Monday, August 6, 2012

FYI: Illinois Amends Licensing Statute As to Fraud Fines, Liability as to "Predatory Lending Database" Violations, Other Changes

On August 3, 2012, Illinois enacted numerous changes to the Illinois Residential Mortgage License Act, including:  (1) increases in fines for fraud and deceptive conduct;  (2) liability for violations of the "predatory lending database" law;  (3) changes as to license fees, averments and NMLS-related amendments;  (4) limitations on short sale activities "on behalf of a borrower or homeowner;"  and (5) limitations on loan modification activities "on behalf of a borrower or homeowner."

A copy of the complete amendments is available at:

Among other things, the amendments include:

Definitions Changes and Additions:

"Servicingnow also "includes management of third-party entities acting on behalf of a residential mortgage licensee for the collection of delinquent payments and the use by such third-party entities of said licensee's servicing records or information, including their use in foreclosure.

"Mortgage loan originatornow also includes "an individual engaged in loan modification activities as defined in subsection (yy) of this Section. A mortgage loan originator engaged in loan modification activities shall report those activities to the Department of Financial and Professional Regulation in the manner provided by the Department; however, the Department shall not impose a fee for reporting, nor require any additional qualifications to engage in those activities beyond those provided pursuant to this Act for mortgage loan originators."

-  "Broker" now includes persons who engage in "loan modification" activities.

-  "Loan Modification" activities means "for compensation or gain, either directly or indirectly offering or negotiating on behalf of a borrower or homeowner to adjust the terms of a residential mortgage loan in a manner not provided for in the original or previously modified mortgage loan" (emphasis added).

-  "Short sale facilitation" means "for compensation or gain, either directly or indirectly offering or negotiating on behalf of a borrower or homeowner to facilitate the sale of residential real estate subject to one or more residential mortgage loans or debts constituting liens on the property in which the proceeds from selling the residential real estate will fall short of the amount owed and the lien holders are contacted to agree to release their lien on the residential real estate and accept less than the  full amount owed on the debt" (emphasis added).

Substantive Changes:

Increases $25k cap for fraud and deception fines to $75,000 for each separate count as to companies, and $3k for specific fraud or deception acts or $6k for pattern-and-practice fraud and deception as to LOs.

Creates liability for "failure to comply with or violation of any provision of Article 3 of the Residential Real Property Disclosure Act," which includes the so-called "predatory lending database" provisions.  Parallel provision for title insurers, title agents, and escrow agents.  Violations must now be referred to HUD.  Information entered into the so-called "predatory lending database" now clarified to include "total monthly consumer debt" of the applicant.

Makes it
unlawful for "any individual who holds a mortgage loan originator license to provide short sale facilitation services unless he or she holds a license under the Real Estate License Act of 2000."

New license averments:  (1) that the licensee "will not charge or collect advance payments from borrowers or homeowners for engaging in loan modification" activities as defined by the amendments; and  (2) the licensee "will not structure activities or contracts to evade provisions of" the IRMLA.  Parallel provisions also now apply as to LOs.

Eliminates disciplinary action for non-complicit whistle-blowers (i.e., a "licensee who files a report with the Department of Financial and Professional Regulation that another licensee is engaged in one or more violations pursuant to this Act shall not be the subject of disciplinary action by the Department, unless the Department determines, by a preponderance of the evidence available to the Department, that the reporting person knowingly and willingly participated in the violation that was reported").

License application fees increased to $2,700 annually.

Makes various amendments to coordinate with the NMLS system.

Effective Date:  Jan. 1, 2013

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874

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