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Chicago Lenders Back in Business - For Now

IL regulator actions enable Chicago Title to continue insuring

December 27, 2005


A decision by Illinois regulators to delay implementation of new lending laws has, at least temporarily, halted plans by some mortgage brokers and title companies to stop doing business in parts of Chicago.

"We are back in business," James Weston, a lawyer for Chicago Title Insurance Co., told MortgageDaily.com after the Illinois Department of Financial and Professional Regulation said it will wait at least 30 days before clarifying the new rules.

The rules, adopted earlier this year by the Illinois legislature, are designed to crack down on predatory lending in, among other places, urban neighborhoods in Chicago and parts of Cook County.

But mortgage lenders and others in the industry said the rules were flawed and may have infringed on borrowers' privacy. Other facets of the new regulations were confusing and would have proven difficult to implement, Weston said.

Chicago Title was going to stop writing title insurance in the Chicago area had the rules been implemented on schedule on Jan. 1. But he and others are encouraged by state's apparent effort to make changes that should more accepted to the industry.

"They are building in a lot of leeway and a lot of flexibility and we think that is going to work," Weston said.

The Illinois Mortgage Bankers Association is also pleased by the state's decision, Executive Director Marv Stockert told MortgageDaily.com.

"We are glad they had some common sense to delay it," Stockert said. "There are still many problems, but at least at this point we can see if the problems can be worked out."

At issue is legislation known as House Bill 4050. It required the state to collect detailed information about mortgages and borrowers in Cook County. It also mandated that some borrowers receive credit counseling prior to taking out a mortgage loan under a pilot program authorized under the legislation.

The legislation inspired by lawmakers seeking to reduce foreclosures and predatory lending on Chicago's southwest side and other areas of Cook County, according to Susan Hofer, spokeswoman for the Department of Financial and Professional Regulation.

But the mortgage bankers association said in a letter to Illinois Gov. Rod R. Blagojevich that the legislation "raises serious consumer privacy concerns and clashes with federal law privacy requirements."

"The procedures mandated ... pose a significant infringement on the civil liberties of Illinois residents by forcing persons in certain geographical areas to subject themselves to mandatory government review before they are permitted to procure home financing," the association said, according to a copy of the letter.

"Additionally, it would force lenders, (regulators), title insurance companies and closing agents to follow extensive, time-consuming and cumbersome procedures that will interfere with, if not completely prevent, the furnishing of home finance products and services in the affected geographical areas," the association said.

Hofer said the state has listened to the concerns and will conduct a review of at least 30 days of the new rules before any are implemented.

"Until the inception date, none of the duties, obligations, contingencies or consequences of ... the pilot program will be imposed," according to the state's order.

Stockert said the state is being prudent not to implement the program because the data collections, credit counseling procedures and overall rules are not in place.

Patrick Crowley is a MortgageDaily.com feature journalist and blogger, and a reporter, blogger and columnist for The Cincinnati Enquirer. e-mail Patrick at: [email protected]

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