A Chicago mortgage planner says home sales are down 45 percent in 10 ZIP codes where Illinois lawmakers now require mortgage brokers to refer borrowers with low credit scores for counseling.

Although September home sales also declined in surrounding ZIP codes, they did not fall as much, according to an analysis of MLS data by Chicago-based mortgage planner Dan Green of Mobium Mortgage.

The four-year Predatory Lending Database Pilot Program, commonly referred to as HB 4050 after the state legislation that created it, took effect Sept. 1.

Intended to reduce predatory lending, the program is targeted at neighborhoods with above-average foreclosure rates. But critics have said it will make it harder for residents in the predominantly minority communities to obtain loans.

Although federally chartered banks are exempt from the program, Green claims that as many as 30 lenders have stopped offering loans in the affected ZIP codes. He says confusion and delays connected with the counseling requirements have slowed sales.

“One month is hardly enough for proof, but it looks like the HB 4050 ZIP codes are not faring as well as their neighbors,” Green wrote in a blog entry detailing his findings. “Surprise, surprise.”

Green did not immediately return a message left with his assistant Monday. But other critics have said the regulations create administrative costs, including a $300 fee for each counseling session, that are passed on to borrowers, and may also complicate the process of bundling mortgages and selling them to investors.

Susan Hofer, a spokeswoman for the Illinois Department of Professional Regulation, said Monday that about one-third of borrowers in the ZIP codes covered by the program have triggered counseling requirements.

Hofer did not dispute Green’s contention that sales have slowed in the areas covered by House Bill 4050, but said it’s unlikely the counseling requirements are to blame.

“An hour or two of counseling is no more likely to delay (a sale) than having an appraisal come back that’s too low or too high,” Hofer told Inman News. “An educated consumer is always better.”

Counseling is required for all applicants with FICO scores of less than 620, and borrowers may also be referred to counseling depending on the terms of a loan.

Brenda Grauer, director of technical assistance and training for Housing Action Illinois, told the Chicago Sun Times that she thinks the drop in sales is temporary.

“The only thing that’s changed is there’s a transparency to the process,” Grauer told the Sun Times. “This doesn’t prevent anybody from getting a loan.”


Send tips or a Letter to the Editor to matt@inman.com or call (510) 658-9252, ext. 150.

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