January 22, 2009, Introduced by Rep. Switalski and referred to the Committee on Banking and Financial Services.
†††† A bill to amend 2002 PA 660, entitled
"Consumer mortgage protection act,"
by amending the title and sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10,
11, 12, 13, 14, and 15 (MCL 445.1631, 445.1632, 445.1633, 445.1634,
445.1635, 445.1636, 445.1637, 445.1638, 445.1639, 445.1640,
445.1641, 445.1642, 445.1643, 445.1644, and 445.1645) and by adding
sections 7a and 7b.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
†††† An act to prohibit certain lending practices; to require
disclosure of certain information for home loans and high-cost home
loans; to prescribe certain duties and obligations of the lender in
a home loan or high-cost home loan transaction; to prescribe the
powers and duties of certain state agencies and officials; and to
prescribe penalties and provide for remedies.
†††† Sec. 1. This act shall be known and may be cited as the
mortgage "home loan protection act".
†††† Sec. 2. (1) As used in this act:
†††† (a) "Affiliate" means a company that controls, is controlled
by, or is under common control with another company.
†††† (b) "Annual percentage rate" means an annual percentage rate
for a loan determined under 12 CFR part 226.
†††† (c) "Bona fide discount points" means an amount paid by a
borrower that meets all of the following:
†††† (i) It is knowingly paid by the borrower for the express
purpose of reducing the interest rate applicable to a home loan.
†††† (ii) It results in a bona fide reduction of the interest rate
applicable to the home loan.
†††† (iii) It is paid in connection with a home loan for which the
undiscounted interest rate does not exceed the conventional
mortgage rate by 2 or more percentage points for a home loan
secured by a first lien or by 3-1/2 or more percentage points for a
home loan secured by a subordinated lien.
†††† (d) "Borrower" means any natural person obligated to repay a
loan. The term includes a coborrower, cosigner, or guarantor.
"Commissioner" means the
commissioner of the office of
of the department of
and industry services energy,
labor, and economic growth.
"Depository institution" means a bank, savings and loan association,
savings bank, or a credit union chartered under state or
federal law. †††† (c)
"Home improvement installment contract" means an agreement of
1 or more documents covering the sale of goods or furnishing of services
to a buyer for improvements to the buyer's principal dwelling
located in this state used for occupancy of 4 or fewer families
under which the buyer promises to pay in installments all or
any part of the price of the goods or services. †††† (d)
"Mortgage loan" means a loan or home improvement installment
contract secured by a first or subordinate mortgage or any
other form of lien or a land contract covering real property located
in this state used as the borrower's principal dwelling and designed
for occupancy by 4 or fewer families. Mortgage loan does not
include any of the following: †††† ( i ) Loans in which the proceeds are used to acquire
the dwelling. †††† ( ii ) Reverse-mortgage transactions. †††† ( iii ) An open-end credit plan being a loan in which the
contemplates repeated advances.
†††† (f) "Company" means a person other than a natural person.
†††† (g) "Conventional mortgage rate" means the most recently
published annual yield on conventional mortgages published by the
board of governors of the federal reserve system in statistical
release H.15 as of the applicable time set forth in 12 CFR
†††† (h) Subject to subsection (3), "creditor" means a lender, as
that term is defined in 24 CFR 3500.2, or a mortgage broker.
†††† (i) "Depository financial institution" means a state or
nationally chartered bank, a state or federally chartered savings
and loan association, savings bank, or credit union, or an entity
of the federally chartered farm credit system.
†††† (j) In connection with a home loan, "excluded points and fees"
means 1 or more of the following:
†††† (i) An amount that is not more than 2% of the total loan
amount, attributable to bona fide fees paid to a federal or state
government agency that insures payment of some portion of a home
†††† (ii) An amount that is not more than 2% of the loan amount,
attributable to bona fide discount points.
†††† (iii) Government fees.
†††† (k) "High-cost home loan" means a home loan in which the terms
of the loan meet or exceed 1 or more thresholds. The term does not
include a government-sponsored loan.
