Industry News

Lawsuit challenges Illinois anti-predatory-lending program

Counseling in some Chicago ZIP codes amounts to redlining

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A pilot program that requires some borrowers in 10 Chicago ZIP codes to receive credit counseling before signing off on a home loan amounts to state-sponsored redlining, according to a lawsuit by residents and real estate professionals. The lawsuit, filed in U.S. District Court in Chicago, seeks to stop Illinois regulators from enforcing the Predatory Lending Database Pilot Program, commonly referred to as HB 4050 after the state legislation that created it. The program -- which does not apply to federally chartered banks -- requires home loan applicants with FICO scores of less than 620 to seek counseling. Borrowers may also be referred to counseling depending on the terms of a loan. Critics say the regulations create administrative costs, including a $300 fee for each counseling session, that are passed on to borrowers, and that counseling requirements may also complicate the process of bundling mortgages and selling them to investors. Although the 10 ZIP codes where the program ...