Wednesday, May 03, 2006

Initial Results of Illinois Crackdowns on Unlawful Mortgage Brokerage Practices

As the result of a series of aggressive, new inspections by state regulators into mortgage lending practices, Illinois Governor Rod R. Blagojevich announced on April 28, 2006 $190,750 in fines for 22 licensed residential mortgage offices and the suspension of one office in Oak Brook, Illinois for failing to comply with state regulations. Earlier this year, the Governor ordered the Illinois Department of Financial and Professional Regulation (IDFPR) to begin a series of unannounced inspections of licensed mortgage companies in response to reports of growing instances of mortgage fraud. This sweep is the first of planned quarterly reviews of the mortgage industry to help protect homebuyers from predatory mortgage lenders.

“Buying a home should be the culmination of the American dream, not the beginning of a nightmare of fraud,” said Gov. Blagojevich. ”We have worked hard to pass laws to protect families from fraud and abuse. We will not tolerate activities that could harm homeowners. Now, mortgage firms are on notice that we’ll be dropping-in unannounced to make sure their brokers are complying with the law.”

IDFPR’s investigation found that 19 mortgage firms employed 35 unregistered loan originators – individuals who process family mortgage applications. In the most egregious violation, First Star Financial Corporation, located at two locations - 361 South Frontage Road, Suite 131, Burr Ridge, and 1355 Remington Road, Suite T, Schaumburg - had 10 unregistered loan originators working in its offices, and was issued fines of $25,000 for each of the two offices employing unregistered loan originators. Residential mortgage companies employing unregistered loan originators are subject to a $2,500 fine for the first violation and $500 for each additional unregistered loan originator. Individual unregistered loan originators are subject to fines of $950 and a permanent notation on their file should they decide to seek certificates of registration in the future.

IDFPR also issued an emergency suspension against Liberty Mortgage Corporation 1301 E. 22nd Street, Suite 815, Oak Brook, IL for refusing to allow its investigators access to its premises on several successive attempts. The suspension is in effect until the administrative review process is completed up to 180 days. In addition, 1st Liberty Banc, Inc. was fined $25,000 for each of the two days the company denied access to authorized state investigators.

Predatory fraudulent mortgage lenders are devastating communities across the state. As the Chicago Tribune reported in November 2005, a single block on South May Street in Chicago saw four homes shuttered within four years due to mortgage fraud, and the area has since become a haven for criminals. A study done by the paper showed that 16 of the 34 census tracts in Englewood and West Englewood were high-intensity fraud areas, with at least 10 frauds per 1,000 owner-occupied housing units.

Other practices under investigation include: multiple businesses operating from the same location; mortgage companies operating from a home without proper Department and zoning permission; business offices closed during office hours, which, according to regulation, must be clearly posted; and, companies operating from locations that are different than the address registered with the state.

These sweeps complement the regular examinations conducted by IDFPR as part of its regulatory responsibility to ensure that residential mortgage companies provide safe, effective services to the homebuyers and homeowners in Illinois.

“Illinois consumers have the right to know that when they do business with companies licensed by our state, they will receive the best possible service by ethical and appropriately trained professionals,” said Dean Martinez, Secretary, Financial and Professional Regulation. ”We will use all the tools available to us to discipline companies which violate of the laws and regulations designed to protect Illinois homebuyers.”

Throughout his administration, Gov. Blagojevich taken numerous actions to assist homebuyers and protect consumers with initiatives to:  Reduced the number of high-risk home loans, Protect homebuyers in at-risk communities from predatory lenders, Regulate the payday loan industry, Give homebuyers easy access to accurate information about their properties, Protect homebuyers from discrimination and Help for first-time homebuyers.

mortgage fraud