Blagojevich Administration Continues to Crackdown on Unscrupulous Lenders

CHICAGO – As part of its ongoing crackdown on mortgage fraud and illegal mortgage practices, the Illinois Department of Financial and Professional Regulation (IDFPR) announced its most recent enforcement action against unlicensed practice by loan originators. IDFPR revoked the license of Illinois Mortgage Funding Corporation, in Westchester after Governor Blagojevich’s Mortgage Fraud Task Force (MFTF) found thousands of loans written by unlicensed loan originators and other illegal business practices at the company’s corporate office. 

The investigation began when IDFPR received a complaint on its consumer hotline from a customer of Illinois Mortgage Funding Corp. who claimed that she was not informed of her right to cancel the transaction during the legally allowed cooling-off period.  Following up on this complaint, the Task Force began a comprehensive examination of the firm’s files. It found more than 12,000 home loans applications were taken by unlicensed loan originators.  The examiners also found 9,750 additional entries where the loan originator was not listed in the company’s loan records. Some files were missing Truth in Lending and Good Faith Disclosure documents required to be provided to borrowers before closing.  One file was missing the appraisal listing the value of the property used to secure the mortgage.

“Governor Blagojevich is committed to protect Illinois borrowers from unscrupulous lenders and our department is going to use every means possible to achieve that goal,” said Dean Martinez, Secretary, IDFPR.  “By revoking this license we are sending a signal that we take mortgage fraud and loan originator reporting violations very seriously.” 

Loan originators are registered in Illinois to ensure that borrowers’ confidential financial information is handled only by professionals who undergo criminal and financial checks as well as pass a rigorous examination about home lending processes.  Of the more than 30,000 practitioners working in the field when the licensing retirement took effect, less than half were granted registration after the screening process.  Loan Solicitors are also registered but do not have to pass the exam and may not take mortgage applications from consumers.

IDFPR examiners also found repeat violations from an earlier examination, including: asking customers to sign blank forms intended to lock interest rates at a certain level, failure to notify customers about changes made to their proposed mortgages prior to closing, and boxes of files containing consumer loan information that were marked for shredding before being properly archived. 

“Purchasing a home is the largest investment most Illinois families make and they are entitled to professional, secure and fair treatment when they visit an Illinois residential mortgage licensee,” said Jorge Solis, Director, Division of Banking, IDFPR. “Companies and loan originators licensed by IDFPR must meet the highest standards of consumer protection and business practices.”

In addition to individual loan files that were incomplete or misfiled, Illinois Mortgage Funding Corporation failed to notify IDFPR that it had two judgments entered against it for $36,000.  It also failed to make public that it had a business affiliation with Global Title Company.  While such affiliations are not illegal, Illinois residential mortgage licensees are required to notify IDFPR about such affiliated business arrangements so customers are aware there might be a conflict of interest.

The original consumer complaint also resulted in revoking the licenses of two employees at Illinois Mortgage Funding Corporation.  A loan solicitor, Rodolfo Martinez, took the consumer’s application, which is against the law.  Only registered loan originators may take applications for loans at residential mortgage companies.   Martinez’s cousin, Francisco Herrera, a registered loan originator, signed off on the loan documents Martinez handled to ensure that the loan would be funded and the violation would not be caught. 

In addition to numerous mistakes on the paperwork, Martinez failed to provide the customer with the Notice to Cancel form which would have explained how the customer could cancel the loan during the legal time period.  When the customer tried to cancel the loan, Martinez failed to respond to her telephone calls or emails.  Martinez attempted to pass the exam required of loan originators and failed the exam in July.

Current customers of Illinois Mortgage Funding Corporation will be permitted to close their loans with IDFPR confirmation of loan application dates, but the company will not be allowed to take any new loan applications once the license revocation takes effect.  The company has 10 days after notification under state law to request an administrative hearing on the revocation order.

A copy of the Order Revoking Loan Originator Registration for Francisco Herrera is available by clicking here.

A copy of the Order Revoking Loan Originator Registration for Rodolfo Martinez is available by clicking here.

A copy of the Order Revoking License for Illinois Mortgage Funding Corporation is available by clicking here.

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