Chicago, Ill. – At a South Side news conference in front of a vacant home that was repossessed as a result of predatory lending practices, Gov. Rod R. Blagojevich today signed into law strict new protections for home loan consumers. The Governor was joined by the bills sponsors, state Rep. Barbara Flynn Currie (D-Chicago) and state Sen. Terry Link (D-Lake Bluff), as well as Attorney General Lisa Madigan, House Speaker Michael Madigan, Commissioner of Banks and Real Estate Lorenzo Padron and local advocates for fair lending.
“The lessons my parents taught me – work hard, be honest, treat people fairly and give back to your community – are the same ones that have guided families in Illinois for hundreds of years. So many share this experience: working hard, saving up and buying a home in which to raise your family,” Blagojevich said. “But sadly, in today’s Illinois, that dream is threatened.”
The National Training and Information Center estimates that foreclosures in Chicago increased by 74% from 1993 to 2001, while foreclosures filed by sub-prime lenders have increased by nearly 500%. More than half of all foreclosures are filed within two years of the loan’s origination, a strong indicator that predatory and abusive lending practices are to blame.
The issue of predatory lending is not unique to Chicago; during hearings on proposed reforms that served as the basis for Senate Bill 1784, people testified from all over Illinois, including Kankakee, Bloomington, Springfield and Decatur.
The new law signed today creates the High Risk Home Loan Act to protect borrowers who enter into high risk home loans, and establishes guidelines for lenders in transferring, dealing in, offering or making high risk home loans. Specifically, the bill:
- Requires residential mortgage licensees to meet a higher minimum net worth standard to ensure their credibility and viability;
- Allows consumers to pursue action against the holder of their loan, not just the original lender. This provision is important because most predatory loans are sold soon after origination;
- Increases fines for violations of the Mortgage License Act from $10,000 to $25,000;
- Requires loan originators – there are over 20,000 operating in Illinois – to register with the Office of Banks and Real Estate, ensuring all home lenders are subject to regulation; and
- Changes the Illinois Consumer Fraud and Deceptive Practices Act, which makes it easier for individuals to pursue court action against lenders, and gives the Illinois Attorney General and State’s Attorneys authority to prosecute unscrupulous lenders.
“Predatory lending practices can wipe out a family's life savings and eat away at the foundations of a community," said Attorney General Lisa Madigan. "Home equity is the single most valuable asset many people have. Unfortunately, many hard-working families are cheated out of their dream. This new law will provide more prosecutorial tools that I will use very aggressively.”
“I’d like to thank Speaker Madigan and the Greater Southwest Organizing Association for pulling together such an impressive group of advocates on this important issue; and thanks to Senator Link and Representative Currie for leading the successful fight in the General Assembly to protect our communities from the devastating effects of predatory lending,” Blagojevich added.
The new standards contained in Senate Bill 1784 go into effective January 1, 2004.