Case Study:

Illinois' Anti-Predatory Mortgage Database

Client: State of Illinois
Implementation Date: 2007
Scope of project: Over 500,000 mortgages submitted into the system, helping thousands of consumers make better informed and cost saving decisions regarding mortgage loan products. Reduced the number of sub-prime lenders within the 4 county jurisdiction by over 66% in the first year.

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In 2007, the State of Illinois found itself dealing with more and more predatory mortgage targeting. Something had to be done.

Members of the Illinois legislature banded together to implement Illinois House Bill 1167. This first-of-its kind mortgage bill targeted certain lending activities and made it mandatory for every loan offered to consumers in certain zip codes to be entered into a real-time database. At the time, the legislation was intended to establish a pilot program to determine if the mortgage lending industry could utilise a platform similar to technology that was already in place to regulate short-term “payday” lending.

Following the success of the pilot program, House Bill 4050 made the program permanent. Encompassing four counties which make up more than 65 percent of the Illinois mortgage market, this new bill made it mandatory for licensed mortgage brokers or originators to submit information for every mortgage they generate to the Anti-Predatory Mortgage Database (www.ILAPLD.com) prior to closing on the property.

“We attribute this result to actions of lenders responding to the presence of external review…We also find that the legislation pushed some borrowers to choose less risky loan products in order to avoid counseling.”

Since 2007, Veritec has provided the State of Illinois with the Anti-Predatory Mortgage Database.

Veritec’s database and program solution analyses every loan in real-time upon submission. Certain loan characteristics are flagged by the system; the regulatory framework then determines if the consumer is required to undergo HUD-certified credit counseling in order to complete and close the loan. The technology has brought complete transparency to the mortgage marketplace in this jurisdiction. In fact, in a 2009 study of the pilot program, the Chicago Federal Reserve concluded that overall, there was a correlation between the Illinois program and lowered foreclosure rates.

Through this program, Illinois borrowers have saved hundreds of millions of dollars in mortgage principal and interest thanks to the implementation of this database.