Act. Such review shall provide for, at a minimum:
(1) appointment of a hearing officer other than a regular employee of the Office of the Commissioner;
(2) appropriate procedural rules, specific deadlines for filings, and standards of evidence and of proof;
(3) provision for apportioning costs among parties to the appeal.
(c) All final agency determinations of appeals to decisions of the Commissioner may be reviewed in accordance with and under the provisions of the “Administrative Review Law”. Appeals from all final orders and judgments entered by a court in review of any final administrative decision of the Commissioner or of any final agency review of a decision of the Commissioner may be taken as in other civil cases.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/4‑13) (from Ch. 17, par. 2324‑13)
Sec. 4‑13. Violations of this Act; Commissioner’s Orders. If the Commissioner finds, as the result of examination, investigation or review of reports submitted by a licensee that the business and affairs of a licensee are not being conducted in accordance with this Act, the Commissioner shall notify the licensee of the correction necessary. Should a licensee fail to correct such violations, the Commissioner shall issue an order requiring immediate correction and compliance with this Act, specifying a reasonable date for performance.
The Commissioner shall promulgate rules and regulations to provide for an orderly and timely appeal of all orders within the Office of the Commissioner. Such rules shall include provision for assessment of fees and costs.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/4‑14) (from Ch. 17, par. 2324‑14)
Sec. 4‑14. Collection of fees. Unless exempt from licensure under this Act, no person engaged in or offering to engage in any act or service, for which a license under this Act is required, may bring or maintain any action in any court of this State to collect compensation for the performance of the licensable services without alleging and proving that he or she was the holder of a valid Residential Mortgage License under this Act at all times during the performance of those services.
(Source: P.A. 87‑642.)

 

(205 ILCS 635/4‑15)
Sec. 4‑15. Enforcement and reporting provisions. The Attorney General may enforce any violation of Section 5‑6, 5‑7, 5‑8, 5‑9, 5‑10, 5‑11, 5‑12, 5‑14, or 5‑15 of this Act as an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/4‑16)
Sec. 4‑16. Private right of action. A borrower injured by a violation of the standards, duties, prohibitions, or requirements of Sections 5‑6, 5‑7, 5‑8, 5‑9, 5‑10, 5‑11, 5‑12, 5‑14, 5‑15, and 5‑16 of this Act shall have a private right of action.
(a) A licensee is not liable for a violation of this Act if:
(1) within 30 days of the loan closing and prior to
receiving any notice from the borrower of the violation, the licensee has made appropriate restitution to the borrower and appropriate adjustments are made to the loan; or
(2) the violation was not intentional and resulted
from a bona fide error in fact, notwithstanding the maintenance of procedures reasonably adopted to avoid such errors, and within 60 days of the discovery of the violation and prior to receiving any notice from the borrower of the violation, the borrower is notified of the violation, appropriate restitution is made to the borrower, and appropriate adjustments are made to the loan.
(b) The remedies and rights provided for in this Act are not exclusive, but cumulative, and all other applicable claims are specifically preserved.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/Art. V heading)

ARTICLE V

LENDING PROCEDURES

 

(205 ILCS 635/5‑1) (from Ch. 17, par. 2325‑1)
Sec. 5‑1. The Commissioner may promulgate rules with respect to brokering and lending procedures of residential mortgage licensees as necessary to accomplish the purposes of this Act.
(Source: P.A. 85‑735.)

 

(205 ILCS 635/5‑5)
Sec. 5‑5. Reverse mortgages; disclosure; good faith dealings, fraudulent or deceptive practices.
(a) At the time a reverse mortgage loan is made or brokered, a licensee must provide to the mortgagor a separate document that informs the mortgagor that by obtaining the reverse mortgage the mortgagor’s eligibility to obtain a tax deferral under the Senior Citizens Real Estate Tax Deferral Act may be adversely affected. The mortgagor must sign the disclosure document as part of the reverse mortgage transaction.
(b) A licensee must act in good faith in all relations with a borrower, including but not limited to, transferring, dealing in, offering, or making a reverse mortgage loan. No licensee shall employ fraudulent or deceptive acts or practices in the making of a reverse mortgage loan, including deceptive marketing and sales efforts.
(Source: P.A. 92‑577, eff. 6‑26‑02; 93‑863, eff. 8‑5‑04.)

