Governor OKs new mortgage counseling

www.chicagotribune.com/business/chi-sat_predatory_1103nov03,0,6687202.story

chicagotribune.com
Governor OKs new mortgage counseling
Measure broadened to all of Cook County
By Mary Umberger
Tribune staff reporter
November 3, 2007

Gov. Rod Blagojevich on Friday signed into a law a bill that revamps and broadens a controversial measure that requires mortgage counseling for many home buyers in Cook County. The law also toughens disclosure and other responsibilities for mortgage brokers around the state.The law replaces one known as HB 4050 that took effect in September 2006. Blagojevich suspended that measure in January over complaints that it promoted redlining because it required counseling for home buyers only in certain Chicago ZIP codes with sizable minority populations. The critics also said the complex provisions caused lending to dry up in the affected areas.The new law has some requirements that affect all of Illinois; others apply only in Cook County.The statewide provisions take effect June 1 and require mortgage brokers to verify that borrowers can afford the full costs of a loan, including principal, interest and taxes, according to the governor's office.All brokers in Illinois also must fully disclose material facts about the loans, such as how much the broker will be paid, and it limits some prepayment penalties.Such provisions are drawing opposition from many in the housing industry, who say it will create bureaucratic delays and make homes more expensive because it imposes a $300 counseling fee, payable by the mortgage broker."If sales were slowed down in the few months that 4050 was in effect, what's going to happen further to the real estate market in Cook County?" said Scott Cheffer, a title insurance agent in Oakbrook Terrace who lobbied against the law in Springfield. "We're going to have to wait and see."The law changes the HB 4050 program by mandating counseling by loan type rather than the credit scores of borrowers, and it expands the requirement to all of Cook County.Starting July 1, it will require counseling for first-time buyers and refinancers in Cook who obtain an interest-only loan; loans with negative amortization, causing the principal to increase; loans with points and fees that total more than 5 percent of the loan amount; loans with a prepayment penalty; or an adjustable-rate mortgage of three years or less.Susan Hofer, a spokesman for the Illinois Department of Financial and Professional Regulation, said the counseling will help prevent foreclosures by giving borrowers a better understanding of the complexities of mortgage loans.She also said the state on Friday announced a series of programs, called Homeowner Outreach Days, in November and December that will allow consumers worried about foreclosure to meet with and get help from lenders, housing counselors and housing officials."It's important that we help families deal with foreclosure, and signing legislation to reduce potentially predatory loans in the future will help prevent the problem," Hofer said. "The legislation will take effect next summer, but we have families who are facing foreclosure between now and then, and the outreach days are to help them."----------mumberger@tribune.com
Copyright © 2007, Chicago Tribune