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(205 ILCS 635/Art.
I heading)
ARTICLE I
GENERAL PROVISIONS
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(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.)
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(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.)
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(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.)
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(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
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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.
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(1.5)
Any employee of a person or entity mentioned
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in item (1) of this subsection.
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(2)
Any person or entity that does not originate
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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.
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(3)
Any person employed by a licensee to assist in
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the performance of the activities
regulated by this Act who is compensated in
any manner by only one licensee.
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(4)
Any person licensed pursuant to the Real Estate
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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.
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(5)
Any individual, corporation, partnership, or
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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.
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(6)
A person who prepares supporting documentation
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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:
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(A)
holds the licensee fully accountable for the
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(B)
otherwise meets the requirements of this
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Section and this Act, does not undermine
the purposes of this Act, and is approved by
the Commissioner.
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(e) "Licensee" or "residential
mortgage licensee" shall mean a person, partnership,
association, corporation, or any other entity who or
which is licensed pursuant to this Act to engage in
the activities regulated by this Act.
(f) "Mortgage loan" "residential
mortgage loan" or "home mortgage loan" shall mean
a loan to or for the benefit of any natural person made primarily
for personal, family, or household use, primarily secured by either
a mortgage on residential real property or certificates of stock
or other evidence of ownership interests in and proprietary leases
from, corporations, partnerships, or limited liability companies
formed for the purpose of cooperative ownership of residential real
property, all located in Illinois.
(g) "Lender" shall
mean any person, partnership, association, corporation, or any other
entity who either lends or invests money in residential mortgage
loans.
(h) "Ultimate equitable
owner" shall mean a person who, directly or indirectly, owns
or controls an ownership interest in a corporation, foreign corporation,
alien business organization, trust, or any other form of business
organization regardless of whether the person owns or controls the
ownership interest through one or more persons or one or more proxies,
powers of attorney, nominees, corporations, associations, partnerships,
trusts, joint stock companies, or other entities or devices, or any
combination thereof.
(i) "Residential mortgage
financing transaction" shall mean the negotiation, acquisition,
sale, or arrangement for or the offer to negotiate, acquire, sell,
or arrange for, a residential mortgage loan or residential mortgage
loan commitment.
(j) "Personal residence
address" shall mean a street address and shall not include a
post office box number.
(k) "Residential mortgage
loan commitment" shall mean a contract for residential mortgage
loan financing.
(l) "Party to a residential
mortgage financing transaction" shall mean a borrower, lender,
or loan broker in a residential mortgage financing transaction.
(m) "Payments" shall
mean payment of all or any of the following: principal, interest
and escrow reserves for taxes, insurance and other related reserves,
and reimbursement for lender advances.
(n) "Commissioner" shall
mean the Commissioner of Banks and Real Estate or a person authorized
by the Commissioner, the Office of Banks and Real Estate Act, or
this Act to act in the Commissioner's stead.
(o) "Loan brokering", "brokering",
or "brokerage service" shall mean the act of helping to
obtain from another entity, for a borrower, a loan secured by residential
real estate situated in Illinois or assisting a borrower in obtaining
a loan secured by residential real estate situated in Illinois in
return for consideration to be paid by either the borrower or the
lender including, but not limited to, contracting for the delivery
of residential mortgage loans to a third party lender and soliciting,
processing, placing, or negotiating residential mortgage loans.
(p) "Loan broker" or "broker" shall
mean a person, partnership, association, corporation, or limited
liability company, other than those persons, partnerships, associations,
corporations, or limited liability companies exempted from licensing
pursuant to Section 1-4, subsection (d), of this Act, who performs
the activities described in subsections (c) and (o) of this Section.
(q) "Servicing" shall
mean the collection or remittance for or the right or obligation
to collect or remit for any lender, noteowner, noteholder, or for
a licensee's own account, of payments, interests, principal, and
trust items such as hazard insurance and taxes on a residential mortgage
loan in accordance with the terms of the residential mortgage loan;
and includes loan payment follow-up, delinquency loan follow-up,
loan analysis and any notifications to the borrower that are necessary
to enable the borrower to keep the loan current and in good standing.
(r) "Full service office" shall
mean office and staff in Illinois reasonably adequate to handle efficiently
communications, questions, and other matters relating to any application
for, or an existing home mortgage secured by residential real estate
situated in Illinois with respect to which the licensee is brokering,
funding originating, purchasing, or servicing. The management and
operation of each full service office must include observance of
good business practices such as adequate, organized, and accurate
books and records; ample phone lines, hours of business, staff training
and supervision, and provision for a mechanism to resolve consumer
inquiries, complaints, and problems. The Commissioner shall issue
regulations with regard to these requirements and shall include an
evaluation of compliance with this Section in his or her periodic
examination of each licensee.
(s) "Purchasing" shall
mean the purchase of conventional or government-insured mortgage
loans secured by residential real estate situated in Illinois from
either the lender or from the secondary market.
(t) "Borrower" shall
mean the person or persons who seek the services of a loan broker,
originator, or lender.
(u) "Originating" shall
mean the issuing of commitments for and funding of residential mortgage
loans.
(v) "Loan brokerage
agreement" shall mean a written agreement in which a broker
or loan broker agrees to do either of the following:
(1)
obtain a residential mortgage loan for the
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borrower or assist the borrower in
obtaining a residential mortgage loan; or
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(2)
consider making a residential mortgage loan to
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(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
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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;
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(2)
any entity:
(A)
that is controlled, directly or indirectly,
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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
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(B)
a majority of the directors or trustees of
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which constitute a majority of the
persons holding any such office with the licensee
or any company that controls the licensee;
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(3)
any company, including a real estate investment
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trust, that is sponsored and advised
on a contractual basis by the licensee or any
subsidiary or affiliate of the licensee.
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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.
(Source: P.A. 93-561, eff. 1-1-04;
93-1018, eff. 1-1-05.)
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(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
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for the efficient administration of
this Act; and
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(2)
performing other duties as are prescribed by the
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(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.)
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(205 ILCS 635/Art.
II heading)
ARTICLE II
LICENSING PROCEDURE
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(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.)
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(205 ILCS 635/2-2) (from Ch. 17, par. 2322-2)
Sec. 2-2. Application
process; investigation; fee.
(a) The Commissioner shall
issue a license upon completion of all of the following:
(1)
The filing of an application for license.
(2)
The filing with the Commissioner of a listing of
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judgments entered against, and bankruptcy
petitions by, the license applicant for the
preceding 10 years.
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(3)
The payment, in certified funds, of
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investigation and application fees,
the total of which shall be in an amount equal
to $2,700 annually, however, the Commissioner
may increase the investigation and application
fees by rule as provided in Section 4-11.
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(4)
Except for a broker applying to renew a license,
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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.
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(5)
The filing of proof satisfactory to the
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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.
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(6)
An investigation of the averments required by
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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 | | |
