2017 Illinois Compiled Statutes
Chapter 205 - FINANCIAL REGULATION
205 ILCS 635/ - Residential Mortgage License Act of 1987.
Article VII - Mortgage Loan Originator License Required
(205 ILCS 635/Art. VII heading)
(205 ILCS 635/7-1)
Sec. 7-1. Registration required; rules and regulations. Beginning 6 months after the effective date of this amendatory Act of the 93rd General Assembly, it is unlawful for any natural person to act or assume to act as a loan originator, as defined in subsection (hh) of Section 1-4, without being registered with the Commissioner unless the natural person is exempt under items (1) and (1.5) of subsection (d) of Section 1-4 of this Act. The Commissioner shall promulgate rules prescribing the criteria for the registration and regulation of loan originators, including but not limited to, qualifications, fees, examination, education, supervision, and enforcement. This Section shall not be effective on or after (1) the operability date of January 1, 2011 or (2) the operability date selected pursuant to Section 7-1A of this Act for a mortgage loan originator license; provided, however, that a violation of this Section committed before the operability date remains subject to penalties authorized by this Act.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-1A)
Sec. 7-1A. Mortgage loan originator license.
(a) It is unlawful for any individual to act or assume to act as a mortgage loan originator, as defined in subsection (jj) of Section 1-4 of this Act, without obtaining a license from the Director, unless the individual is exempt under subsection (c) of this Section. It is unlawful for any individual who holds a mortgage loan originator license to provide short sale facilitation services unless he or she holds a license under the Real Estate License Act of 2000. Each licensed mortgage loan originator must register with and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry.
(b) In order to facilitate an orderly transition to licensing and minimize disruption in the mortgage marketplace, the operability date for subsection (a) of this Section shall be as provided in this subsection (b). For this purpose, the Director may require submission of licensing information to the Nationwide Mortgage Licensing System and Registry prior to the operability dates designated by the Director pursuant to items (1) and (2) of this subsection (b).
(1) For all individuals other than individuals
described in item (2) of this subsection (b), the operability date as designated by the Director shall be no later than July 31, 2010, or any date approved by the Secretary of the U.S. Department of Housing and Urban Development, pursuant to the authority granted under federal Public Law 110-289, Section 1508.
(2) For all individuals registered as loan
originators as of the effective date of this amendatory Act of the 96th General Assembly, the operability date as designated by the Director shall be no later than January 1, 2011, or any date approved by the Secretary of the U.S. Department of Housing and Urban Development, pursuant to the authority granted under Public Law 110-289, Section 1508.
(3) For all individuals described in item (1) or (2)
of this subsection (b) who are loss mitigation specialists employed by servicers, the operability date shall be July 31, 2011, or any date approved by the Secretary of the U.S. Department of Housing and Urban Development pursuant to authority granted under Public Law 110-289, Section 1508.
(c) The following, when engaged in the following activities, are exempt from this Act:
(1) Registered mortgage loan originators, when
acting for an entity described in subsection (tt) of Section 1-4.
(2) Any individual who offers or negotiates terms of
a residential mortgage loan with or on behalf of an immediate family member of the individual.
(3) Any individual who offers or negotiates terms of
a residential mortgage loan secured by a dwelling that served as the individual's residence.
(4) A licensed attorney who negotiates the terms of
a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of a lender, mortgage broker, or other mortgage loan originator.
(d) A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless he or she obtains and maintains a license under subsection (a) of this Section. Each independent contractor loan processor or underwriter licensed as a mortgage loan originator must have and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry.
(e) For the purposes of implementing an orderly and efficient licensing process, the Director may establish licensing rules or regulations and interim procedures for licensing and acceptance of applications. For previously registered or licensed individuals, the Director may establish expedited review and licensing procedures.
(Source: P.A. 96-112, eff. 7-31-09; 97-891, eff. 8-3-12.)
(205 ILCS 635/7-2)
Sec. 7-2. State license application and issuance.
(a) Applicants for a license shall apply in a form prescribed by the Director. Each form shall contain content as set forth by rule, regulation, instruction, or procedure of the Director and may be changed or updated as necessary by the Director in order to carry out the purposes of this Act.
(b) In order to fulfill the purposes of this Act, the Director is authorized to establish relationships or contracts with the Nationwide Mortgage Licensing System and Registry or other entities designated by the Nationwide Mortgage Licensing System and Registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to this Act.
