Predatory Lending Database Program Fact Sheet

Posted at 3:05 AM, Sep. 29, 2008

Illinois has enacted a comprehensive predatory lending measure, Public Act 95-691 (SB 1167) that is now in effect as of July 1, 2008.  This law revises the predatory lending pilot program that was originally in the HB 4050. 

The purpose of this program is to reduce predatory lending practices by assiting certain borrowers in understanding the terms and conditions of the loan that is being applied for.

Borrowers will be required to undergo counseling if the borrower and the mortgage they are applying for meet certain criteria.    This information will be placed into a database accessible only by housing counselors, closing agents and licensed mortgage brokers and loan originators. 

Requirements are:

A.  The broker or loan originator is not exempt from the Residential Mortgage License Act

       AND

B.  The borrowers (all of them if more than one) are first-time homebuyers seeking a mortgage on a 1 to 4 unit dwelling that will be owner-occupied in Cook County or the borrowers are refinancing a primary residence.

       AND

C.  The loan includes one or more of the following characteristics:

* The loan permits interest only payments;

* The loan may result in negative amortization;

* The total points and fees payable by the borrower at or before closing will exceed 5%;

* The loan includes a pre-payment penalty; or

* The loan is an Adjustable Rate Mortgage (ARM) which allows adjustments of the interest rate in the first three years.

The program will be administered such that ALL mortgages recorded in Cook County will need to have a Certificate of Compliance or Certificate of Exemption attached to the mortgage.  Counseling must be done by a HUD-certified agency. 

If the borrower qualifies, prior to closing they will be notified and given a list of participating counseling agencies.  Only after this review will the loan be given a "clear to close" status.  Should the closing agent upon review notice any changes to the originial loan terms, the buyer would be required to re-counsel and the loan would be suspended until further notice.