 

(205 ILCS 635/5‑6)
Sec. 5‑6. Verification of borrower’s ability to repay.
(a) No licensee may make, provide, or arrange for a residential mortgage loan without verifying the borrower’s reasonable ability to pay the principal and interest on the loan, real estate taxes, homeowner’s insurance, assessments, and mortgage insurance premiums, if applicable.
For residential mortgage loans in which the interest rate may vary, the reasonable ability to pay the principal and interest on the loan shall be determined based on a fully indexed rate, which rate shall be calculated by using the index rate prevailing at the time of origination of the loan plus the margin that will apply when calculating the adjustable rate under the terms of the loan, assuming a fully amortizing repayment schedule based on the term of the loan.
For loans that allow for negative amortization, the principal amount of the loan shall be calculated by including the maximum amount the principal balance may increase due to negative amortization under the terms of the loan.
(b) For all residential mortgage loans made by a licensee, the borrower’s income and financial resources must be verified by tax returns, payroll receipts, bank records, or other reasonably reliable methods, based upon the circumstances of the proposed loan. Nothing in this Section shall be construed to limit a licensee’s ability to rely on criteria other than the borrower’s income and financial resources to establish the borrower’s reasonable ability to repay a residential mortgage loan; however, such other criteria must be verified through reasonably reliable methods and documentation. A statement by the borrower to the licensee of the borrower’s income and resources is not sufficient to establish the existence of the income or resources when verifying the reasonable ability to pay. Stated income should be accepted only if there are mitigating factors that clearly minimize the need for direct verification of ability to repay.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/5‑7)
Sec. 5‑7. Broker agency relationship.
(a) A mortgage broker shall be considered to have created an agency relationship with the borrower in all cases and shall comply with the following duties:
(1) A mortgage broker shall act in the borrower’s
best interest and in good faith toward the borrower. A mortgage broker shall not accept, give, or charge any undisclosed compensation or realize any undisclosed remuneration, either through direct or indirect means, that inures to the benefit of the mortgage broker on an expenditure made for the borrower;
(2) mortgage brokers shall carry out all lawful
instructions given by borrowers;
(3) mortgage brokers shall disclose to borrowers all
material facts of which the mortgage broker has knowledge which might reasonably affect the borrower’s rights, interests, or ability to receive the borrower’s intended benefit from the residential mortgage loan, but not facts which are reasonably susceptible to the knowledge of the borrower;
(4) mortgage brokers shall use reasonable care in
performing duties; and
(5) mortgage brokers shall account to a borrower for
all the borrower’s money and property received as agent.
(b) Nothing in this Section prohibits a mortgage broker
from contracting for or collecting a fee for services rendered and which had been disclosed to the borrower in advance of the provision of those services.
(c) Nothing in this Section requires a mortgage broker to
obtain a loan containing terms or conditions not available to the mortgage broker in the mortgage broker’s usual course of business, or to obtain a loan for the borrower from a mortgage lender with whom the mortgage broker does not have a business relationship.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/5‑8)
Sec. 5‑8. Prepayment penalties.
(a) No licensee may make, provide, or arrange a mortgage loan with a prepayment penalty unless the licensee offers the borrower a loan without a prepayment penalty, the offer is in writing, and the borrower initials the offer to indicate that the borrower has declined the offer. In addition, the licensee must disclose the discount in rate received in consideration for a mortgage loan with the prepayment penalty.
(b) If a borrower declines an offer required under subsection (a) of this Section, the licensee may include a prepayment penalty that extends no longer than three years or the first change date or rate adjustment of a variable rate mortgage, whichever comes earlier, provided that, if a prepayment is made during the fixed rate period, the licensee shall receive an amount that is no more than:
(1) 3% of the total loan amount if the prepayment is
made within the first 12‑month period following the date the loan was made;
(2) 2% of the total loan amount if the prepayment is
made within the second 12‑month period following the date the loan was made; or
(3) 1% of the total loan amount if the prepayment is
made within the third 12‑month period following the date the loan was made, if the fixed rate period extends 3 years.
(c) Notwithstanding any provision in this Section, prepayment penalties are prohibited in connection with the sale or destruction of a dwelling secured by a residential mortgage loan.
(d) This Section applies to loans made, refinanced, renewed, extended, or modified on or after the effective date of this amendatory Act of the 95th General Assembly.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(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) 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.)

