Illinois Real Estate License Act Update

Real Estate License Act Rewrite has not yet passed.

On Sunday May 31, the rewrite of the Illinois Real Estate License Act was included in Senate Bill 268 which incorporates a series of measures.  Due to the flurry of budget activity in the summer session, the bill was not considered.

It is anticipated that the bill may be addressed in the fall session. 

Among many other changes, the proposed license law :

• eliminates the licensing category of salesperson; every licensee would be either a broker or managing broker
• requires that all salespersons move to the broker license category no later than April 30, 2012, by either passing a proficiency exam or by taking 30 hours of education and passing an exam
• prohibits the issuance of new salesperson licenses after April 30, 2011 
• increases the education required for broker licensing from 45 to 90 hours
• requires brokers to take 30 hours of post-licensing education within the first renewal period
• requires 12 hours of continuing education each renewal period after the first renewal
• takes effect December 31, 2009

The current Act Expires December 31, 2009 and some type of action is required.  We will keep you posted as updates become available.

New Truth in Lending Disclosures

Revised Truth in Lending Act disclosures are now in effect.  Lenders are now subject to modified disclosure requirements under the Federal Reserve Board Truth in Lending Regulation Z. 

For lenders, the new rules are complex and compliance will be challenging.  While real estate licensees are not attorneys and do not have to understand the full law, they need to understand the basics so that they can advise clients of potential delays under the new rules. 

Key highlights of the change include*   

The new requirements apply to all mortgages secured by a borrower’s home, including primary and second homes and refinancings. Investor loans continue to be exempt. 

Lenders must give good faith estimates of mortgage loan costs within 3 business days after the consumer applies for a loan (early disclosure).

The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.

The closing may not take place until expiration of a 7 day waiting period after the consumer receives the early disclosure.

If the annual percentage rate (APR) changes by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan.

The APR includes not only the interest rate on the loan but certain other costs related to settlement, so it will be important for any fees that affect the APR to be as accurate as possible, as early as possible, to minimize the need for a corrected TILA disclosure. 

The consumer may modify or waive both waiting periods for a documented personal financial emergency, but must receive disclosures no later than the time of the modification or waiver.   Source: National Association of Realtors (NAR)

What do these changes mean for the real estate licensee and the client?   They need to be aware that there can and will be delays and they need to plan ahead.  The 30 day or less closing will be an exception rather than the rule and contracts should be written appropriately.  They need to be aware that changes in the loan amount, interest rate or additional closing costs could change the APR and require corrected disclosures and consequently a delay in closing.    

If the house does not appraise and the mortgage amount changes, it could trigger a change in the APR.  If the closing date must change and prorated closing costs change, it could trigger a change in the APR.  If the closing agent doesn't have the necessary documents from all involved parties causing a change in closing date, it could trigger a change in the APR.  Anything  that might effect a change in the APR could trigger a change in the APR and that change could bring about the need for a corrected disclosure and a delayed closing.

Real estate closing schedules are going to become more complicated as the consumer, real estate agent, attorney, lender, closing agents and others involved in closing the transaction learn to work with the new rules.  The real estate agent will need to plan ahead, to stay informed of changing conditions and to be prepared for delays.

A working knowledge of the new rules, timing and good communication will be the key to a successful closing. 

Additional Resources

Federal Reserve Board Final Rules and Staff Commentary (May 19, 2009) 

Mortgage Banker's Association Summary of New Requirements (May 21, 2009)

Illinois Real Estate Schools and Classes

How to Find a School That Meets the Educational Requirements for Illinois Real Estate Licensing

A recent Google search for Illinois real estate classes resulted in an impressive return of 28,100,000 in 0.64 seconds.

The first three pages contained seven organic links and eleven sponsored links that led to sites that are in compliance with the definitions and regulations found in the Illinois Real Estate License Act.The other 30 were irrelevant or for the most part links to marketing companies or pages designed to generate income by marketing using Google Ad words, practices which can mislead the unsuspecting consumer.

Real estate licensing in Illinois is regulated by the Illinois Department of Financial and Professional Regulation which is responsible for compliance with The Real Estate License Act of 2000 and the Administrative Rules associated with the Act.

Section 5-30 sets forth the educational requirements for Illinois Real Estate Licensing.

Section 5-30. Education requirements to obtain an original broker or salesperson license.

