HB-6615, As Passed House, November 13, 2008

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 6615

 

 

 

 

 

 

 

 

 

 

 

 

 

     A bill to require mortgage lenders and mortgage servicers to

 

provide certain notices and information; to provide for the

 

establishment of a program to prevent home foreclosures; to provide

 

for the establishment of an information database; to provide for

 

the powers and duties of certain state governmental officers and

 

entities; to provide remedies; and to repeal acts and parts of

 

acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 1. This act shall be known and may be cited as the "home

 

foreclosure prevention act".

 

     Sec. 2. As used in this act:

 

     (a) "Acts as a mortgage servicer" means engages, whether for

 

compensation or gain from another or on its own behalf, in the

 

business of receiving scheduled periodic payments from a borrower


 

pursuant to the terms of a mortgage loan, including money for an

 

escrow account, and paying principal, interest, and other payments

 

with respect to the money received from the borrower as is required

 

under the mortgage loan, mortgage servicing loan documents, or

 

servicing contract.

 

     (b) "Commissioner" means the commissioner of the office of

 

financial and insurance regulation.

 

     (c) "Mortgage lender" means a person engaged in the business

 

of making mortgage loans for compensation or gain and a mortgage

 

lender as that term is defined in section 1a of the mortgage

 

brokers, lenders, and servicers licensing act, 1987 PA 173, MCL

 

445.1651a.

 

     (d) "Mortgage loan" means a loan secured by a first or

 

subordinate mortgage of or a land contract for the purchase of real

 

property located in this state, used or improved for use as a

 

principal dwelling or primary residence, and designed for occupancy

 

by 4 or fewer families.

 

     (e) "Mortgage servicer" means a person who directly or

 

indirectly acts as a mortgage servicer, who is a servicer, as that

 

term is defined in 12 USC 2605, with respect to mortgage loans, or

 

who is a mortgage servicer as that term is defined in section 1a of

 

the mortgage brokers, lenders, and servicers licensing act, 1987 PA

 

173, MCL 445.1651a.

 

     (f) "Subprime loan" means a mortgage loan originated after

 

December 31, 2004 and before January 1, 2009 to which both of the

 

following apply:

 

     (i) The difference between the annual percentage rate for the


 

loan and the yield on United States treasury securities with

 

comparable periods of maturity is either equal to or greater than 3

 

percentage points if the loan is secured by a first lien mortgage

 

or deed of trust or 5 percentage points if the loan is secured by a

 

subordinate lien mortgage or deed of trust. Without regard to

 

whether the loan is subject to or reportable under the home

 

mortgage disclosure act of 1975, 12 USC 2801 to 2811, the

 

difference between the annual percentage rate and the yield on

 

treasury securities with comparable periods of maturity shall be

 

determined using the same procedures and calculation methods

 

applicable to loans that are subject to the reporting requirements

 

of the home mortgage disclosure act of 1975, 12 USC 2801 to 2811,

 

with the yield on treasury securities being determined as of the

 

fifteenth day of the month before the application for the loan.

 

     (ii) The difference between the annual percentage rate for the

 

loan and the conventional mortgage rate is either equal to or

 

greater than 1.75 percentage points if the loan is secured by a

 

first lien mortgage or deed of trust or 3.75 percentage points if

 

the loan is secured by a subordinate lien mortgage or deed of

 

trust. As used in this subparagraph, "conventional mortgage rate"

 

means the most recent daily contract interest rate on commitments

 

for fixed-rate first mortgages published by the board of governors

 

of the federal reserve system in the federal reserve statistical

 

release H.15, or a publication that supersedes that release, during

 

the week before the week in which the interest rate for the loan is

 

set.

 

     Sec. 3. (1) At least 45 days before filing a judicial


 

foreclosure action under chapter 31 of the revised judicature act

 

of 1961, 1961 PA 236, MCL 600.3101 to 600.3185, or publishing a

 

notice of foreclosure by advertisement under section 3208 of the

 

revised judicature act of 1961, 1961 PA 236, MCL 600.3208, to

 

foreclose a mortgage on a primary residence that secures a subprime

 

loan, the mortgage servicer for the loan shall send written notice

 

by mail to the last known address of the borrower to inform the

 

borrower of the availability of resources to avoid foreclosure. The

 

notice shall include all of the following:

 

     (a) An itemization of all past due amounts that cause the loan

 

to be in default.

