(215 ILCS 5/Art. XLIII heading)
(215 ILCS 5/1300) (from Ch. 73, par. 1065.1000)
Sec. 1300. Title. This Article may be cited as the Mortgage Insurance Consolidation Law.
(Source: P.A. 86-378.)
(215 ILCS 5/1301) (from Ch. 73, par. 1065.1001)
Sec. 1301. Purpose. The purpose of this Article is to protect the interests of Illinois insureds by:
(1) establishing minimum standards and procedures for the effectuation of mortgage insurance consolidations;
(2) establishing disclosure requirements specific to mortgage insurance consolidations and requiring insurers to make such disclosures on a timely basis;
(3) clarifying the applicability of the unfair rate discrimination provisions of this Code to consolidations involved in loan transfers so as to prevent premium increases for consumers resulting from mandatory premium recalculation;
(4) requiring that group mortgage life insurance certificates contain minimum standard provisions including conversion rights; and
(5) preventing the arbitrary termination of mortgage insurance coverage in connection with consolidations.
(Source: P.A. 86-378.)
(215 ILCS 5/1302) (from Ch. 73, par. 1065.1002)
Sec. 1302. Scope. (a) This Article applies:
(1) To all insurance companies authorized to transact the business of insurance in this State of the kind or kinds of business described in Class 1(a) and (b) and Class 2(a) of Section 4 of this Code except for the kind or kinds of business described in Article IX 1/2 of this Code.
(2) To all mortgage insurance coverage offered, issued, or issued for delivery in this State, by mail or otherwise, in connection with consolidations regardless of whether the financial institution involved is located in or outside Illinois.
(3) To all consolidations whether the old coverage is provided under an individual or group policy.
(b) Except as otherwise specifically provided, it is not intended that this Article conflict with or supersede any other provisions of this Code, or any rules promulgated by the Department of Insurance implementing any such provisions.
(Source: P.A. 86-378.)
(215 ILCS 5/1303) (from Ch. 73, par. 1065.1003)
Sec. 1303. Definitions. The following definitions shall apply to this Article:
"Consolidation" means any transaction in which a financial institution makes its premium collection services available to its mortgage debtors in connection with a particular insurer's ("new insurer") offer of mortgage insurance, which offer is made to debtors who, immediately prior to the offer, had mortgage insurance with another insurer ("old insurer") and were paying premiums for that insurance with their monthly mortgage payments.
"Financial institution" or "servicer" means any entity or organization that services mortgage loans by collecting and accounting for monthly mortgage insurance premiums as part of the debtor's monthly mortgage payment for one or more insurers.
"Insured" means the individual loan customer or certificate holder.
"Loan transfer" means a transaction in which the servicing of a block of mortgage loans is transferred from one servicer to another servicer. This shall include, but not be limited to, mergers or acquisitions.
"Loan transfer consolidation" means a consolidation in which coverage is limited to insureds whose mortgage loans have been sold or transferred in the secondary market from one servicer to another.
"Group-to-group consolidation" means a consolidation in which coverages under both the old plan and the new plan is provided under group policies.
"Mortgage insurance" means mortgage life insurance (term or ordinary), mortgage disability insurance, mortgage accidental death insurance, or any combination thereof, including both individual and group policies, and any certificates issued thereunder, on credit transactions of more than 10 years duration and written in connection with a credit transaction that is secured by a first mortgage or deed of trust and made to finance the purchase of real property or the construction of a dwelling thereon or to refinance a prior credit transaction made for such a purpose.
"New coverage" or "new plan" means the mortgage insurance coverage or plan for which a financial institution collects premium beginning on the effective date of a consolidation.
"New insurer" means any insurer who offers mortgage insurance coverage to borrowers of the financial institution who can no longer remit monthly premiums for the old insurer along with their monthly mortgage payment.
"Old coverage" or "old plan" means the mortgage insurance coverage or plan for which a financial institution collects premiums immediately prior to a consolidation.
"Old insurer" means any insurer for whom a financial institution will no longer make its premium collection facilities available for all or some of the insurer's policyholders or certificate holders.
(Source: P.A. 100-201, eff. 8-18-17.)
(215 ILCS 5/1304) (from Ch. 73, par. 1065.1004)
Sec. 1304. General requirements. Except as provided in Section 1305, no insurer shall participate in any consolidation unless, in addition to all other requirements provided by law, it complies with the following:
(1) The new insurer must calculate premiums for the new coverage on the basis of its own rates, the prospective insured's then attained age, if applicable, and the amount of insurance offered.
(2) Notice of the new premium shall be mailed, together with the offer of new coverage, to the prospective insured at least 30 days prior to the effective date of the new coverage.
