The long-delayed Illinois Predatory Lending Database Pilot Program (the "Pilot Program") is delayed no more. The Illinois Department of Financial and Professional Regulation (the "IDFPR") has announced September 1, 2006 as the inception date for the four-year Pilot Program created by House Bill 4050 that was signed into law in July, 2005. The requirements of the Pilot Program are complex and require careful review. A short description of the Pilot Program together with a number of links to helpful information and a description of a new DocMagic audit follow.

The Pilot Program

The Pilot Program establishes an online predatory lending database managed by the IDFPR covering the following designated zip codes within Cook County (the "Pilot Program Area") found to have a high rate of foreclosure due to predatory lending practices: 60620, 60621, 60623, 60628, 60629, 60632, 60636, 60638, 60643 and 60652. The Pilot Program requires mortgage brokers and loan originators licensed under the Illinois Residential Mortgage License Act of 1987 (the "IRMLA") to enter loan application information into the database. The IDFPR's Division of Banking will then make a determination whether or not to recommend mandatory housing counseling to the borrower. The borrower must participate in a counseling interview with an approved counseling agency. After the interview, the counseling agency must submit certain information, including but not limited to a statement of the counselor's recommendation (which a borrower is free to ignore) into the database. Title insurance companies and closing agents must submit certain information into the database for loans that proceed to closing. It is the responsibility of the IDFPR's Division of Banking to issue various certificates, including certificates of compliance with the counseling requirements of the Pilot Program and certificates of exemption if, for example, the lender is exempt from licensing under the IRMLA, or the property is exempt because it is either commercial, industrial or government real estate (non-residential real estate), or an investment or multifamily property, or the loan is an FHA reverse mortgage. A certificate of compliance or certificate of exemption must be included as a cover page on every mortgage submitted for recording in the Pilot Program Area. The Pilot Program specifies the time periods within which all of these actions are to occur.

Helpful Links

Here are a series of links to information relevant regarding to the Pilot Program:

• Click here to view a copy of the IDFPR's inception date announcement.

• The provisions of HB 4050 are codified at 765 ILCS 77/70 et seq. and are accessible here.

• Click here for the administrative rules applicable to the Pilot Program.

• Click here for additional information about HB 4050 and the Pilot Program.

• The Illinois Mortgage Bankers Association has posted on its website a copy of a memo prepared by the IDFPR regarding the Pilot Program; the memo is available here.

New Audit

The new DocMagic audit is triggered if a property has a zip code located within the Pilot Program Area. The new audit will read as follows:

"THE PROPERTY IS LOCATED IN THE IL PREDATORY LENDING DATABASE PILOT PROGRAM AREA (HB 4050; 765 ILCS 77/70)"

Please contact a Customer Service representative at (800) 649-1362 if you have any questions regarding the Pilot Program or this audit.

Bill Lambropoulos is the General Counsel and Director of Compliance and Legal Services at Document Systems, Inc.