 

     (b) An itemization of any other charges that must be paid to

 

bring the loan current.

 

     (c) The earliest date that proceedings to foreclose the

 

mortgage may be commenced.

 

     (d) A statement that the borrower may have options available

 

other than foreclosure and that the borrower may discuss available

 

options with the mortgage lender, the mortgage servicer, or a

 

counselor approved by the United States department of housing and

 

urban development.

 

     (e) The address, telephone number, and other contact

 

information for the mortgage lender, the mortgage servicer, or the

 

agent for either of them who is authorized to attempt to work with

 

the borrower to avoid foreclosure.

 

     (f) The name, address, telephone number, and other contact

 

information for 1 or more counseling agencies approved by the

 

United States department of housing and urban development or the


 

Michigan state housing development authority operating to assist

 

borrowers in this state to avoid foreclosure.

 

     (g) The address, telephone number, and other contact

 

information for the consumer complaint section of the office of

 

financial and insurance regulation.

 

     (h) The telephone numbers of the state bar of Michigan's

 

lawyer referral service and of a local legal aid office serving the

 

area in which the property is located, and a statement that if the

 

borrower cannot afford an attorney, he or she should contact the

 

referral service or legal aid office.

 

     (2) By the deadline for sending a notice under subsection (1),

 

the mortgage servicer shall send a written notice to any occupants

 

of the property. The notice under this subsection shall include all

 

of the following:

 

     (a) A statement informing the occupant of any available

 

resources for a tenant to avoid foreclosure of property the tenant

 

is leasing.

 

     (b) A statement that if the occupant is a tenant, the occupant

 

should seek legal counsel.

 

     (c) The telephone numbers required under subsection (1)(h) and

 

a statement that if the occupant cannot afford an attorney, he or

 

she should contact the referral service or legal aid office.

 

     Sec. 4. (1) Within 3 business days after mailing the notice

 

required by section 3, the mortgage servicer shall file information

 

with the state court administrative office. The filing shall be in

 

an electronic format as designated by the state court

 

administrative office and shall contain the name, address, and


 

telephone number of the borrower and the date the notice was mailed

 

to the borrower.

 

     (2) As permitted by applicable federal law and law of this

 

state, optional information may be requested from a mortgage

 

servicer to facilitate further review by the commissioner under the

 

Michigan home foreclosure prevention program established under

 

section 5. The nature of the optional information requested shall

 

be determined in connection with the design of the database under

 

subsection (3). The optional information shall be used by the

 

commissioner to prioritize efforts to reach borrowers most likely

 

to avoid foreclosure and to prevent delay for defaults where

 

foreclosure is unavoidable.

 

     (3) By January 1, 2009, the state court administrative office

 

shall establish an internal database to track information required

 

to be provided under this section. The commissioner shall design

 

and develop this database, in consultation with the state court

 

administrative office, in a manner to promote the Michigan home

 

foreclosure prevention program established under section 5. Except

 

as provided in section 8(2), only the state court administrative

 

office and the commissioner or the commissioner's designee shall

 

have access to the database.

 

     Sec. 5. (1) The commissioner shall establish the Michigan home

 

foreclosure prevention program to seek solutions to avoid

 

foreclosures for certain subprime loans. In developing the program,

 

the commissioner may seek input from any person, including housing

 

counselors approved by the United States department of housing and

 

urban development or the Michigan state housing development


 

authority, community organizations, state agencies, mortgage

 

lenders, and mortgage servicers.

 

     (2) The Michigan home foreclosure prevention program may

 

provide for the mediation of foreclosure proceedings. If mediation

 

is provided for by the Michigan home foreclosure prevention

 

program, all of the following provisions shall be included:

 

     (a) That mediation is nonbinding.

 

     (b) That mediation shall be conducted by a designee of the

 

commissioner, who may be a counselor identified under section

 

3(1)(d).

 

     (c) That the individual designated to conduct the mediation

 

may terminate the mediation if the individual determines that there

 

is unlikely to be a resolution to which both sides will agree.

 

     (d) That if the borrower fails to appear for a scheduled

 

mediation and if the commissioner determines that the borrower did

 

not have good cause for the failure to appear, the commissioner may

 

rescind the extension order under section 6.

