Illinois Amends Mortgage Licensing and Residential Foreclosure Laws
by: Nicole Legere
Amendments to the Residential Mortgage License Act
Illinois recently amended the Residential Mortgage License Act of 1987 with changes to sections 1-3 and 4-2, and also by adding section 7-15. These changes address requirements for exempt company registration under the Residential Mortgage License Act of 1987, and allow for the sponsorship of individual loan originators. They will become effective immediately upon becoming law.
Individuals who are exempt from licensure due to their status as a federally chartered savings bank registered with the Nationwide Mortgage Licensing System (NMLS) may apply to the secretary for an exempt company registration. This allows for the sponsorship of one or more individuals subject to the mortgage loan originator licensing requirements of the Residential Mortgage License Act. As a result, independent agents will be able to act as mortgage loan originators. In order to be eligible for this status the mortgage loan originator must be covered under an exclusive written contract with, and originate loans solely on behalf of, the exempt person. The loan originator must also hold a valid current insurance producer license.
The exempt person must still fulfill any NMLS reporting requirements, provide a blanket surety bond, supervise the activities of all sponsored mortgage loan originators, comply with all rules and orders to ensure SAFE Act compliance, and pay an annual registration fee.
An application can be denied by the secretary for a number of reasons including a finding that the individual is not a person of honesty, truthfulness or good character. A person may also be denied if there has been a final judgment against him/her in a civil action on grounds of fraud, deceit, or misrepresentation, and the conduct on which the judgment is based indicates that it would be “contrary to the interest of the public to permit the person to manage a loan originator.” These findings can also lead to a fine, suspension, or revocation of the license.
Exempt entities are subject to examination and investigation of sponsored loan originators at a frequency to be determined by the secretary. The exempt entity shall provide access to mortgage loan originator documents and originator offices in order to assist with the examination.
Changes to Residential Foreclosure Laws
Illinois has also made amendments regarding foreclosures of residential real estate when a lease is involved. These changes address tenant rights during the foreclosure process, and provide some protections for those tenants with a written lease agreement. These changes will become effective November 19, 2013.
An entity that assumes control of residential real estate in foreclosure may only terminate a bona fide lease at the end of the lease term or, in the case of month-to-month leases, no early than 90 days after giving written notice. There is an exception for purchasers of residential real estate in foreclosure if the purchaser intends to occupy the property as a primary residence. In that case, the lease may be terminated after 90 days’ notice. A foreclosure judgment will not terminate or otherwise affect a bona fide lease in cases of residential property foreclosure even when the lessee is a named party.
An additional amendment clarified the technical procedure for foreclosure against a deceased mortgagor. The court is not required to appoint a special representative to represent the deceased party so long as there is a living person who holds a “100% interest in the property that is the subject of the action, by virtue of being the deceased mortgagor’s surviving joint tenant or surviving tenant by the entirety.”
About the Author
Nicole Legere, J.D. is Assistant Vice President and Senior Compliance Consultant at Bankers Advisory, Inc. She is a graduate of the University of Massachusetts at Amherst and earned her Juris Doctor at Roger Williams School of Law. Nicole is admitted to the Bar in Massachusetts and New York. She can be reached at nicole@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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