(c) In connection with an application for licensing as a mortgage loan originator, the applicant shall, at a minimum, furnish to the Nationwide Mortgage Licensing System and Registry information concerning the applicant's identity, including the following:
(1) Fingerprints for submission to the Federal Bureau
of Investigation, and any governmental agency or entity authorized to receive such information for a state, national and international criminal history background check.
(2) Personal history and experience in a form
prescribed by the Nationwide Mortgage Licensing System and Registry, including the submission of authorization for the Nationwide Mortgage Licensing System and Registry and the Director to obtain:
(A) an independent credit report obtained from a
consumer reporting agency described in Section 603(p) of the Fair Credit Reporting Act; and
(B) information related to any administrative,
civil, or criminal findings by any governmental jurisdiction.
(d) For the purpose of this Section, and in order to reduce the points of contact which the Federal Bureau of Investigation may have to maintain for purposes of subsection (c) of this Section, the Director may use the Nationwide Mortgage Licensing System and Registry as a channeling agent for requesting information from and distributing information to the Department of Justice or any governmental agency.
(e) For the purposes of this Section and in order to reduce the points of contact which the Director may have to maintain for purposes of item (2) of subsection (c) of this Section, the Director may use the Nationwide Mortgage Licensing System and Registry as a channeling agent for requesting and distributing information to and from any source so directed by the Director.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-3)
Sec. 7-3. Issuance of license. The Director shall not issue a mortgage loan originator license unless the Director makes at a minimum the following findings:
(1) The applicant has never had a mortgage loan originator license revoked in any governmental jurisdiction, except that a subsequent formal vacation of such revocation shall not be deemed a revocation.
(2) The applicant has not been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court:
(A) during the 7-year period preceding the date of
the application for licensing and registration; or
(B) at any time preceding such date of application,
if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering;
provided that any pardon of a conviction shall not be a conviction for purposes of this item (2).
(3) The applicant has demonstrated financial responsibility, character, and general fitness so as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly, and efficiently within the purposes of this Act. For purposes of this item (3) a person has shown that he or she is not financially responsible when he or she has shown a disregard for the management of his or her own financial condition. A determination that an individual has not shown financial responsibility may include, but is not limited to, consideration of:
(A) current outstanding judgments, except judgments
solely as a result of medical expenses;
(B) current outstanding tax liens or other
government liens and filings, educational loan defaults, and non-payment of child support;
(C) foreclosures within the past 3 years;
(D) a pattern of seriously delinquent accounts
within the past 3 years; and
(E) an independent credit report obtained under
Section 7-2(c)(2) of the Act; provided that, a credit score may not be the sole basis for determining that an individual has not shown financial responsibility; provided further that, the credit report may be the sole basis for determining that an individual has not shown financial responsibility.
(4) The applicant has completed the pre-licensing education requirement described in Section 7-4 of this Act.
(5) The applicant has passed a written test that meets the test requirement described in Section 7-5 of this Act.
(6) The applicant has met the surety bond requirement as required pursuant to Section 7-12 of this Act.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-4)
Sec. 7-4. Pre-licensing and education of mortgage loan originators.
(a) In order to meet the pre-licensing education requirement referred to in item (4) of Section 7-3 of this Act an individual shall complete at least 20 hours of education approved in accordance with subsection (b) of this Section, which shall include at least:
(1) 3 hours of Federal law and regulations;
(2) 3 hours of ethics, which shall include
instruction on fraud, consumer protection, and fair lending issues; and
(3) 2 hours of training related to lending standards
for the nontraditional mortgage product marketplace.
(b) For purposes of subsection (a) of this Section, pre-licensing education courses shall be reviewed and approved by the Nationwide Mortgage Licensing System and Registry based upon reasonable standards. Review and approval of a pre-licensing education course shall include review and approval of the course provider.
(c) Nothing in this Section shall preclude any pre-licensing education course, as approved by the Nationwide Mortgage Licensing System and Registry, that is provided by the employer of the applicant or an entity which is affiliated with the applicant by an agency contract, or any subsidiary or affiliate of such an employer or entity.
(d) Pre-licensing education may be offered in a classroom, online, or by any other means approved by the Nationwide Mortgage Licensing System and Registry.
(e) The pre-licensing education requirements approved by the Nationwide Mortgage Licensing System and Registry for the subjects listed in items (1) through (3) of subsection (a) for any state shall be accepted as credit towards completion of pre-licensing education requirements in Illinois.
(f) An individual previously registered under this Act who is applying to be licensed after the effective date of this amendatory Act of the 96th General Assembly must prove that he or she has completed all of the continuing education requirements for the year in which the registration or license was last held.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-5)
Sec. 7-5. Testing of mortgage loan originators.
