Tweaks to Illinois' 1987 Residential Mortgage License Act, signed into law last week by Gov. Pat Quinn, will give the state's regulatory department more resources to combat shady mortgage lenders who engage in fraud, according to the bill's supporters.
Under the new law--HB4521--mortgage lenders looking to become licensed will have to pay $657 more, or $2,700, for a license. What's more, the maximum fines for mortgage fraud jumped from $25,000 to $75,000.
Tom Feltner, vice president of Woodstock Institute, a Chicago-based housing advocacy group, noted that providing more resources to the Illinois Department of Financial and Professional Regulation, the body that regulates mortgage lending, is paramount to identifying fraud.
"By increasing the licensing fees, that’s going to give the department more resources to supervise mortgage companies and to enforce mortgage fraud protections," Feltner said.
The new law also requires mortgage lenders to submit to background checks, something that, previously, was only required of loan originators, said Susan Hofer, spokesperson for IDFPR.
The bill's Senate sponsor, 16th District state Sen. Jacqueline Collins, noted in a press release that the new law will also provide whistleblower protections to incentivize people to report alleged fraud.
"There’s a real need for whistleblower protections within organizations, so that [employees] can come forward when they’ve witnessed possible violations of the act," Feltner said.
But that provision only states that "protection" essentially means the IDFPR will not discipline, say, a whistleblower who comes forward to report violations that might have occurred within his or her company--so long as he or she had nothing to do with the illicit activity. Furthermore, the legislation does not protect the whistleblower from criminal or civil penalties, according to a source familiar with the new law.
Detecting mortgage fraud can be difficult because its scams come in many forms, from loan modification and foreclosure schemes, to flopping, where a straw buyer is used to buy a foreclosed property, which is then sold at a higher price.
Illinois is among the top 10 states with the most reports of mortgage fraud, according to a July report by Lexis Nexis. What's more, Illinois also ranks 8th nationwide on the report's Mortgage Fraud Index, a calculation that indicates the amount of mortgage-related fraud in states.
On Saturday, Aug. 11, The Illinois Attorney General's Office will hold a seminar to educate homeowners on how to responsibly obtain loan modifications. A number of state lawmakers and mortgage lenders will also be there to help. The event is at at Community Recreation Center, 505 N. Springinsguth Rd., in Schaumburg. It starts at 10 a.m.
© Community Renewal Society 2012