†††† (l) "Home loan" means a closed-end or open-end credit plan or
other extension of credit that meets all of the following:
†††† (i) It does not exceed the maximum original principal
obligation as set forth in section 305(a)(2) of the federal home
loan mortgage act, 12 USC 1454(a)(2).
†††† (ii) It meets the requirements for a federally related mortgage
loan under 24 CFR 3500.2.
†††† (iii) It is not a reverse mortgage transaction or a loan
primarily for business, agricultural, or commercial purposes.
†††† (m) "Index" means a published index rate to which the interest
rate on a home loan is tied.
†††† (n) "Margin" means the number of percentage points a creditor
adds to an index to calculate the interest rate at each adjustment
period, as set forth in the loan agreement
†††† (o) "Mortgage broker" means that term as defined in 24 CFR
"Person" means an
individual, corporation, limited
liability company, partnership, association, governmental entity,
or any other legal entity.
"Reverse-mortgage" means a nonrecourse loan under which both
of the following apply: †††† ( i ) A mortgage or other form of lien securing 1 or
is created in the borrower's principal dwelling. †††† ( ii ) The principal, interest, or shared appreciation or
payable only after the borrower dies, the dwelling is transferred,
or the borrower ceases to occupy the dwelling as a principal
dwelling. †††† (g)
"Regulated lender" means a depository institution or a licensee
or a registrant under the consumer financial services act, 1988
PA 161, MCL 487.2051 to 487.2072, 1984 PA 379, MCL 493.101 to 493.114,
the secondary mortgage loan act, 1981 PA 125, MCL 493.51 to
493.81, or the mortgage brokers, lenders, and servicers licensing
act, 1987 PA 173, MCL 445.1651 to 445.1684, and a seller under
the home improvement finance act, 1965 PA 332, MCL 445.1101 to
445.1431. †††† (h)
"State and federal laws" means, individually and collectively,
1 or more of the laws or regulations of this state or the
federal government which regulate or are applicable to a mortgage
loan or a person when brokering, making, servicing, or collecting
a mortgage loan, including, without limitation, the federal
truth in lending act, title I of the consumer credit protection
act, Public Law 90-321, 15 U.S.C. 1601 to 1608, 1610 to 1613,
1615, 1631 to 1635, 1637 to 1649, and 1661 to 1667f, real estate
settlement procedures act of 1974, Public Law 93-533, 88 Stat.
1724, equal credit opportunity act, title VII of the consumer credit
protection act, Public Law 90-321, 15 U.S.C. 1691 to 1691f, fair
housing act, title VIII of the civil rights act of 1968, Public
Law 90-284, 82 Stat. 81, fair credit report act, title VI of the
consumer credit protection act, Public Law 90-321, 15 U.S.C. 1681
to 1681v, the homeowners protection act of 1998, Public Law 105-216,
112 Stat. 897, the fair debt collection practices act, title
VIII of the consumer credit protection act, Public Law 90- 321,
15 U.S.C. 1601nt and 1692 to 1692o, consumer financial services
act, 1988 PA 161, MCL 487.2051 to 487.2072, mortgage brokers,
lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651
to 445.1684, the secondary mortgage loan act, 1981 PA 125, MCL
493.51 to 493.81, 1977 PA 135, MCL 445.1601 to 445.1614, and home
improvement finance act, 1965 PA 332, MCL 445.1101 to 445.1422.
†††† (q) Subject to subsection (2), "points and fees" means all of
†††† (i) All items included in the definition of finance charge in
12 CFR 226.4(a) and 12 CFR 226.4(b), except interest or the time
†††† (ii) All items described in 12 CFR 226.32(b)(1)(iii).
†††† (iii) All compensation paid directly or indirectly to a mortgage
broker from any source, including a mortgage broker that originates
a loan in its own name or in a table-funded transaction.
†††† (iv) The cost of all premiums directly or indirectly financed
by the creditor for any credit life, credit disability, or credit
property insurance in which the creditor is named as a beneficiary,
or any other life or health insurance, or any payments directly or
indirectly financed by the creditor for any debt cancellation or
suspension agreement or contract. However, insurance premiums paid
on a monthly basis or debt cancellation or suspension fees
calculated and paid on a monthly basis are not considered financed
by the creditor.
