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High Foreclosure Rates Draw Scrutiny to Lenders in IL.(regulations in mortgages)
Springfield, IL -- The Illinois Department of Financial and Professional Regulation has issued proposed regulations in connection with the state's House bill to establish a four-year predatory lending pilot program in as-yet-undefined Cook County areas with high mortgage foreclosure rates.
Under the statute, the department is required to maintain and administer a predatory lending database to gather and organize certain pieces of information in connection with residential mortgage loan transactions in the pilot program area. The department will use the information in the database to determine whether a borrower must obtain credit counseling from a HUD-certified credit counselor.
Terry Bivins, immediate past president of the Illinois Association of Mortgage Brokers, sees a lot of problems with the law as it is currently written. Mr. Bivins and the association are submitting public comments on the proposed rule, which must be received by the department by Dec. 5.
The regulations would exempt reverse mortgages, which already have separate counseling requirement as well as FHA first-time homebuyers. "We were expecting pages and pages of information - exemptions for certain types of loans. That didn't happen. They have spelled out certain types of borrowers with FICO scores and certain products that have to go through this," said Mr. Bivins. "The rules are terrible. Sometimes, it applies to purchase money loans or refis. They don't distinguish the two. We anticipate the department may rewrite them."
The proposed regulation enumerates specific information in addition to the statutory list that brokers and originators would be required to submit to the department. Specifically, it would require mortgage brokers and originators to submit to the department any and all financing by the borrower for the subject property within 12 months prior to the date of the application. Loan information, including the interest rate, term, purchase price, downpayment, closing costs and prepayment penalty, if any, would also need to be submitted.
The proposed regulation also states that a borrower will be recommended for credit counseling if there is a FICO score of 620 or less, or if the borrower has a FICO score from 621 to ...
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