A law taking effect Jan. 1 to limit predatory lending has spurred concerns that new home loans could be halted in Cook County after the new year due to confusion regarding the scope of the rules.
But in an effort to alleviate widespread concerns in the lending industry and avoid the potential nightmare of canceled closings–or worse, no new mortgages offered in Cook County after Jan. 1–the state department implementing the law will file an emergency rule on Thursday.
That rule will “eliminate any ambiguity in the industry and maintain a stream of mortgage funding for Cook County,” said Susan Hofer, spokeswoman for the Illinois Department of Financial and Professional Regulation.
The legislation, House Bill 4050, is aimed at lowering the home foreclosure rate in Cook County, mainly on Chicago’s Southwest Side. In the 60629 ZIP Code, for example, 1,299 properties were in various stages of foreclosure as of Wednesday, according to the Web site RealtyTrac.
The law authorizes a four-year pilot program to create a database to track lenders who make loans in areas of Cook County where foreclosure rates are high. It requires lender-funded credit counseling for borrowers in some circumstances and that the counseling be certified and recorded with the mortgage at closing.
But the legislation did not name the pilot areas; rather, it authorized the Illinois Department of Financial and Professional Regulation to choose them and set up the program and database, Hofer said. She added that the department does not have authority to name the areas, start the program or initiate the database until Jan. 1.
That lack of information needs to be quickly clarified, a representative from the mortgage industry said Wednesday.
“We don’t know what the rules will be,” said Marv Stockert, executive director of the Illinois Association of Mortgage Brokers, based in Lombard. “We don’t know if loans signed before Jan. 1 will be valid after that date. Mortgage brokers and the title industry feel the law is flawed.”
Barton Pitts, owner of Professional Mortgage Partners in Downers Grove, echoed those concerns.
“The communication from the Illinois Department of Financial and Professional Regulation regarding HB 4050 has been virtually non-existent,” said Pitts, whose company has about 100 employees in six offices, including two in Chicago.
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“Some of the lenders that we sell loans to have informed us that they will not lend in Cook County after Jan. 1 until they can get more clarity from the state. In the meantime, I have 25 loan officers in Chicago that aren’t sure what to tell their Cook County customers after the new year.”
The regulatory department says the emergency rule it plans to introduce Thursday will take care of those concerns. According to the department, the emergency rule means that companies do not have to comply with the law until:
– The pilot communities are named, which will happen by the end of January.
– The rulemaking process is completed. Draft rules were forwarded Wednesday to the Joint Committee on Administrative Rules after a 45-day public comment period (this sentence as published has been corrected in this text). The committee now has 45 days to act.
– The databases are initiated and lenders and title companies are trained in their use.
– A referral list of qualified, HUD-certified credit counselors has been developed with the participation of lenders and community organizations.
Then, Hofer said, the secretary of the department will announce the start date for the pilot program. That date will be 30 days after that announcement, she added.
The bill’s backers said the mortgage industry has opposed this law from the start.
“The mortgage industry fought the legislation all the way. Now they’re fighting the implementation of the law,” said Steve Brown, press secretary for Rep. Michael Madigan (D-Chicago), co-sponsor of the legislation.
“They say the sky is going to fall. It’s a lot of bluster. They mean to terrorize people. Those making the threats are the same ones who complained about the bad effects of the bill before,” Brown said.
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