We have a mortgage company that is a third party-originator and does mortgage document preparation and underwriting for all banks under our holding company. Would the proposed administrative rules for residential mortgage lenders under the Illinois Community Reinvestment Act (Illinois CRA) apply to our mortgage company? Also, would our mortgage company be considered an “affiliate” of our bank since they are under the same holding company?

The Illinois CRA rules for residential mortgage lenders will apply to your mortgage company if it is licensed under the Illinois Residential Mortgage License Act of 1987 and lent or originated 50 or more residential mortgage loans in the previous calendar year. Additionally, if the Illinois CRA rules for banks are finalized as proposed, your mortgage company will be considered an “affiliate” of your bank if your bank controls the company or it is under common control with your bank. In other words, your mortgage company may be covered by two sets of administrative rules under the Illinois CRA, if the rules are finalized as proposed. As mentioned below, the IBA plans to submit a comment letter on the proposed rules to point out this concern as well as our members’ other concerns.

The IDFPR has proposed separate sets of Illinois CRA rules for Illinois-chartered banks and covered residential mortgage lenders (as well as Illinois-chartered credit unions). Under the Illinois CRA, a covered residential mortgage lender is “an entity licensed under the Illinois Residential Mortgage License Act of 1987 which lent or originated 50 or more residential mortgage loans in the previous calendar year.” The proposed Illinois CRA rules similarly define a covered mortgage lender as a licensed mortgage lender “that has made 50 or more home mortgage loans in the State in the last calendar year reportable under the Home Mortgage Disclosure Act and also is responsible for underwriting, making credit decisions for, issuing of commitments, or funding the home mortgage loans.”

If your mortgage company is a licensed residential mortgage lender and originated or lent fifty or more residential mortgage loans in the past year, it will likely be covered by the Illinois CRA rules for residential mortgage lenders. The Illinois Department of Financial and Professional Regulation (IDFPR) maintains a list of licensed residential mortgage lenders here: https://idfpr.illinois.gov/Banks/MBLookup/mblist.htm. If your bank’s mortgage company appears on that list, you would also have to confirm that the licensed mortgage company lent or originated at least fifty residential mortgage loans in the last year.

Your bank’s mortgage company also may be subject to the Illinois CRA rules for banks if those rules are finalized as proposed. The proposed Illinois CRA administrative rules for banks define the term “bank” to include any affiliates of the bank. The rules define affiliate as “any company that controls, is controlled by, or is under common control with another company,” and incorporate the federal Bank Holding Company Act’s definition of “control.” Under the Bank Holding Company Act, a holding company “controls” a company if the controlling company directly or indirectly owns, controls, or has power to vote at least 25% of another company’s voting securities, controls the election of a majority of the directors or trustees of the company, or directly or indirectly exercises a controlling influence over the management or policies of the company. If the Illinois CRA rules for banks are finalized as proposed, your mortgage company would be considered an “affiliate” of your bank if your bank controls the mortgage company or if the mortgage company is under common control with your bank.

The IBA plans to submit written comments and testimony on the Illinois Department of Financial and Professional Regulation (IDFPR)’s proposed Illinois CRA rules, and we plan to urge the IDFPR to limit the scope of the rules for banks to Illinois-chartered banks, not including their affiliates. If your bank has any comments or concerns about the proposed Illinois CRA rules, please email those to [email protected].

For resources related to our guidance, please see:

Illinois CRA, 205 ILCS 735/35-5 (“‘Covered financial institution’ means a bank chartered under the Illinois Banking Act, a savings bank chartered under the Illinois Savings Bank Act, a credit union incorporated under the Illinois Credit Union Act, an entity licensed under the Illinois Residential Mortgage License Act of 1987 which lent or originated 50 or more residential mortgage loans in the previous calendar year, and any other financial institution under the jurisdiction of the Department as designated by rule by the Secretary.”)

IDFPR, Notice of Proposed Rules, Mortgage Community Reinvestment, 46 Ill. Reg. 19726, 19862 (December 16, 2022) (“‘Mortgage lender’ means a mortgage lender, licensed under 205 ILCS 635, that has made 50 or more home mortgage loans in the State in the last calendar year reportable under the Home Mortgage Disclosure Act and also is responsible for underwriting, making credit decisions for, issuing of commitments, or funding the home mortgage loans.”)

IDFPR, Notice of Proposed Rules, Bank Community Reinvestment, 46 Ill. Reg. 19726, 19801 (December 16, 2022) (“‘Bank’ means a bank that has a charter issued under the Illinois Banking Act [205 ILCS 5], a savings bank that has a charter issued under the Savings Bank Act [205 ILCS 205], and a banking office of a foreign banking corporation issued a certificate of authority under the Foreign Banking Office Act [205 ILCS 645] and, as applicable under this Part, any affiliates thereof.”)

IDFPR, Notice of Proposed Rules, Bank Community Reinvestment, 46 Ill. Reg. 19726, 19801 (December 16, 2022) (“‘Affiliate’ means any company that controls, is controlled by, or is under common control with another company. The term ‘control’ has the meaning given to that term in 12 U.S.C. 1841(a)(2), and a company is under common control with another company if both companies are directly or indirectly controlled by the same company.”)

Bank Holding Company Act, 12 USC 1841(a)(2) (“Any company has control over a bank or over any company if—

(A) the company directly or indirectly or acting through one or more other persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the bank or company;

(B) the company controls in any manner the election of a majority of the directors or trustees of the bank or company; or

(C) the Board determines, after notice and opportunity for hearing, that the company directly or indirectly exercises a controlling influence over the management or policies of the bank or company.”)