Illinois regulators move against predatory lenders

CHICAGO - The state Office of Banks and Real Estate and the Department of Financial Institutions proposed draft rules June 23 that would curb predatory lending and "protect consumers from unscrupulous and deceptive lending practices." The draft rules would apply to any home equity loan in which the APR is more than 10% over U.S. Treasury securities having comparable periods of maturity, and when the total points and fees payable by the consumer at or before closing exceed the greater of 8% of the total loan amount or $400. Among the provisions of the draft rulemaking, it would prohibit these lenders from making high-risk loans until the borrower's ability to repay was established and verified; require the lenders to report to the agencies semi-annually their default and foreclosure rates on conventional loans; and prohibit the practice of "flipping" in a 12-month period. Lenders would be required to provide full disclosure to borrowers of any pre-paid insurance products or warranties connected with the loan. The draft rule also provides a mechanism-the Mortgage Awareness Program (MAP)-for consumer education and awareness. MAP is a counseling and educational program certified by the Director or the Commissioner of the Office of Banks and Real Estate. The agencies intend to submit the rules to the Joint Committee on Administrative Rules (JCAR) on July 7. The agencies also intend to hold a public hearing on the rules shortly after.