Governor orders statewide sweep for compliance with anti-predatory lending law

Cook County consumer protections tracked on new data-base

SPRINGFIELD – Governor Rod R. Blagojevich’s Mortgage Fraud Task Force (MFTF), housed in the Department of Financial and Professional Regulation (IDFPR), is completing a two-day statewide compliance sweep of lending institutions today. They are auditing more than 200 mortgage companies to make sure each is complying with the consumer protection provisions of the Anti-Predatory Lending Act (S.B. 1167) the governor signed last November. Most provisions of S.B. 1167 took effect on June 1 of this year.

“Passing a law is a good first step toward protecting consumers from predatory lenders, but we need to make sure that both the letter and the intent of the law are being followed,” said Gov. Blagojevich in ordering this compliance check. “Families struggling to keep a roof over their heads deserve to know that Illinois lenders are meeting their responsibilities.”

Twenty-two examiners will visit lenders in ten counties across Illinois to review randomly selected loan files. The files will be audited to make sure that lenders have: 1) verified that the borrower will be able to pay the costs of the loans, including principle, interest, insurance and taxes, 2) offered a loan with no pre-payment penalties and/or provided information about pre-payment penalties in the loan being agreed to, 3) provided borrowers with copies of appraisals done on the home, 4) provided borrowers an easy to understand explanation of different types of loans, and 5) disclosed how and how much the mortgage broker is being paid.

Once the compliance sweep is completed, the MFTF will carefully review the findings and conduct in-depth investigations of any companies that fail to comply with the new law’s consumer protection provisions.

In Cook County, a new program requires lenders to recommend counseling to first-time home buyers and anybody refinancing an existing mortgage if their loan is interest-only, has negative amortization, points and fees that total more than 5% of the loan amount, the loan includes a pre-payment penalty, or if the loan is an ARM of three years or less.
In July, the first month of the new program, 22,616 new mortgage transactions were completed in Cook County. Of those, 91 loans had terms that required borrowers to complete counseling and 17 borrowers completed counseling. An additional 313 borrowers were originally offered loans that would have triggered the counseling requirement, but the lenders improved the terms of the loan offered, thereby eliminating the need for counseling.

Early this year, Governor Blagojevich launched the Illinois Homeowner Assistance Initiative, which includes a $410 million Illinois Homeowner Assistance Pool to provide predictable, fixed-rate mortgages for Illinois borrowers with moderately good credit; established a statewide counseling network to ensure homeowners know their options; and made it easier for consumers to report fraudulent and deceptive practices. He also asked the Mortgage Fraud Task Force (MFTF) to examine mortgage lenders more often to make sure they remain financially healthy.

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