(a) In order to meet the written test requirement referred to in item (5) of Section 7-3, an individual shall pass, in accordance with the standards established under this subsection (a), a qualified written test developed by the Nationwide Mortgage Licensing System and Registry and administered by a test provider approved by the Nationwide Mortgage Licensing System and Registry based upon reasonable standards.
(b) A written test shall not be treated as a qualified written test for purposes of subsection (a) of this Section unless the test adequately measures the applicant's knowledge and comprehension in appropriate subject areas, including:
(1) ethics;
(2) federal law and regulation pertaining to
mortgage origination;
(3) State law and regulation pertaining to mortgage
origination; and
(4) federal and State law and regulation, including
instruction on fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues.
(c) Nothing in this Section shall prohibit a test provider approved by the Nationwide Mortgage Licensing System and Registry from providing a test at the location of the employer of the applicant or the location of any subsidiary or affiliate of the employer of the applicant, or the location of any entity with which the applicant holds an exclusive arrangement to conduct the business of a mortgage loan originator.
(d) An individual shall not be considered to have passed a qualified written test unless the individual achieves a test score of not less than 75% correct answers to questions.
An individual may retake a test 3 consecutive times with each consecutive taking occurring at least 30 days after the preceding test.
After failing 3 consecutive tests, an individual shall wait at least 6 months before taking the test again.
A licensed mortgage loan originator who fails to maintain a valid license for a period of 5 years or longer shall retake the test, not taking into account any time during which such individual is a registered mortgage loan originator.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-6)
Sec. 7-6. Standards for license renewal.
(a) The minimum standards for license renewal for mortgage loan originators shall include the following:
(1) The mortgage loan originator continues to meet
the minimum standards for license issuance under Section 7-3.
(2) The mortgage loan originator has satisfied the
annual continuing education requirements described in Section 7-7.
(3) The mortgage loan originator has paid all
required fees for renewal of the license.
(b) The license of a mortgage loan originator failing to satisfy the minimum standards for license renewal shall expire. The Director may adopt procedures for the reinstatement of expired licenses consistent with the standards established by the Nationwide Mortgage Licensing System and Registry.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-7)
Sec. 7-7. Continuing education for mortgage loan originators.
(a) In order to meet the annual continuing education requirements referred to in Section 7-6, a licensed mortgage loan originator shall complete at least 8 hours of education approved in accordance with subsection (b) of this Section, which shall include at least:
(1) 3 hours of Federal law and regulations;
(2) 2 hours of ethics, which shall include
instruction on fraud, consumer protection, and fair lending issues; and
(3) 2 hours of training related to lending standards
for the nontraditional mortgage product marketplace.
(b) For purposes of this subsection (a), continuing education courses shall be reviewed and approved by the Nationwide Mortgage Licensing System and Registry based upon reasonable standards. Review and approval of a continuing education course shall include review and approval of the course provider.
(c) Nothing in this Section shall preclude any education course, as approved by the Nationwide Mortgage Licensing System and Registry, that is provided by the employer of the mortgage loan originator or an entity which is affiliated with the mortgage loan originator by an agency contract, or any subsidiary or affiliate of the employer or entity.
(d) Continuing education may be offered either in a classroom, online, or by any other means approved by the Nationwide Mortgage Licensing System and Registry.
(e) A licensed mortgage loan originator:
(1) Except as provided in Section 7-6 and
subsection (i) of this Section, may only receive credit for a continuing education course in the year in which the course is taken; and
(2) May not take the same approved course in the
same or successive years to meet the annual requirements for continuing education.
(f) A licensed mortgage loan originator who is an approved instructor of an approved continuing education course may receive credit for the licensed mortgage loan originator's own annual continuing education requirement at the rate of 2 hours credit for every one hour taught.
(g) A person having successfully completed the education requirements approved by the Nationwide Mortgage Licensing System and Registry for the subjects listed in subsection (a) of this Section for any state shall be accepted as credit towards completion of continuing education requirements in this State.
(h) A licensed mortgage loan originator who subsequently becomes unlicensed must complete the continuing education requirements for the last year in which the license was held prior to issuance of a new or renewed license.