(3) The new coverage shall be put into effect only after the new insurer receives an application which has been signed by the prospective insured.
(4) Whenever the existing coverage is provided under individual policies, the new insurer shall comply with the requirements of Part 917 of Title 50 of the Illinois Administrative Code, promulgated by the Department of Insurance.
(5) All riders which are a part of the existing insurance shall be offered without proof of insurability to all policyholders (or certificate holders) obtained by consolidation, including, but not limited to, waiver of premium and accidental death insurance.
(6) Prospective insureds shall be given the option to name the beneficiary of their choice by the new insurer, if the previous beneficiary is other than a financial institution.
(7) Regulations including, but not limited to, those promulgated by the Department of Insurance implementing Sections 143, 149, 151, 236, 237, 421, 424 and 507.1 of this Code concerning misrepresentations to any policyholder for the purpose of inducing or tending to induce such policyholder to lapse, forfeit or surrender his insurance, unfair or deceptive practices, complaints, solicitation and replacement of life insurance, compensation, and rebating shall be complied with.
(Source: P.A. 86-378.)
(215 ILCS 5/1305) (from Ch. 73, par. 1065.1005)
Sec. 1305. Loan transfer consolidations. In a consolidation conducted as a result of a loan transfer, the offer of new coverage may be based on the same premium the insured was paying for his old coverage only if, in addition to all other requirements provided by law, the following conditions are met:
(1) Both the old and the new coverage must be provided under a group policy.
(2) An offer of new coverage must be made as soon as reasonably possible after the loan transfer. If an offer of new coverage is not made within 30 days after the loan transfer, or at least 30 days prior to the proposed effective date of the new coverage, the insurer shall notify the debtor, in writing, that he has the right to an unconditional refund of all premiums paid for the new coverage as long as he exercises that right, in writing, within 30 days from the date of the notification.
(3) The new coverage offered to the prospective insured must be the same as the old coverage, including all supplemental benefits provided under the old plan. If the coverage offered is not the same, then all the requirements of Section 1304 shall apply.
(4) In addition to the requirements of Section 1307, the certificate shall contain the following notice, printed in bold type on page one of the certificate:
This certificate is issued to you in connection with a mortgage insurance consolidation. It is the intention of the Company to provide you group coverage which is equal to or better than the group coverage you had before. To the extent the benefits provided or the provisions of your prior certificate of insurance are more liberal than those under this certificate, the provisions of your prior certificate will control. Therefore, you should keep your old certificate along with this certificate for comparison purposes.
(5) The information contained in the notice prescribed by paragraph (4) shall also be disclosed in writing (separate from the certificate of insurance) to each prospective insured at the time the offer of new coverage is made.
(6) Only the group coverage written in connection with the loans which are the subject of the loan transfer may be consolidated pursuant to this Section.
(7) Payment of the required premium shall constitute acceptance of the new coverage if:
(A) such acceptance mechanism is clearly explained to the debtor; and
(B) All other disclosure requirements of this Article are met.
(8) Regulations including, but not limited to, those promulgated by the Department of Insurance implementing Sections 143, 149, 151, 236, 237, 421, 424 and 507.1 of this Code concerning misrepresentations to any policyholder for the purpose of inducing or tending to induce such policyholder to lapse, forfeit or surrender his insurance, unfair or deceptive practices, complaints, solicitation and replacement of life insurance, compensation and rebating shall be complied with.
(9) If an insurer charges debtor insureds the same premium for the new coverage that they were paying for the old coverage, and, as a result, debtor insureds of a financial institution are charged different premium rates for the same coverage, such rate differences shall not constitute unfair discrimination under Sections 236 and 364 of this Code provided all the other applicable requirements of this Code are met.
(Source: P.A. 86-378.)
(215 ILCS 5/1306) (from Ch. 73, par. 1065.1006)
Sec. 1306. Out-of-state consolidations. If Illinois residents whose loans are serviced outside Illinois are involved in a group-to-group consolidation by an out-of-state servicer, Section 1305 may be employed if the Illinois residents are an incidental part of the consolidation. Otherwise the provisions of this Article shall apply to any consolidation insofar as it involves Illinois residents. For purposes of this provision "incidental" shall mean that the Illinois residents comprise less than 25% or 100 lives of the total lives involved in the consolidation, whichever is less.
(Source: P.A. 86-378.)
