- Published: Friday, August 03, 2012 11:51 AM
Lenders may not require up-front payments for loan modifications
Legislation to deter mortgage fraud was signed into law today. House Bill 4521, sponsored by State Senator Jacqueline Y. Collins tightens the regulation of mortgage lenders and protects borrowers seeking loan modifications or short sales.
“In 2009, I co-sponsored the law that enrolled Illinois in the National Mortgage Licensing System and Registry. Today, we are taking another step toward an objective, transparent, and accountable process for licensing and regulating the lenders who hold so much power in our economy,” Sen. Collins said. “Exercising vigilant oversight in the areas of loan modifications and short sales will be particularly beneficial as we work to slow the rate of foreclosure and protect distressed homeowners from financial exploitation.”
The new law requires lenders to submit to background checks performed by a national industry standards group, increases licensing fees and fines for violators, and prohibits lenders from charging homeowners in advance for loan modifications.
Lenders will now be required to pay an extra $657 per year for their licenses. The fee had been reduced in 2009, but it was restored to the original amount to help pay for background checks and other expenses of the Department of Financial and Professional Regulation. The maximum fine for a mortgage fraud violation will also now be tripled (increasing it from $25,000 to $75,000) and protections are now included for whistleblowers who report fraudulent activity. Finally, it also clarifies that entities performing loan modification or short sale facilitation must be licensed to offer those services and may not force borrowers to pay up-front for loan modifications.
“We must have a strong mechanism for enforcing the laws that protect borrowers and homeowners,” Sen. Collins said. “Recent history has taught us that some lenders will take advantage of lax regulations. The results can devastate individuals, families and communities. I’m proud of the continued progress Illinois is achieving in the areas of housing and consumer finance as we work for justice in these trying times.”