 

(205 ILCS 635/5‑10)
Sec. 5‑10. Comparable monthly payment quotes. When comparing different loans, the licensee must not state or imply that monthly loan payments, if they include amounts escrowed for payment of property taxes and homeowner’s insurance, are comparable with monthly loan payments that do not include these amounts.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/5‑11)
Sec. 5‑11. Requirement to provide borrower with a copy of all appraisals. Licensees must provide to the borrower a complete copy of any appraisal, including any appraisal generated using the Automated Valuation Model, obtained by the lender for use in underwriting the residential mortgage loan within 3 business days of receipt by the licensee, but in no event less than 24 hours prior to the day of closing. The appraisal may be sent via first class mail, commercial carrier, by facsimile or by e‑mail, if the borrower has supplied an e‑mail address.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/5‑12)
Sec. 5‑12. Disclosure of refinancing options. If the subject of a future loan is discussed by a licensee making, providing, or arranging a mortgage loan, the licensee shall disclose the circumstances under which a new loan could be considered. Such disclosure shall clearly state that it is not a contract and that the licensee is not representing or promising that a new loan could or would be made at any time in the future.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/5‑14)
Sec. 5‑14. Prohibition on equity stripping and loan flipping. No licensee may engage in equity stripping or loan flipping, as those terms are defined in the Illinois Fairness in Lending Act.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/5‑15)
Sec. 5‑15. Prohibition on financing certain insurance premiums. No licensee may make, provide, or arrange for a residential mortgage loan that finances, directly or indirectly, any credit life, credit disability, or credit unemployment insurance; however, insurance premiums calculated and paid on a monthly basis shall not be considered to be financed by the lender.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/5‑16)
Sec. 5‑16. Prohibition on encouraging default. A licensee may not recommend or encourage default or the failure to make timely payments on an existing residential mortgage loan or other debt prior to and in connection with the closing or planned closing of a residential mortgage loan that refinances all or any portion of the existing loan or debt.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/5‑17)
Sec. 5‑17. Severability. If any provision of this Act or its application to any person or circumstance is held invalid, the invalidity of that provision or application does not affect other provisions or applications of this Act that can be given effect without the invalid provision or application.
(Source: P.A. 95‑691, eff. 6‑1‑08.)

 

(205 ILCS 635/Art. VI heading)

ARTICLE VI. ENFORCEMENT POWERS

 

(205 ILCS 635/6‑1) (from Ch. 17, par. 2326‑1)
Sec. 6‑1. Powers not exclusive. The powers granted by this Article shall be in addition to all others granted to the Commissioner by this Act. The powers granted by this Article shall not preclude the Commissioner from exercising such other powers granted under this Act as are necessary and proper to carrying out the purposes and provisions of this Act.
(Source: P.A. 87‑1098.)