(215 ILCS 5/1307) (from Ch. 73, par. 1065.1007)
Sec. 1307. Group certificates. No insurer may participate in a group-to-group consolidation or a loan transfer consolidation unless in addition to all other requirements provided by law, it complies with the following:
(1) A group certificate must be delivered to each debtor insured under the new plan, which certificate shall include the following information:
(A) the name or names of the single or joint insureds;
(B) identification of the insured mortgage;
(C) the amount of insurance under the new plan;
(D) the premium for the new coverage;
(E) the effective date of the new coverage;
(F) the beneficiary for the new coverage.
(2) The new coverage offered to the prospective insured must be the same coverage as the old coverage, including all supplemental benefits, or the same type of coverage as the old coverage, whichever is otherwise required by this Article.
(3) A group certificate evidencing the new coverage may not include a contestability clause or, in the case of mortgage life insurance, a provision excluding suicide.
(Source: P.A. 86-378.)
(215 ILCS 5/1308) (from Ch. 73, par. 1065.1008)
Sec. 1308. Conversion privilege. Notwithstanding the provisions of Section 231.1(H) of this Code, all group mortgage life insurance policies and any certificates issued thereunder shall include a conversion privilege permitting a debtor insured to convert, without evidence of insurability, to an individual policy of decreasing term insurance within 30 days of the date the debtor insured's group coverage is terminated for any reason other than the nonpayment of premiums. The initial amount of coverage under the individual policy shall be an amount equal to the amount of coverage terminated under the group policy and shall decrease over a term that corresponds with the scheduled term of the insured debtor's mortgage loan. The premium for the individual policy shall be the same premium the debtor insured was paying under the group policy.
(Source: P.A. 86-378.)
(215 ILCS 5/1309) (from Ch. 73, par. 1065.1009)
Sec. 1309. Required disclosures. (a) In conjunction with the offer of new coverage involving any consolidation, the new insurer shall disclose in writing to each insured under the old plan or plans at least 30 days prior to the effective date of the new coverage the following:
(1) Identification of the insured mortgage.
(2) The name of the insured or insureds.
(3) Name of the owner of the individual policy or master policy (if group insurance) under both the new and old plans, if known.
(4) The premium for the new and old coverage.
(5) Amount of coverage for both the new and old plans. If the amount of coverage for the old plan is not known, a statement that the amount may be scheduled and it may be less than or greater than the amount of the loan and the insured should check the policy schedule for an exact amount of coverage.
(6) Effective dates of the old coverage if the contestable or suicide period have not expired as of the effective date of the new coverage. If the new insurer waives the contestable and suicide period, then the effective date of the old coverage does not need to be disclosed.
(7) Name of the beneficiary under the old plan, if known.
(8) A statement as to whether the old plan was an individual or group plan and a statement as to whether the new plan is an individual or a group plan.
(9) A statement that neither the old plan or new plan is required.
(10) A statement that the prospective insured may have the right to continue or convert his old coverage by paying premiums directly to the old insurer, and what the prospective insured must do to keep the old coverage in effect including, but not limited to, the name and address of the company involved, the policy number or other information which reasonably identifies the insured's plan of coverage, the amount of the premium and where it is to be sent.
(11) A statement that the mortgage payment will be reduced by the amount of the old plan premium if the new plan is not accepted.
(12) Name and home office address of the new and old insurer, as well as the address and phone number for the customer services office for Illinois insureds.
(13) The effective date of the new coverage.
(14) Whether premium rates under the new plan are guaranteed.
(15) Material differences, if any between the new plan and the old plan.
(b) Any insurer which fails to provide the written notice required by subsection (a) at least 30 days prior to the effective date of the new coverage shall notify the debtor, in writing, that he has the right to an unconditional refund of all premiums paid for the new coverage as long as he exercises that right, in writing, within 30 days from that notification.
(Source: P.A. 86-378.)
(215 ILCS 5/1310) (from Ch. 73, par. 1065.1010)
Sec. 1310. Compensation. No sponsorship fees, or other special fees designed to induce their participation, shall be paid to a financial institution in connection with any mortgage consolidation, and any compensation paid to either the financial institution or any of its representatives shall be only in accordance with Section 151 and all other applicable provisions of this Code.
(Source: P.A. 86-378.)
(215 ILCS 5/1311) (from Ch. 73, par. 1065.1011)
Sec. 1311. No group policy or group certificate of mortgage insurance used in connection with a consolidation, nor any application, endorsement or rider which becomes a part of any such group policy or certificate, may be issued or delivered in this State until a copy of the form has been filed with and approved by the Director.
(Source: P.A. 86-378.)
(215 ILCS 5/1312) (from Ch. 73, par. 1065.1012)
Sec. 1312. The Director is authorized to adopt such rules governing mortgage insurance consolidations as he deems necessary to implement or enforce this Article.
(Source: P.A. 86-378.)