 

     (3) The Michigan home foreclosure prevention program

 

established under this section shall provide that the commissioner

 

may relieve a mortgage lender or mortgage servicer from

 

participation in the Michigan home foreclosure prevention program

 

if the mortgage lender or mortgage servicer can demonstrate to the

 

commissioner that the mortgage lender or mortgage servicer has a

 

system for establishing workouts for borrowers.

 

     Sec. 6. The commissioner shall review information provided in

 

the database created under section 4 to determine whether a

 

subprime loan is appropriate for efforts to avoid foreclosure. If


 

the commissioner reasonably believes, based on a full review of the

 

loan information, the mortgage lender's or mortgage servicer's loss

 

mitigation efforts, the borrower's capacity and interest in staying

 

in the home, and other appropriate factors, that efforts under the

 

Michigan home foreclosure prevention program established under

 

section 5 will offer a reasonable prospect to avoid foreclosure,

 

the commissioner may do 1 or both of the following:

 

     (a) Extend the earliest date to commence proceedings to

 

foreclose the mortgage as contained in the notice under section 3

 

for not more than 30 days. If the commissioner extends the date

 

under this subdivision, the commissioner shall notify the borrower,

 

mortgage servicer, and state court administrative office.

 

     (b) Issue an order under the Michigan home foreclosure

 

prevention program ordering the mortgage lender, the mortgage

 

servicer, and the borrower to participate in mediation.

 

     Sec. 7. Except as provided in sections 8(2) and 9, the data

 

provided to the state court administrative office under section 4

 

shall be used exclusively for the Michigan home foreclosure

 

prevention program developed under section 5. The information

 

provided to the database is not a public record and not subject to

 

the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246,

 

except that a mortgage lender or mortgage servicer shall have

 

access to the information submitted with regard to the lender or

 

servicer's own loans. Provision of information to the state court

 

administrative office for use by the commissioner is not a

 

violation of applicable law.

 

     Sec. 8. (1) Until the Michigan home foreclosure prevention


 

program developed under section 4 is discontinued, a complaint to

 

judicially foreclose a mortgage on a primary residence that secures

 

a subprime loan filed after, or a notice to foreclose a mortgage on

 

a primary residence that secures a subprime loan published after,

 

December 14, 2008 shall contain a certification by the filer or

 

publisher that all of the following are true:

 

     (a) Notice was provided as required by section 3.

 

     (b) Information was provided as required by section 4.

 

     (c) The filing or publication date is on or after the earliest

 

date to commence proceedings to foreclose the mortgage as contained

 

in the notice under section 3 and, if applicable, as extended by

 

the commissioner under section 6.

 

     (2) A clerk of the circuit court, sheriff, deputy sheriff,

 

undersheriff, or other judicial officer acting under chapter 31 of

 

the revised judicature act of 1961, 1961 PA 236, MCL 600.3101 to

 

600.3185, for judicial foreclosures or under section 3216 of the

 

revised judicature act of 1961, 1961 PA 236, MCL 600.3216, for

 

foreclosures by advertisement may access the database established

 

under section 4 to confirm a certification provided under

 

subsection (1).

 

     (3) If a certification under subsection (1) in a complaint to

 

foreclose a mortgage contains a materially inaccurate statement,

 

the action may be dismissed without prejudice and the plaintiff

 

ordered to pay costs incurred by the defendant in defending the

 

action.

 

     (4) If a certification under subsection (1) in a notice of

 

foreclosure by advertisement contains a materially inaccurate


 

statement, the sale of the property under section 3216 of the

 

revised judicature act of 1961, 1961 PA 236, MCL 600.3216, shall

 

not be conducted until the party attempting to foreclose by

 

advertisement has complied with this act.

 

     Sec. 9. (1) The commissioner shall report annually to the

 

standing committees of the house and senate with primary

 

jurisdiction over banking and financial services matters on all of

 

the following:

 

     (a) The number of notices given to the state court

 

administrative office under section 3.

 

     (b) A summary of results obtained under the Michigan home

 

foreclosure prevention program.

 

     (c) A description of the Michigan home foreclosure prevention

 

program.

 

     (2) The duty to report under this section continues until 1

 

year after the Michigan home foreclosure prevention program is

 

discontinued.

 

     Sec. 10. This act is repealed effective 2 years after the

 

effective date of this act.

 

     Enacting section 1. This act does not take effect unless House

 

Bill No. 6614 of the 94th Legislature is enacted into law.