Dan Green gave us a heads up on this in his Mortgage Reports Blog yesterday. At issue is SB1674, the Senate Bill which would significantly expand upon the Predatory Lending Database program that was once called HB4050. At issue is also SB572 which seeks to increase transfer taxes (transfer stamps) to $3.00 per $1,000 of sale price. Both these bills may be called in the next 24 hours.

These bills are ill-conceived and will have disastrous consequences for the people of Illinois. What are we talking about here, specifically with regard to SB1674?

• This bill seeks to force MANDATORY Home Counseling on real estate buyers by the state, thus the real estate system will implode. The entire county of Cook would be required to partake in credit counseling for various types of loans. Lenders would pull out of Illinois and Cook County, just as they did when the bill was first introduced a year ago. Property values decreased 20-30% in the areas originally designated by the law (10 zip codes on the south side of Chicago). Now everyone in Cook County would be at risk.

• Stated income loans and no-income verification loans as we know them today would be eliminated in the State of Illinois. Anyone that is self-employed, in a sales or commission-based business or a small business or franchise owner in addition to the thousands of regular citizens who need this type of loan, would be devastated by this amendment.

• There would be a fiduciary responsibility on all loans in the State of Illinois, thus private right of action by the consumer, charges by Attorney General or IDFPR can be levied against the loan originator’s personal assets even though the bank is creating and underwriting the loan. This would destroy competition for loans between brokers and banks, and therefore, would drive up rates and fees to the consumer from banks. There is no clear language for what a fiduciary responsibility would entail but experts believe that the current model used to keep rates and fees low and points upfront non-existent, would be damaged. That means more cost to you, the consumer.

The scary part is that the original bill was supposed to combat predatory lending which in itself is a noble thought. This bill doesn’t accomplish that though, because it doesn’t attack the root of predatory lending. People are only preyed upon when they don’t know they are being preyed upon. The educated consumer rules the day in this country. We need to tell our politicians that we don’t want our government running our lives, but we do want more opportunities to become educated and empowered. A vote against SB1674 is a vote in favor of competition and low rates and fees for all.

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