While there are many potential intersections between the TRID rules and Illinois law, so far we have found three areas where it is necessary to consult Illinois law in order to comply with the TRID rules:

(1) Under the upcoming TRID rules, the new Closing Disclosure must state whether a consumer “may remain responsible for any deficiency after foreclosure.” A similar requirement applies to the Loan Estimate for refinance transactions. Our understanding is that Illinois law does not protect borrowers against deficiencies after foreclosure. The Illinois Mortgage Foreclosure Law states that a foreclosure does not affect the lender’s right to obtain a personal judgment against the borrower in the event of a deficiency, and a number of Illinois courts have permitted a mortgagee to pursue a money judgment against a borrower for a deficiency after the foreclosure.

Resources:

• Regulation Z, 12 CFR 1026.38(p)(3) (requirement in Closing Disclosure to disclose consumer’s responsibility “for any deficiency after foreclosure under applicable State law”)

• Regulation Z, 12 CFR 1026.37(m)(7) (requirement in Loan Estimate to disclose the consequences of losing state law protections against liability for deficiencies)

• Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1511 (a mortgage foreclosure does not affect the mortgagee’s rights to obtain a personal judgment against any person for a deficiency)

• Metrobank v. Cannatello, 964 N.E.2d 656, 663 (1st Dist. 2012) (the Illinois Mortgage Foreclosure Law “provide[s] the foreclosure court with the authority to enter personal judgments for any deficiencies after sale of the real estate . . . .”)

• St. Ange v. Chambliss, 71 Ill.App.3d 658, 660 (1st Dist. 1979) (“the Illinois cases hold that in any foreclosure proceeding the creditor may proceed against the property and in addition may obtain a money judgment in personam for any deficiency”)

(2) Under the upcoming TRID rules, creditors must provide the Closing Disclosure three business days before “consummation” of the loan, and Regulation Z provides that state law governs when “consummation” occurs. Under Illinois case law, a mortgage loan is consummated on the date of the loan closing. A number of Illinois courts have held that consummation occurs on the date of the loan closing for purposes of the TILA.

Resources:

• Regulation Z, 12 CFR 1026.2(a)(13) (“Consummation” means the time that a consumer becomes contractually obligated on a credit transaction.)

• Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 2(a)(13), Comment 1 (“When a contractual obligation on the consumer’s part is created is a matter to be determined under applicable law; Regulation Z does not make this determination. A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation.”)

• Personius v. Homeamerican Credit, Inc., 234 F.Supp.2d 817, 820 (N.D. Ill. 2002)  (The borrowers “became contractually obligated [for purposes of TILA] on the closing date of their mortgages . . . .”)

• Jenkins v. Mercantile Mortg. Co., 231 F.Supp.2d 737, 745 (N.D. Ill. 2002) (“A credit transaction is consummated for the purposes of TILA when the plaintiffs become contractually obligated on a credit transaction, in this case, the consummation being the closing of the loan.”)

• Streit v. Fireside Chrysler-Plymouth, Inc., 697 F.2d 193, 196 (7th. Cir. 1983) (The date the borrowers signed the retail installment contract for an auto loan was the date of consummation for purposes of the TILA.)

(3) As under the previous mortgage disclosure rules, the creditor must disclose transfer taxes on the Loan Estimate and Closing Disclosure, but only if the transfer taxes are payable by the borrower. That determination must be made under state or local law, and if those are unclear, the determination must be made with reference to “common practice in the locality of the property.”

Illinois state law does not assign the responsibility of paying the transfer tax to either the seller or the buyer, so either “local law” or “common practice” will determine whether a buyer or seller is responsible for the tax. Chicago’s Municipal Code, for example, specifies that the buyer pays all transfer taxes, but other localities differ. In some cases, the property sales contract will assign responsibility for transfer taxes to one of the parties, which will settle the question. But if neither local law nor the contract states which party is paying the transfer taxes, you will need to determine the “common practice” in the area where the property is located to determine whether the borrower will likely be paying the transfer tax, triggering disclosure. 

Resources:

• Regulation Z, 12 CFR 1026.37(g)(1) (requirement in Loan Estimate to disclose transfer taxes)

• Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 37(g)(1), Comment 4 (“Only transfer taxes paid by the consumer are disclosed on the Loan Estimate pursuant to § 1026.37(g)(1). State and local government transfer taxes are governed by State or local law, which determines if the seller or consumer is ultimately responsible for paying the transfer taxes. . . . If State or local law is unclear or does not specifically attribute transfer taxes to the seller or the consumer, the creditor is in compliance with requirements of §1026.37(g)(1) if the amount of the transfer tax disclosed is not less than the amount apportioned to the consumer using common practice in the locality of the property.”)

• Chicago Municipal Code 3-33-030(C) (places the burden of paying the Chicago transfer tax on the buyer)

• Attorney’s Title Guaranty Fund (ATG) webpage (tracks all local transfer taxes in Illinois, including information on whether the buyer or the seller must pay the tax)