CHICAGO – As the result of a series of aggressive, new inspections by state regulators into mortgage lending practices, Governor Rod R. Blagojevich today announced $190,750 in fines for 22 licensed residential mortgage offices and the suspension of one office in Oak Brook for failing to comply with state regulations. Earlier this year, the Governor ordered the Illinois Department of Financial and Professional Regulation (IDFPR) to begin a series of unannounced inspections of licensed mortgage companies in response to reports of growing instances of mortgage fraud. This sweep is the first of planned quarterly reviews of the mortgage industry to help protect homebuyers from predatory mortgage lenders.
"Buying a home should be the culmination of the American dream, not the beginning of a nightmare of fraud," said Gov. Blagojevich. "We have worked hard to pass laws to protect families from fraud and abuse. We will not tolerate activities that could harm homeowners. Now, mortgage firms are on notice that we’ll be dropping-in unannounced to make sure their brokers are complying with the law."
IDFPR’s investigation found that 19 mortgage firms employed 35 unregistered loan originators – individuals who process family mortgage applications. In the most egregious violation, First Star Financial Corporation, located at two locations - 361 South Frontage Road, Suite 131, Burr Ridge, and 1355 Remington Road, Suite T, Schaumburg - had 10 unregistered loan originators working in its offices, and was issued fines of $25,000 for each of the two offices employing unregistered loan originators. Residential mortgage companies employing unregistered loan originators are subject to a $2,500 fine for the first violation and $500 for each additional unregistered loan originator. Individual unregistered loan originators are subject to fines of $950 and a permanent notation on their file should they decide to seek certificates of registration in the future.
IDFPR also issued an emergency suspension against Liberty Mortgage Corporation 1301 E. 22nd Street, Suite 815, Oak Brook, IL for refusing to allow its investigators access to its premises on several successive attempts. The suspension is in effect until the administrative review process is completed up to 180 days. In addition, 1st Liberty Banc, Inc. was fined $25,000 for each of the two days the company denied access to authorized state investigators.
Predatory fraudulent mortgage lenders are devastating communities across the state. As the Chicago Tribune reported in November 2005, a single block on South May Street in Chicago saw four homes shuttered within four years due to mortgage fraud, and the area has since become a haven for criminals. A study done by the paper showed that 16 of the 34 census tracts in Englewood and West Englewood were high-intensity fraud areas, with at least 10 frauds per 1,000 owner-occupied housing units.
Other practices under investigation include: multiple businesses operating from the same location; mortgage companies operating from a home without proper Department and zoning permission; business offices closed during office hours, which, according to regulation, must be clearly posted; and, companies operating from locations that are different than the address registered with the state.
These sweeps complement the regular examinations conducted by IDFPR as part of its regulatory responsibility to ensure that residential mortgage companies provide safe, effective services to the homebuyers and homeowners in Illinois.
"Illinois consumers have the right to know that when they do business with companies licensed by our state, they will receive the best possible service by ethical and appropriately trained professionals," said Dean Martinez, Secretary, Financial and Professional Regulation. "We will use all the tools available to us to discipline companies which violate of the laws and regulations designed to protect Illinois homebuyers."
Throughout his administration, Gov. Blagojevich taken numerous actions to assist homebuyers and protect consumers.
Reduced the number of high-risk home loans: In August 2003, the Governor signed the High Risk Home Loan Act to protect consumers from predatory mortgage lending practices. As a result of the Act, the state has seen both a reduction in the number of high-risk home loans and a change in lenders’ business practices so they are no longer offering high-risk loans as defined in the Act.
Protect homebuyers in at-risk communities from predatory lenders: In July 2005, Gov. Blagojevich signed into law HB 4050 that provides borrowers with critical information on home loans and helps state regulators and law enforcement track and crack down on dishonest lenders.
Regulate the payday loan industry: In June 2005, the Governor signed into law the Payday Loan Reform Act that for the first time regulates the payday loan industry in Illinois and strengthens protections to consumers. The groundbreaking legislation limits the interest that can be charged for each loan to $15.50 per $100, sets caps on total loans amounts, and prevents borrowers from having more than two loans at a time, among other provisions.
Give homebuyers easy access to accurate information about their properties: In August 2005, Gov. Blagojevich signed three bills to help homebuyers and homeowners obtain access to accurate and important information about their properties: House Bill 1428, which requires lenders to notify homebuyers of accurate and timely property tax payment from the buyer’s escrow account; House Bill 2462, which requires property tax exemption information to be included on the seller’s transfer declaration; and House Bill 2594, which requires home repair contracts to increase consumer awareness of contract clauses that waive the homeowner’s right to trial by jury for repair disputes.
Protect homebuyers from discrimination: In 2005, Gov. Blagojevich announced a Fair Housing program to help protect homebuyers against discrimination in housing. The Illinois Department of Human Rights and other agencies conduct training seminars around the state to inform homebuyers, tenants, landlords, property owners, advertisers, housing advocates, and community organizations about Illinois’ anti-discrimination laws.
Help for first-time homebuyers: In 2005, Gov. Blagojevich launched the I-Loan mortgage program, providing one more option for low and moderate-income residents who want to purchase their first home by offering an interest rate that is approximately a half percent below the market rate.