 

(205 ILCS 635/6‑2) (from Ch. 17, par. 2326‑2)
Sec. 6‑2. Removal and prohibition.
(a) 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.
(b) Whenever, in the opinion of the Commissioner, any
director, officer, or employee of a licensee shall have violated any law, rule, or order relating to that licensee or shall have obstructed or impeded any examination or investigation by the Commissioner, shall have engaged in an unsafe, unsound, or unlawful practice in conducting the business of the licensee, or shall have violated any law or engaged or participated in any unsafe, unsound or unlawful practice in connection with any licensee or other business entity such that the character and fitness of the director, officer, or employee does not assure reasonable promise of safe, sound, and lawful operation of the licensee, the Commissioner may issue an order of removal. If, in the opinion of the Commissioner, any former director, officer, or employee of a licensee, prior to the termination of his or her service with that licensee, violated any law, rule, or order relating to that licensee, obstructed or impeded any examination or investigation by the Commissioner, engaged in an unsafe or unsound practice in conducting the business of that licensee or any subsidiary or holding company of the licensee, or violated any law or engaged or participated in any unsafe, unsound, or unlawful practice in connection with any financial institution or other business entity such that the character and fitness of the director, officer, or employee would not have assured reasonable promise of safe, sound, and lawful operation of the licensee, the Commissioner may issue an order prohibiting that person from further service with a licensee as a director, officer, or employee. An order issued pursuant to this subsection shall be served upon the director, officer, or employee. A copy of the order shall be sent to each owner or director of the licensee affected by registered mail. The person affected by the action may make a request to the Commissioner for a hearing pursuant to Section 4‑1(n) within 10 days after receipt of the order. The hearing shall be held before a hearing officer within 30 days after the request has been received by the Commissioner. The hearing officer shall prepare a finding and report the same to the Commissioner who shall consider the finding in making his determination approving, modifying, or disapproving his order as a final administrative decision. If a hearing is held before a hearing officer, the Commissioner shall make his determination within 60 days from the conclusion of the hearing. Any person affected by a decision of the Commissioner under this subsection (b) may have the decision reviewed only under and in accordance with the Administrative Review Law and the rules adopted pursuant thereto. A copy of the order shall also be served upon the licensee of which he is a director, officer, or employee, whereupon he shall cease to be a director, officer, or employee of that licensee. The Commissioner may institute a civil action against the director, officer, or employee of the licensee to enforce compliance with or to enjoin any violation of the terms of the order. Any person who has been the subject of an order of removal or an order of prohibition issued by the Commissioner under this subsection may not thereafter serve as director, officer, or employee of any licensee, or of any other entity that is subject to licensure or regulation by the Commissioner unless the Commissioner has granted prior approval in writing.
(Source: P.A. 93‑1018, eff. 1‑1‑05.)

 

(205 ILCS 635/6‑3) (from Ch. 17, par. 2326‑3)
Sec. 6‑3. Appointment of receiver or conservator. When the Commissioner makes a finding that a receivership or conservatorship is necessary to protect consumers of a licensee from the consequences of the licensee’s failures to comply with this Act or other unsafe and unsound practices, the Commissioner shall request the Attorney General of this State to petition the Circuit Court of Cook County, or of the county in which the licensee is located, to appoint a receiver or conservator for purposes of protecting consumers and resolving the affairs of the licensee.
(Source: P.A. 87‑1098.)

 

(205 ILCS 635/Art. VII heading)

ARTICLE VII. REGISTRATION OF LOAN ORIGINATORS

 

(205 ILCS 635/7‑1)
Sec. 7‑1. Registration required; rules and regulations. Beginning 6 months after the effective date of this amendatory Act of the 93rd General Assembly, it is unlawful for any natural person to act or assume to act as a loan originator, as defined in subsection (hh) of Section 1‑4, without being registered with the Commissioner unless the natural person is exempt under items (1) and (1.5) of subsection (d) of Section 1‑4 of this Act. The Commissioner shall promulgate rules prescribing the criteria for the registration and regulation of loan originators, including but not limited to, qualifications, fees, examination, education, supervision, and enforcement.
(Source: P.A. 93‑561, eff. 1‑1‑04.)


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