Since 1995, the courts, the Illinois Attorney General and the Illinois Office of Banks and Real Estate had all concluded that the limitations on permissible points under the Illinois Interest Act (815 ILCS 205/4.1a(f)) had been preempted by the federal Depository Institutions Deregulation and Monetary Control Act of 1980 ("DIDMCA"). As a result of DIDMCA's preemption, the Interest Act's 3% cap on charges with respect to any mortgage loan with an interest rate in excess of 8% could be ignored. However, the recent (March 2004) Illinois Appellate Court (First District) decision in U.S. Bank v. Clark effectively reversed this position by concluding that Illinois had "opted out" of DIDMCA in 1992 when the Illinois Interest Act was modified and reenacted.

For lenders making mortgage loans in Illinois, this decision means that any mortgage loan in Illinois with an interest rate in excess of 8% is subject to a 3% cap on charges. To make matters worse, virtually all charges imposed in connection with the mortgage loan, regardless of who paid them, when they were paid, to whom they were paid and regardless of how they are characterized (with the exception of a very limited number of lender-paid charges) are included in that 3% cap.

Shortly after the U.S. Bank v. Clark case was decided, a major lender/investor and DSI customer (who has asked to remain unnamed) requested DSI to implement an audit that would identify any Illinois loan that exceeded the 3% limitation on charges under the Interest Act and, if so, display a warning to that effect. Working together, the audit was developed and implemented in very short order with great success. This audit has now been implemented across the board for all DocMagic users.

To view a copy of the Illinois Interest Act, please visit: Illinois Interest Act - 815 ILCS 205/4.1a.

Please feel free to contact DSI's Compliance Department at (800) 649-1362 if you have any questions regarding how this audit works.