Gov. Blagojevich urges congressional support for Federal Mortgage Reform Act

CHICAGO- Governor Rod R. Blagojevich today sent a letter to members of the Illinois Congressional delegation urging their support of a bill that would further protect Illinois homeowners against predatory, high risk or overly expensive mortgages whether they obtain their loan from a local or national company.  H.R. 3915, "The Mortgage Reform and Anti-Predatory Lending Act of 2007" provides homeowners with protections similar to those implemented by Gov. Blagojevich on a state level since 2003.   It ensures that Illinois' most important consumer protections would also apply to borrowers seeking loans from banks, thrifts and credit unions, or other lenders that provide mortgages in Illinois and across the country. 

 

"The recent sub-prime mortgage melt-down shows that too many working families have been robbed of the American Dream of homeownership. However, swift passage of "The Mortgage Reform and Anti-Predatory Lending Act of 2007" will help make sure that homebuyers can avoid the nightmare of foreclosure regardless if their loans are from state or federally chartered lenders," said Gov. Blagojevich.  "As elected leaders, we must do what we can to protect Americans from going into foreclosure."

 

H.R. 3915 would expand the rights of home buyers by subjecting all mortgage originators (including individuals as well as companies and banks that originate mortgages) to be subject to a federal duty of care that requires:

 

(1) licensing and registration, as applicable, under State or Federal law;

 

(2) presenting consumers with appropriate mortgage loans (i.e., consumer has reasonable ability to repay and receives net tangible benefit, and loan does not have predatory characteristics);

 

(3) making full disclosures to consumers;

 

(4) certifying to lenders compliance with mortgage origination requirements, and

 

(5) including a mortgage originator's unique identifier in loan documents.

 

Other provisions of H.R. 3915 provide borrowers with protection against pre-payment penalties, equity stripping and loan flipping (selling a loan just to get fees without any benefit to the borrower).   The bill establishes minimum standards for all mortgages and will allow all Illinois homeowners to be protected from predatory or unscrupulous lenders.  The standards established in H.R. 3915 include requiring the lender to prove that the borrower has an ability to repay the loan or that the loan has net tangible benefits to the borrower.  These provisions require creditors to make a reasonable determination, at the time the mortgage is consummated, that the consumer has a reasonable ability to repay the loan; or for refinancing, the refinanced loan will provide a net tangible benefit to the consumer.

 

Since 2003, Governor Rod R. Blagojevich has signed a series of laws to protect Illinois homeowners from predatory, high risk or overly expensive mortgages. All of these consumer protections improved the options available to Illinois families seeking a mortgage from an Illinois licensed residential mortgage lender. 

 

Illinois licensed residential finance companies, mortgage brokers, and loan originators meet some of the nation's highest standards.  The state restricts predatory and high-cost loans, requires licensing of mortgage loan originators, and requires mortgage brokers and lenders to fully disclose their reimbursements, as well as the fees, extra costs and penalties associated with the loan to borrowers before the loan is completed.  In a pilot program affecting Cook County, some first time borrowers and those refinancing their homes must received counseling from federally certified professionals.

 

Illinois has licensed loan originators since 2005, but there has been no national database available to check the licensing status of professionals who had previously worked in another state.  Under H.R. 3915, a Nationwide Mortgage Licensing System and Registry (NMLSR) would allow Illinois lenders and regulators to quickly determine if a job or license applicant had been disciplined in another state. 

 

Illinois has also restricted high cost loans (High Risk Home Loan Act, 2003) and requires loan originators working for residential mortgage companies to make sure that the proposed loan best meets the financial needs of potential homeowners (Anti-Predatory Loan Act, 2007).  Mortgage brokers must verify that a borrower will be able to pay the costs of the loans, including principle, interest, insurance and taxes and will be held to a higher standard than they have in the past.  They must act in borrower's interest, by fully disclosing material facts about the loans being offered.  They must also disclose how much money the broker will be paid. When comparing different loans, brokers must use apples-to-apples comparisons on monthly payments.

 

The House Committee approved this measure on November 6 by a vote of 45 to 19.  Members of the Illinois delegation who serve on the Financial Services Committee are: Rep. Luis V. Gutierrez, (D-4), Rep. Melissa L. Bean, (D-8), Rep. Donald A. Manzullo (R-16), Rep. Judy Biggert (R-13), Rep. Peter J. Roskam (R-6).

 

The text of the Governor's letter follows: