September 29, 2004, Introduced by Rep. Hunter and referred to the Committee on Commerce.
A bill to amend 2002 PA 660, entitled
"Consumer mortgage protection act,"
by amending the title and sections 1, 2, 4, 5, 8, 9, 10, 12, and
15 (MCL 445.1631, 445.1632, 445.1634, 445.1635, 445.1638,
445.1639, 445.1640, 445.1642, and 445.1645); and to repeal acts
and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 TITLE
2 An act to prohibit certain lending practices; to require
3 disclosure of certain information for home loans and high-cost
4 home loans; to prescribe certain duties and obligations of the
5 lender in a home loan or
high-cost home loan transaction; to
6 prescribe the powers
and duties of certain state agencies and
7 officials; and to prescribe penalties and provide for remedies.
8 Sec. 1. This act shall be known and may be cited as the
1 "consumer
mortgage "home loan
protection act".
2 Sec. 2. (1) As used in this act:
3 (a)
"Commissioner" means the commissioner of the office of
4 financial and
insurance services of the department of consumer
5 and industry services.
6 (b)
"Depository institution" means a bank, savings and loan
7 association, savings
bank, or a credit union chartered under
8 state or federal law.
9 (c) "Home
improvement installment contract" means an
10 agreement of 1 or more
documents covering the sale of goods or
11 furnishing of services
to a buyer for improvements to the buyer's
12 principal dwelling
located in this state used for occupancy of 4
13 or fewer families
under which the buyer promises to pay in
14 installments all or
any part of the price of the goods or
15 services.
16 (d) "Mortgage
loan" means a loan or home improvement
17 installment contract
secured by a first or subordinate mortgage
18 or any other form of
lien or a land contract covering real
19 property located in
this state used as the borrower's principal
20 dwelling and designed
for occupancy by 4 or fewer families.
21 Mortgage loan does not
include any of the following:
22 (i) Loans in which the proceeds are used to acquire the
23 dwelling.
24 (ii) Reverse-mortgage transactions.
25 (iii) An open-end credit plan being a loan in which the
26 lender reasonably
contemplates repeated advances.
27 (e)
"Person" means an individual, corporation, partnership,
1 association, governmental
entity, or any other legal entity.
2 (f)
"Reverse-mortgage" means a nonrecourse loan under which
3 both of the following
apply:
4 (i) A mortgage or other form of lien securing 1 or more
5 advances is created in
the borrower's principal dwelling.
6 (ii) The principal, interest, or shared appreciation or
7 equity is payable only
after the borrower dies, the dwelling is
8 transferred, or the
borrower ceases to occupy the dwelling as a
9 principal dwelling.
10 (g)
"Regulated lender" means a depository institution or a
11 licensee or a
registrant under the consumer financial services
12 act, 1988 PA 161, MCL
487.2051 to 487.2072, 1984 PA 379,
13 MCL 493.101 to 493.114,
the secondary mortgage loan act, 1981
14 PA 125, MCL 493.51 to
493.81, or the mortgage brokers, lenders,
15 and servicers
licensing act, 1987 PA 173, MCL 445.1651 to
16 445.1684, and a seller
under the home improvement finance act,
17 1965 PA 332, MCL
445.1101 to 445.1431.
18 (h) "State
and federal laws" means, individually and
19 collectively, 1 or
more of the laws or regulations of this state
20 or the federal
government which regulate or are applicable to a
21 mortgage loan or a
person when brokering, making, servicing, or
22 collecting a mortgage
loan, including, without limitation, the
23 federal truth in
lending act, title I of the consumer credit
24 protection act, Public
Law 90-321, 15 U.S.C. 1601 to 1608, 1610
25 to 1613, 1615, 1631 to
1635, 1637 to 1649, and 1661 to 1667f,
26 real estate settlement
procedures act of 1974, Public Law 93-533,
27 88 Stat. 1724, equal
credit opportunity act, title VII of the
1 consumer credit
protection act, Public Law 90-321, 15 U.S.C. 1691
2 to 1691f, fair housing
act, title VIII of the civil rights act of
3 1968, Public Law
90-284, 82 Stat. 81, fair credit report act,
4 title VI of the consumer
credit protection act, Public Law
5 90-321, 15 U.S.C. 1681
to 1681v, the homeowners protection act of
6 1998, Public Law
105-216, 112 Stat. 897, the fair debt collection
7 practices act, title
VIII of the consumer credit protection act,
8 Public Law 90-321, 15
U.S.C. 1601nt and 1692 to 1692o, consumer
9 financial services
act, 1988 PA 161, MCL 487.2051 to 487.2072,
10 mortgage brokers,
lenders, and servicers licensing act, 1987
11 PA 173, MCL 445.1651 to
445.1684, the secondary mortgage loan
12 act, 1981 PA 125, MCL
493.51 to 493.81, 1977 PA 135, MCL 445.1601
13 to 445.1614, and home
improvement finance act, 1965 PA 332,
14 MCL 445.1101 to
445.1422.
15 (a) "Affiliate" means a company that controls, is controlled
16 by, or is under common control with another company.
17 (b) "Annual percentage rate" means an annual percentage rate
18 for a loan determined under 12 CFR part 226.
19 (c) "Bona fide discount points" means an amount paid by a
20 borrower that meets all of the following:
21 (i) It is knowingly paid by the borrower for the express
22 purpose of reducing the interest rate applicable to a home loan.
23 (ii) It actually reduces the interest rate applicable to the
24 home loan.
25 (iii) It is paid in connection with a home loan for which the
26 undiscounted interest rate does not exceed the conventional
27 mortgage rate by 2 or more percentage points for a home loan
1 secured by a first lien or by 3-1/2 or more percentage points for
2 a home loan secured by a subordinated lien.
3 (d) "Borrower" means any natural person obligated to repay a
4 loan, including a coborrower, cosigner, or guarantor.
5 (e) "Company" means a person other than a natural person.
6 (f) "Conventional mortgage rate" means the most recently
7 published annual yield on conventional mortgages published by the
8 board of governors of the federal reserve system in statistical
9 release H.15, or any publication that may supersede it, as of the
10 applicable time set forth in 12 CFR 226.32(a)(1)(i).
11 (g) "Conventional prepayment penalty" means a prepayment
12 penalty or fee that is collected or charged in a home loan and
13 that is authorized by law other than this act, if the home loan
14 does not have an annual percentage rate that exceeds the
15 conventional mortgage rate by more than 2 percentage points and
16 does not permit any prepayment fees or penalties that exceed 2%
17 of the amount prepaid.
18 (h) "Creditor" means a lender, as that term is defined in 24
19 CFR 3500.2, or a mortgage broker.
20 (i) "Excluded points and fees" means, in connection with a
21 home loan, 1% of the total loan amount attributable to bona fide
22 fees paid to a federal or state government agency that insures
23 payment of some portion of a home loan, plus an amount that does
24 not exceed 2% of the loan amount attributable to either bona fide
25 discount points or a conventional prepayment penalty, but not
26 both.
27 (j) "High-cost home loan" means a home loan in which the
1 terms of the loan meet or exceed 1 or more thresholds.
2 (k) "Home loan" means an open-end credit plan or extension of
3 credit that meets all of the following:
4 (i) It does not exceed the maximum original principal
5 obligation as set forth in and from time to time adjusted under
6 section 305(a)(2) of the federal home loan mortgage act, 12 USC
7 1454(a)(2).
8 (ii) It meets the requirements for a federally related
9 mortgage loan under 24 CFR 3500.2.
10 (iii) It is not a reverse mortgage transaction or a loan
11 primarily for business, agricultural, or commercial purposes.
12 (l) "Mortgage broker" means that term as defined in 24 CFR
13 3500.2.
14 (m) Subject to subsection (2), "points and fees" means all of
15 the following:
16 (i) All items included in the definition of finance charge in
17 12 CFR 226.4(a) and 12 CFR 226.4(b), except interest or the time
18 price differential.
19 (ii) All items described in 12 CFR 226.32(b)(1)(iii).
20 (iii) All compensation paid directly or indirectly to a
21 mortgage broker from any source, including a mortgage broker that
22 originates a loan in its own name in a table-funded transaction.
23 (iv) The cost of all premiums directly or indirectly financed
24 by the creditor for any credit life, credit disability, credit
25 unemployment, or credit property insurance, or any other life or
26 health insurance, or any payments directly or indirectly financed
27 by the creditor for any debt cancellation or suspension agreement
1 or contract. However, insurance premiums paid on a monthly basis
2 or debt cancellation or suspension fees calculated and paid on a
3 monthly basis are not considered financed by the creditor.
4 (v) The maximum prepayment fees and penalties that may be
5 charged or collected under the terms of the loan documents.
6 (vi) All prepayment fees or penalties that are incurred by
7 the borrower if the loan refinances a previous loan originated or
8 currently held by the same creditor or an affiliate of the
9 creditor.
10 (vii) For an open-end loan, points and fees are calculated by
11 adding the total points and fees known at or before closing,
12 including the maximum prepayment penalties that may be charged or
13 collected under the terms of the loan documents, plus the minimum
14 additional fees the borrower must pay to draw down an amount
15 equal to the total credit line.
16 (n) "Rate threshold" means an annual percentage rate
17 calculated under 12 CFR 226.32(a)(1)(i), whether the home loan is
18 a "residential mortgage transaction" or an extension of "open-end
19 credit" as those terms are defined in 12 CFR 226.2.
