Note: This updated and modified article incorporates much of the information contained in a number of separate articles regarding the Illinois Anti-Predatory Lending Database Program published in prior editions of the Compliance Wizard.  A list of those articles appears at the bottom of this article.

The Illinois Anti-Predatory Lending Database Program (the "ILAPLD") has been in effect for owner-occupied, one-to-four family properties located within Cook County, Illinois since July 1, 2008.  Effective July 1, 2010, the ILAPLD has been expanded to also apply to owner-occupied, one-to-four family properties located in Will, Kane and Peoria counties.  No other changes have been made to the ILAPLD other than this expansion of the program to properties located in the foregoing three counties.

Certificate Required to Record Mortgage:

The ILAPLD program works generally like this: in order to record a mortgage in any of the counties in which the ILAPLD applies, the mortgage must be accompanied by either a Certificate of Completion or a Certificate of Exemption.  It is the closing agent's responsibility to determine which certificate is appropriate in a given transaction.

When the ILAPLD program was first implemented for Cook County, a Certificate of Exemption was required to record the mortgage if the mortgage application was taken prior to July 1, 2008 (the ILAPLD effective date), but closed after July 1, 2008; however, no information was required to be entered into the Anti-Predatory Lending Database ("Database") for that loan.  Anticipate a comparable rule with respect to mortgage loan applications taken prior to July 1, 2010 but closed after July 1, 2010 and submitted for recordation in Will, Kane and Peoria counties.  In addition, certain entities that are exempt from the ILAPLD (e.g., entities not required to be licensed under the Illinois Residential Mortgage License Act, such as banks and other depository financial institutions) need not enter information into the Database but must nonetheless receive a Certificate of Exemption from the closing agent prior to recordation of the mortgage.

Within 10 days after taking a mortgage application, brokers and originators must input certain required borrower and loan-related information into the Database.  First, a determination is made if the property is exempt.  Exempt properties include: non-owner occupied properties, commercial properties, residential properties with 5+ units, and government properties.  Reverse mortgages are also exempt.  If the property is not exempt, then within seven (7) days after receipt of that information, the Illinois Department of Financial and Professional Regulation (IDFPR) must make a determination whether to recommend housing counseling by a HUD-approved counselor. 

Housing Counseling:

If counseling is not required, the loan may proceed to closing.  However, counseling is required for purchase transactions if all the borrowers are first-time homebuyers.  In addition, counseling is required if the borrower is refinancing a primary residence and the loan includes one or more of the following features:

• interest only payments;
• negative amortization;
• total points and fees paid by the borrower exceed 5% (Note: "points and fees" are defined by reference to the Illinois High Risk Home Loan Act (the "HRHL Act"), and not, for properties located in Cook County, the Cook County predatory lending ordinance (the "Ordinance").1  There are some key differences between the HRHL Act and the Ordinance with respect to how points and fees are defined.  Under the HRHL Act, certain charges that are otherwise excluded from points and fees under the Ordinance are included in the definition of points and fees under the HRHL: tax service charges, attorney's fees (if the borrower has the right to select the attorney), and, most significantly, payments to government agencies or government-sponsored agencies in connection with a government-sponsored mortgage program (e.g. FHA UFMIP, VA funding fee, USDA guarantee fee).  As a consequence of these differing definitions of points and fees, it is possible for a loan to not exceed the applicable points and fees threshold under the Ordinance, but to exceed the applicable points and fees threshold under the HRHL Act);
• the loan includes a prepayment penalty; or
• the loan is an ARM which allows for adjustment within the first three (3) years of the loan term.

The borrower may not waive required counseling.  Additional procedures and timeframes are included to accommodate changes in loan or commitment terms.  The borrower then has 10 days within which to complete counseling, and the counselor has seven (7) days to input information and recommendations into the Database.  Regardless of the counselor's recommendation, the borrower decides whether or not to proceed with the transaction.  Reasonable and customary costs of counseling up to $300 must be paid by the broker or originator. 

Closing:

Within 10 days after closing a loan, the title company or closing agent must submit required information to the Database.  Finally, the title company or closing agent must attach the certificate of compliance (or certificate of exemption, if applicable) to the mortgage in order to record the mortgage. 

Audit:

Not later than July 1, 2010, the following audit will return if the property securing a mortgage loan is located in Cook, Will, Kane and Peoria counties:

WARNING: PROPERTY IS LOCATED IN THE IL PREDATORY LENDING DATABASE PROGRAM (765 ILCS 77/70)

Additional information:

To view a copy of the recent amendments to the Predatory Lending Database Program (Public Act 096-0856), go here. 

The Predatory Lending Database Program website is located here. 

A useful overview can be viewed here.   

This article incorporates and updates the information contained in the following articles:

Please contact DocMagic's Compliance Department if you have any questions regarding any of the information contained in this article.

1 Will, Kane and Peoria counties do not have county-specific ordinances addressing predatory lending practices similar to those in Cook County.