(i) A person meeting the requirements of Section 7-6 may make up any deficiency in continuing education as established by rule or regulation of the Director.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-8)
Sec. 7-8. Authority to require license. In addition to any other duties imposed upon the Director by law, the Director shall require mortgage loan originators to be licensed and registered through the Nationwide Mortgage Licensing System and Registry. In order to carry out this requirement the Director is authorized to participate in the Nationwide Mortgage Licensing System and Registry. For this purpose, the Director may establish by agreement, order or rule requirements as necessary, including, but not limited to, the following:
(1) Background checks for:
(A) criminal history through fingerprint or
other databases;
(B) civil or administrative records;
(C) credit history; or
(D) any other information as deemed necessary by
the Nationwide Mortgage Licensing System and Registry.
(2) The payment of fees to apply for or renew
licenses through the Nationwide Mortgage Licensing System and Registry;
(3) The setting or resetting as necessary of renewal
or reporting dates; and
(4) Requirements for amending or surrendering a
license or any other such activities as the Director deems necessary for participation in the Nationwide Mortgage Licensing System and Registry.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-9)
Sec. 7-9. Report to Nationwide Mortgage Licensing System and Registry. Subject to State privacy laws, the Director is required to report regularly violations of this Act, as well as enforcement actions and other relevant information, to the Nationwide Mortgage Licensing System and Registry subject to the provisions contained in Section 4-8.1A of this Act.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-10)
Sec. 7-10. Nationwide Mortgage Licensing System and Registry information challenge process. The Director shall establish a process whereby mortgage loan originators may challenge information entered into the Nationwide Mortgage Licensing System and Registry by the Director.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-11)
Sec. 7-11. Mortgage loan originator suspension or revocation of registration; refusal to renew; fines.
(a) In addition to any other action authorized by this Act or any other applicable law, rule or regulation, the Director may do the following:
(1) Suspend, revoke, or refuse to renew a license or
reprimand, place on probation or otherwise discipline a licensee if the Director finds that the mortgage loan originator has violated this Act or any other applicable law or regulation or has been convicted of a criminal offense.
(2) Impose a fine of not more than $1,000 or, for
engaging in an act prohibited by item (1) of Section 7-13, not more than $3,000 for each day for each violation of this Act or any other applicable law or regulation that is committed. If the Mortgage Loan Originator engages in a pattern of repeated violations, the Director may impose a fine of not more than $2,000 or, for engaging in an act prohibited by item (1) of Section 7-13, not more than $6,000 for each day for each violation committed. In determining the amount of a fine to be imposed pursuant to this Act or any other applicable law or regulation, the Director shall consider all of the following:
(A) The seriousness of the violation;
(B) The mortgage loan originator's good
faith efforts to prevent the violation; and
(C) The mortgage loan originator's history
of violations and compliance with orders.
(b) In addition to any other action authorized by this Act or any other applicable law, rule or regulation, the Director may investigate alleged violations of the Act or any other applicable law, rule or regulation and complaints concerning any such violation. The Director may seek a court order to enjoin the violation.
(c) In addition to any other action authorized by this Act or any other applicable law, rule or regulation, if the Director determines that a mortgage loan originator is engaged in or is believed to be engaged in activities that may constitute a violation of this Act or any other applicable law, rule or regulation, the Director may issue a cease and desist order to compel the mortgage loan originator to comply with this Act or any other applicable law, rule or regulation or, upon a showing that an emergency exists, may suspend the mortgage loan originator's license for a period not exceeding 180 calendar days, pending investigation.
(Source: P.A. 96-112, eff. 7-31-09; 97-891, eff. 8-3-12.)
(205 ILCS 635/7-12)
Sec. 7-12. Surety bond required.
(a) Each mortgage loan originator shall be covered by a surety bond in accordance with this Section. In the event that the mortgage loan originator is an employee or exclusive agent of a person subject to this Act, the surety bond of such person subject to this Act can be used in lieu of the mortgage loan originator's surety bond requirement. The surety bond shall provide coverage for each mortgage loan originator in an amount prescribed under subsection (b) of this Section. The surety bond shall be in a form prescribed by the Director. The Director may promulgate rules or regulations with respect to the requirements for such surety bonds as necessary to accomplish the purposes of this Act.
(b) The penal sum of the surety bond shall be maintained in an amount that reflects the dollar amount of loans originated as determined by the Director.
(c) When an action is commenced on a licensee's bond the Director may require the filing of a new bond.
(d) Immediately upon recovery upon any action on the bond the licensee shall file a new bond.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-13)
Sec. 7-13. Prohibited acts and practices for mortgage loan originators. It is a violation of this Act for an individual subject to this Act to:
(1) Directly or indirectly employ any scheme,
device, or artifice to defraud or mislead borrowers or lenders or to defraud any person.