20 (o) "Servicer" means that term as defined in 24 CFR 3500.2.
21 (p) "Servicing" means that term as defined in 12 CFR 3500.2.
22 The term also includes any other activities or responsibilities
23 undertaken in connection with a home loan by a person who acts as
24 a servicer with respect to that home loan, including, but not
25 limited to, collection and default management functions.
26 (q) "Threshold" means a rate threshold or a total points and
27 fees threshold.
1 (r) "Total loan amount" means the principal of the loan minus
2 those points and fees that are included in the principal amount
3 of the loan. For an open-end loan, the total loan amount is
4 calculated using the total line of credit allowed under the home
5 loan at closing.
6 (s) "Total points and fees threshold" means 1 of the
7 following, as applicable:
8 (i) For a home loan in which the total loan amount is
9 $20,000.00 or more, the total points and fees payable in
10 connection with the home loan exceed 4% of the total loan
11 amount.
12 (ii) For a home loan in which the total loan amount is less
13 than $20,000.00, the total points and fees payable in connection
14 with the home loan exceed $800.00 or 7% of the total loan amount,
15 whichever is less.
16 (t) "Truth in lending act" means the federal truth in lending
17 act, 15 USC 1601 to 1667f.
18 (2) Points and fees do not include any of the following:
19 (a) Taxes, filing fees, recording fees, or other charges or
20 fees paid to or required by a public official for determining the
21 existence of or for perfecting, releasing, or satisfying a
22 security interest.
23 (b) Bona fide and reasonable fees paid to a person other than
24 a creditor or an affiliate of the creditor for any of the
25 following:
26 (i) Tax payment services.
27 (ii) Flood certification.
1 (iii) Pest infestation or flood determination.
2 (iv) Appraisal.
3 (v) Inspections performed before the closing.
4 (vi) Credit reports.
5 (vii) Surveys.
6 (viii) Attorney fees, if the borrower has the right to select
7 the attorney from an approved list or otherwise.
8 (ix) Notary fees.
9 (x) Escrow charges in addition to any paid under subdivision
10 (a).
11 (xi) Title insurance premiums.
12 (xii) Fire and hazard insurance and flood insurance premiums,
13 if the conditions in 12 CFR 226.4(d)(2) are met.
14 Sec. 4. (1) A
person offering to make or making a mortgage
15 loan shall not do
either of the following:
16 (a) Charge a fee
for a product or service if the product or
17 service is not
actually provided to the customer.
18 (b) Misrepresent
the amount charged by or paid to a third
19 party for a product or
service.
20 (2) A lender in
making a mortgage loan shall not finance as
21 part of the loan
single premium coverage for any credit life,
22 credit disability, or
credit unemployment.
23 (3) A person,
appraiser, or real estate agent shall not make,
24 directly or
indirectly, any false, deceptive, or misleading
25 statement or representation
in connection with a mortgage loan
26 including, but not
limited to, the borrower's ability to qualify
27 for a mortgage loan or
the value of the dwelling that will secure
1 repayment of the
mortgage loan.
2 (4) A lender shall
not insert or change information on an
3 application for a
mortgage loan if the lender knows that the
4 information is false
and misleading and intended to deceive a
5 third party that the
borrower is qualified for the loan when in
6 fact the third party
would not approve the loan without the
7 insertion or change.
8 (5) A statement or
representation is deceptive or misleading
9 if it has the capacity
to deceive or mislead a borrower or
10 potential borrower.
The commissioner shall consider any of the
11 following factors in
deciding whether a statement or
12 misrepresentation is
deceptive or misleading:
13 (a) The overall
impression that the statement or
14 representation
reasonably creates.
15 (b) The particular
type of audience to which the statement is
16 directed.
17 (c) Whether it may
be reasonably comprehended by the segment
18 of the public to which
the statement is directed.
19 (6) A lender shall
not condition the payment of an appraisal
20 upon a predetermined
value or the closing of the mortgage loan
21 which is the basis of
the appraisal.
22 (7) A person shall
not directly or indirectly compensate,
23 coerce, or intimidate
an appraiser for the purpose of influencing
24 the independent
judgment of the appraiser with respect to the
25 value of the dwelling
offered as security for repayment of the
26 mortgage loan.
27 (8) A mortgage
loan note shall not contain blanks regarding
1 payments, interest
rates, maturity date, or amount borrowed to be
2 filled in after the
note is signed by the borrower.
3 (1) A creditor making a home loan shall not directly or
4 indirectly finance any credit life, credit disability, credit
5 unemployment, or credit property insurance, any other life or
6 health insurance, or any payments directly or indirectly for any
7 debt cancellation or suspension agreement or contract. However,