Alerts and Updates
Illinois' Predatory Home Loan Practices Act - House Bill 1478
May 21, 2007
Proposed Bill Amends the Residential Mortgage License Act of 1987Currently under consideration by state legislators is Illinois House Bill 1478, known as the "Predatory Home Loan Practices Act," which amends the Residential Mortgage License Act of 1987.
In part, Illinois House Bill 1478 provides that a licensee must verify 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. 205 ILCS 635/4-16 new. With regard to residential mortgages in which the interest rate may vary, a licensee must verify the borrower's reasonable ability to repay the principal and interest on the loan based on the fully indexed rate. Id. The proposed Bill outlines what documents a licensee must obtain to verify the borrower's ability to repay, including "tax returns, payroll receipts, bank receipts, or other similarly reliable documents." Id.
The proposed Bill limits the instances in which a lender may impose a prepayment penalty. 205 ILCS 635/5-8 new. The Bill also proposes a requirement that the licensee provide a borrower with a copy of any appraisal. 205 ILCS 635/5-11 new. The Bill prohibits equity stripping or loan flipping. 205 ILCS 635/5-14 new.
The proposed Bill also imposes an agency relationship on mortgage brokers between the mortgage broker and the borrower. 205 ILCS 635/5-7 new.
The Bill grants enforcement authority to the attorney general. The Bill also provides for private right of action by a borrower. The Bill does contain some safe harbor provisions that, in essence, require a lender to make appropriate restitution to the borrower if violations of the proposed Bill were not intentional, provided that the licensee has appropriate procedures in place to avoid errors. 205 ILCS 635/4-16 new. On May 2, 2007, the Bill was placed on the calendar for third reading.
For the full text of House Bill 1478, see: http://www.ilga.gov/legislation/95/HB/PDF/09500HB1478lv.pdf
For Further Information
If you have any questions about Illinois House Bill 1478 or would like more information, please contact Frederick R. Ball, one of our other Chicago attorneys in the firm's Real Estate or Banking and Financial Services Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
