An Illinois law taking effect Jan. 1 to limit predatory lending has spurred concerns that new home loans could be halted in Chicago’s Cook County after the new year due to confusion regarding the scope of the rules, the Chicago Tribune reported.
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 said it would file an emergency rule on Thursday, media reports said.
That rule will “eliminate any ambiguity in the industry and maintain a stream of mortgage funding for Cook County,” Susan Hofer, spokeswoman for the Illinois Department of Financial and Professional Regulation, told the Tribune.
The legislation, House Bill 4050, is aimed at lowering the home foreclosure rate in Cook County, mainly on Chicago’s Southwest Side, media accounts said.
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, according to accounts. It requires lender-funded credit counseling for borrowers in some circumstances and that the counseling be certified and recorded with the mortgage at closing, accounts said.
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 told the Times. She added that the department does not have authority to name the areas, start the program or initiate the database until Jan. 1, the Times reported.
That lack of information needs to be quickly clarified, a representative from the mortgage industry told the Times Wednesday.
“We don’t know what the rules will be,” Marv Stockert, executive director of the Illinois Association of Mortgage Brokers told the Times. “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.”
The regulatory department told the Times the emergency rule it plans to introduce Thursday will take care of those concerns. The Times reported that 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 after a 45-day public comment period. 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 told the Times, the secretary of the department will announce the start date for the pilot program. That date will be 30 days after that announcement, she said.
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