(a) All applicants for a broker's license, except applicants who meet the criteria set forth in subsection
(c) of this Section shall

(i) give satisfactory evidence of having completed at least 120 classroom hours, 45 of which shall be those hours required to obtain a salesperson's license plus 15 hours in brokerage administration courses, in real estate courses approved by the Advisory Council or

(ii) for applicants who currently hold a valid real estate salesperson's license, give satisfactory evidence of having completed at least 75 hours in real estate courses, not including the courses that are required to obtain a salesperson's license, approved by the Advisory Council.

(b) All applicants for a salesperson's license, except applicants who meet the criteria set forth in subsection (c) of this Section shall give satisfactory evidence that they have completed at least 45 hours of instruction in real estate courses approved by the Advisory Council.

(c) The requirements specified in subsections (a) and (b) of this Section do not apply to applicants who: are currently admitted to practice law by the Supreme Court of Illinois and are currently in active standing.

(d) A minimum of 15 of the required hours of pre-license education shall be in the areas of Article 15 of this Act, disclosure and environmental issues, or any other currently topical areas that are determined by the Advisory Council.

Approved courses are licensed by the Illinois Department of Financial and Professional Regulation and must be conducted by a pre-license school which according to Article 1 of the License Act means a school licensed by the IDFPR offering courses in subjects related to real estate transactions, including the subjects upon which an applicant is examined in determining fitness to receive a license.

The fact is that there are only 86 schools licensed by the IDFPR to provide approved pre-licensing classes. Of the 86, only 33 are licensed to provide some form of distance education. So why the return of 28,100,000 in a search for "Illinois Real Estate Classes"? By the way, 6 of the 33 appeared on the first 5 pages as either organic or sponsored links, the balance of the relevant links were marketing sites.

One type of marketing site claims to be an Illinois school, but is really an affiliate who resells a licensed school's course. An entity may only claim to be an approved school if they are one of the 86 licensed schools. If you have any problems or complaints with this type of "school" the IDFPR has no authority in another state to help you resolve the issue. In order to preserve your Illinois legal rights, it is best to register directly with the licensed school at the web site of the licensed school.

Beware of any "school' claiming to be approved by the Illinois Real Estate commission. Illinois does not have a Real Estate Commission. Real estate is regulated by the Illinois Department of Financial and professional Regulation.

Beware of any "school" that claims to be licensed in multi-states, while a few are, this is not common. Before enrolling, go to the web site of the IDFPR and check to see if it is a licensed school or an affiliate marketer. For your legal protection it is best to deal directly with the provider rather than a middleman. Maybe you can even negotiate a reduced course fee since no commission will be paid to a middleman.

Beware of any "school" with an out of state address or no address in there contact information. Section 1450.275 of the Administrative Rules states that a pre-license school must provide an office in Illinois for the maintenance of all records and office space for customer service.

Beware of any substantial misrepresentation, misleading or untruthful advertising, including without limitation guaranteeing success or a pass score on any exam. These are grounds for discipline under Section 1450.315 of the Administrative Rules of the Illinois Real Estate License Act.

Illinois real estate sales is a profession that falls under the Real Estate License Act of 2000 and is regulated by the Illinois Department of Financial Regulation. Beware of any misleading advertising about courses and requirements and if you have any questions, consult IDFPR.

Mike Fair, Director
Illinois Academy of Real Estate

A Modern Day Parable of the Unforgiving Lender

I recently had an interesting discussion with a client/student who suggested that the current financial crisis could be compared to the Parable of the Unforgiving Servant found in Matthew
18:23-35. As I considered our discussion, I came to the conclusion that there was some truth in the observation.

What do you think?

The United States Government wanted to settle accounts with the banking industry. When the accounting began, Lenders owed billions and could not pay. Uncle Sam ordered them to reduce executive compensation, quit throwing wild parties and paying extravagant bonuses or they would have to sell of their assets and perhaps file bankruptcy.

The banking industry fell on its knees and implored Uncle Sam, "Have patience with me, and I will pay everything." And Uncle Sam had pity on the banks, forgave them, paid the debt himself.

But when the banking industry went out, it found tax paying consumers that owed hundreds of thousands of dollars and seized the consumer, began to choke him saying, "Pay what you owe." The tax paying consumer fell down and pleaded with the banking industry saying, "Have patience with me and I will pay you." The banking industry refused, foreclosing on his homes and raising credit card and consumer interest rates.

Maybe the day will come when someone becomes greatly distressed and will report to Uncle Sam all that has happened and on that day Uncle Sam will summon the banking industry and say, "You wicked lenders! I forgave you because you pleaded with me. And should you not have mercy on the tax paying consumer as I had mercy on you?" And Uncle Sam will deliver them to their fate.

He that has ears to hear, let him hear.

Mike Fair, director
Illinois Academy of Real Estate