Anti-predatory lending database

Since July 1, real estate transactions in Cook County have been subjected to a little added bureaucracy thanks to the Illinois General assembly. On that date, the predatory lending database program commenced. This new law (which is actually an older law redux) requires a certificate to be attached to every mortgage presented for recording. The certificate must either state that the mortgage is in compliance with the program or that it is exempt from the program. Without either an exemption certificate or a compliance certificate, the mortgage is not recordable.

The stated purpose of this program is to reduce instances of predatory lending through increased awareness by borrowers of loan terms. Perhaps this explains why the law was added to the Residential Real Property Disclosure Act and not the Mortgage Act or the Residential Mortgage License Act.

As stated, a mortgage must have a certificate attached to be recordable. Whether the exemption certificate is appropriate or whether the compliance certificate is required depends on when the application was taken, who originated the loan, the type of loan, and the type of property. The following factors would permit the use of a certificate of exemption:

• The application was taken prior to July 1, 2008.
• The loan was originated by an exempt entity. An exempt entity is one that is not required to be licensed under the Residential Mortgage License Act.
• Commercial, vacant, or mixed use property.
• Property containing more than 4 residential dwelling units.
• Investment property (non-owner occupied).
• Government property.
• The loan is a reverse mortgage; or a home equity line of credit not made with a new first mortgage.

All other mortgages will require a certificate of compliance.

So far, there has been little or no experience with the production of compliance certificates simply because of the recent inception date for the program. The closers at Prairie Title report that the process of generating exemption certificates is quite straight forward; and has not been time-consuming. Of course, as more compliance certificates are required, the database will certainly become increasingly burdened. This may result in significantly more time needed to complete closings. Data requirements for compliance certificates are far more extensive.

Because of the increased duties and potential liability imposed on settlement agents, many are charging additional fees or increasing their closing fee for Cook County transaction. Although this may be justified, Prairie Title has decided against assessing any extra costs upon the parties to the transaction at this time. We believe that to fairly determine the impact on our processes and procedures, we need the experience of working under this new program for a while. It is our hope that the database will work so flawlessly and efficiently that no additional charges will ever be necessary. Nonetheless, by working with the program for a while, we will be confident that our fees will be appropriately reflective of the burdens and responsibilities imposed upon us by this new law.