Legitimacy of Illinois Mortgage Law Questioned in Chicago Neighborhoods
A second lawsuit has been filed that seeks to halt implementation of a controversial Illinois mortgage law requiring some people buying homes or refinancing their home loans in certain Chicago neighborhoods to receive financial counseling.
According to the Chicago Tribune, the complaint filed in federal court seeks to enjoin the Illinois Department of Financial and Professional Regulation from implementing the law, HB 4050. Dean Martinez, secretary of the regulatory agency, is named as the sole defendant.
“This is a law that disproportionately affects the minority community,” said Joseph Nery, one of the attorneys for the four plaintiffs in the latest suit. “There is a discriminatory effect, and there may have been discriminatory intent.”
The suit says the law, which took effect September 1, has had a chilling effect on the real estate market in the 10 South and Southwest Side ZIP codes where the counseling is mandated. It also says it places an unfair burden on owners and buyers in the predominantly Latino and African-American neighborhoods.
The law, formally known as the Illinois Predatory Lending Database Pilot Program, requires counseling for mortgage loan applicants who have bad credit scores or other issues.
The state regulators chose the 10 ZIP codes for the four-year pilot program because it found high levels of mortgage fraud and foreclosures there.
But critics are disputing those statistics, and they say the complexities of compliance have unfairly driven more than one home mortgage company out of the ZIP codes. The ZIP codes in question are 60620, 60621, 60623, 60628, 60629, 60632, 60636, 60638, 60643 and 60652.
Susan Hofer, a spokesman for Martinez’s department, said she couldn’t comment on pending litigation.
The plaintiffs in the suit filed Monday are three consumers who say they have had difficulties buying, selling or refinancing because of the law and at least one real estate agent who reports a significant decline in business because of it, according to the federal complaint.
A separate suit, filed in late October by five consumers and members of the real estate community, cited similar difficulties in the marketplace.