(2) Engage in any unfair or deceptive practice
toward any person.
(3) Obtain property by fraud or misrepresentation.
(4) Solicit or enter into a contract with a borrower
that provides in substance that the person or individual subject to this Act may earn a fee or commission through "best efforts" to obtain a loan even though no loan is actually obtained for the borrower.
(5) Solicit, advertise, or enter into a contract for
specific interest rates, points, or other financing terms unless the terms are actually available at the time of soliciting, advertising, or contracting.
(6) Conduct any business covered by this Act without
holding a valid license as required under this Act, or assist or aid and abet any person in the conduct of business under this Act without a valid license as required under this Act.
(7) Fail to make disclosures as required by this Act
and any other applicable State or federal law, including regulations thereunder.
(8) Fail to comply with this Act or rules or
regulations promulgated under this Act, or fail to comply with any other state or federal law, including the rules and regulations thereunder, applicable to any business authorized or conducted under this Act.
(9) Make, in any manner, any false or deceptive
statement or representation of a material fact, or any omission of a material fact, required on any document or application subject to this Act.
(10) Negligently make any false statement or
knowingly and willfully make any omission of material fact in connection with any information or report filed with a governmental agency or the Nationwide Mortgage Licensing System and Registry or in connection with any investigation conducted by the Director or another governmental agency.
(11) Make any payment, threat or promise, directly
or indirectly, to any person for the purpose of influencing the independent judgment of the person in connection with a residential mortgage loan, or make any payment threat or promise, directly or indirectly, to any appraiser of a property, for the purpose of influencing the independent judgment of the appraiser with respect to the value of the property.
(12) Collect, charge, attempt to collect or charge,
or use or propose any agreement purporting to collect or charge any fee prohibited by this Act, including advance fees for loan modification.
(13) Cause or require a borrower to obtain property
insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer.
(14) Fail to truthfully account for monies belonging
to a party to a residential mortgage loan transaction.
(15) Engage in conduct that constitutes dishonest
dealings.
(16) Knowingly instruct, solicit, propose, or cause a
person other than the borrower to sign a borrower's signature on a mortgage related document, or solicit, accept or execute any contract or other document related to the residential mortgage transaction that contains any blanks to be filled in after signing or initialing the contract or other document, except for forms authorizing the verification of application information.
(17) Discourage any applicant from seeking or
participating in housing or financial counseling either before or after the consummation of a loan transaction, or fail to provide information on counseling resources upon request.
(18) Charge for any ancillary products or services,
not essential to the basic loan transaction for which the consumer has applied, without the applicant's knowledge and written authorization, or charge for any ancillary products or services not actually provided in the transaction.
(19) Fail to give reasonable consideration to a
borrower's ability to repay the debt.
(20) Interfere or obstruct an investigation or
examination conducted pursuant to this Act.
(21) Structure activities or contracts to evade
provisions of this Act.
(Source: P.A. 96-112, eff. 7-31-09; 97-891, eff. 8-3-12.)
(205 ILCS 635/7-14)
Sec. 7-14. Unique identifier shown. The unique identifier of any person originating a residential mortgage loan shall be clearly shown on all residential mortgage loan application forms, solicitations, and advertisements, including business cards and websites, and any other documents as established by rule, regulation, or order of the Commissioner.
(Source: P.A. 96-112, eff. 7-31-09.)
(205 ILCS 635/7-15)
Sec. 7-15. Examination and investigation of certain mortgage loan originators. The activities requiring a licensee of a mortgage loan originator that are sponsored by an exempt entity under subsection (a-1) of Section 1-3 of this Act are subject to examination and investigation by the Secretary. Mortgage loan originators sponsored by an exempt entity shall keep and maintain records of his or her loan activities for a period of 36 months and shall produce records on demand by the Secretary. The records shall include a loan log or loan production log as approved by the Secretary and any loan application entered, prepared, or created through or from the mortgage loan originator's activities. Mortgage loan originators sponsored by an exempt entity shall provide access, upon the Secretary's demand, to his or her offices for the purposes of the Department's examination and investigation. The Secretary shall determine the manner and frequency at which the Department shall conduct examinations of the mortgage loan originators. Mortgage loan originators sponsored by an exempt entity shall cooperate at all times with the Department pursuant to requirements of this Section and shall be subject to penalties under Section 7-11 of this Act for failure to comply.
(Source: P.A. 98-492, eff. 8-16-13.)
