Predatory Lending for Real Estate Program Goes Into Effect Today

Posted by Judy Orr on Friday, September 1st, 2006 at 11:07am.

Today's implementation of the Cook County Predatory Lending Database Pilot Program will cause an interesting real estate climate in the areas affected.  It is also known as House Bill 4050 and was passed by Illinois General Assembly and signed into law by the Governor in 2005.  The zip codes affected are 60620, 60621, 60623, 60628, 60629, 60632, 60636, 60638, 60643 and 60652.

The basis for this program is to ensure that predatory lending no longer exists by forcing extra steps in the mortgage process.  Basically, information about mortgage borrowers purchasing in the above zip codes has to now go through the Illinois Department of Financial and Professional Regulation (“DFPR” or “Department”).  Based on certain established criteria, the Department will determine if the borrower(s) have to go through mandatory credit counseling before being able to get a mortgage.

Unless this law gets amended, it will be in effect for four years.  It has real estate brokers, agents, attorneys and mortgage providers that work in the areas buzzing!  The Association of REALTORS has opposed this bill.  Everyone in the real estate and mortgage business is bracing for the hardships to sellers and buyers because of this program and we can only guess at the impact this will cause in these areas.

Again, the premise is to protect borrowers in these areas from predatory lending.  But with this new law, borrowers will now be facing more red tape and bureaucracy, possible fewer options and higher costs and most certainly time delays.  All of these factors will also affect area sellers and could freeze up real estate buying and selling to the point where sellers stop selling and buyers don't even attempt to make purchases while this program is in effect.

It is also questionable whether the resources are available to even provide this kind of borrower screening and either way, many feel that this effort should be put into going after predatory lenders rather than affecting buyers and sellers in these zip codes.

There are many issues regarding the program that have not even been addressed and it just seems like it will be a forced "wait and see" attitude.  From people I've spoken with, it also sounds like many don't know what to do and how to proceed.  In my opinion, things just don't sound like they were thoroughly worked out and many rumors have been started.

In fact, yesterday I had to e-mail some "Facts" and "Faq's" I've received from our local board to a real estate attorney who was being told erroneous information from mortgage brokers regarding loans started prior to today's date.  He was told they had to close before today in order to not have to go through the screening process.  From what I've read, that is not true.  But if attorneys are being told this by mortgage brokers, then someone doesn't know the rules.

State and local associations are banding together to continue to challenge this program.  If any buyer, seller, real estate broker/agent, mortgage broker, attorney, etc., has any input on the effects of this program, we all need to communicate problems this law is causing and not just become apathetic to the situation.

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