†††† (v) The maximum prepayment fees and penalties that may be
charged or collected under the terms of the loan documents.
†††† (vi) All prepayment fees or penalties that are incurred by the
borrower if the loan refinances a previous loan originated or
currently held by the same creditor or an affiliate of the
†††† (vii) For an open-end loan, points and fees are calculated by
adding the total points and fees known at or before closing,
including the maximum prepayment penalties that may be charged or
collected under the terms of the loan documents, plus the minimum
additional fees the borrower must pay to draw down an amount equal
to the total credit line.
†††† (r) "Rate threshold" means an annual percentage rate that
equals or exceeds the rate calculated under 12 CFR 226.32(a)(1)(i),
whether the home loan is a "residential mortgage transaction" or an
extension of "open-end credit" as those terms are defined in 12 CFR
†††† (s) "Table-funded transaction" means a loan transaction closed
by a mortgage broker in the mortgage broker's own name with funds
advanced by a person other than the mortgage broker in which the
loan is assigned contemporaneously or within 1 business day of the
funding of the loan to the person that advances the funds.
†††† (t) "Threshold" means a rate threshold or a total points and
†††† (u) "Total loan amount" means the principal of the loan minus
those points and fees described in subsection (2) that are included
in the principal amount of the loan. For an open-end loan, the
total loan amount is calculated using the total line of credit
allowed under the home loan at closing.
†††† (v) "Total points and fees threshold" means 1 of the
following, as applicable:
†††† (i) For a home loan in which the total loan amount is
$20,000.00 or more, the total points and fees payable in connection
with the home loan after subtracting any excluded points and fees
exceed 5% of the total loan amount.
†††† (ii) For a home loan in which the total loan amount is less
than $20,000.00, the total points and fees payable in connection
with the home loan after subtracting any excluded points and fees
exceed $1,000.00 or 8% of the total loan amount, whichever is less.
†††† (2) Points and fees do not include any of the following:
†††† (a) Taxes, filing fees, recording fees, or other charges or
fees paid to or required by a public official for determining the
existence of or for perfecting, releasing, or satisfying a security
†††† (b) Bona fide and reasonable fees paid to a person other than
a creditor or an affiliate of the creditor for any of the
†††† (i) Tax payment services.
†††† (ii) Flood certification.
†††† (iii) Pest infestation or flood determination.
†††† (iv) Appraisal.
†††† (v) Inspections performed before the closing.
†††† (vi) Credit reports.
†††† (vii) Surveys.
†††† (viii) Attorney fees, if the borrower has the right to select
the attorney from an approved list or otherwise.
†††† (ix) Notary fees.
†††† (x) Escrow charges in addition to any paid under subdivision
†††† (xi) Title insurance premiums.
†††† (xii) Fire and hazard insurance and flood insurance premiums,
if the conditions in 12 CFR 226.4(d)(2) are met.
†††† (xiii) Fees for preparing loan documents, including, but not
limited to, deeds, mortgages, and settlement documents.
†††† (3) This act does not apply to a depository financial
institution or an operating subsidiary of a depository financial
A person shall broker, make, or service mortgage loans
in accordance with all applicable state and federal laws. A
creditor shall not directly or indirectly finance any credit life,
credit disability, or credit unemployment insurance in which the
creditor is named as a beneficiary, any other life or health
insurance, or any payments directly or indirectly for any debt
cancellation or suspension agreement or contract. However,
insurance premiums or debt cancellation or suspension fees
calculated and paid in equal monthly installments are not
considered financed by the creditor.
†††† (2) A creditor shall not knowingly or intentionally make a
home loan to a borrower that refinances an existing home loan if
the new loan does not have reasonable, tangible net benefit to the
borrower considering all of the circumstances. As used in this
subsection, "reasonable, tangible net benefit" includes, but is not
limited to, 1 or more of the following:
†††† (a) The borrower receives an amount of cash-out from the new
loan that is equal to or more than 1-1/2 times the amount of
borrower-paid closing costs that are imposed by the creditor for
originating the loan, as disclosed on the HUD-1 settlement
statement, plus the amount of any prepayment penalty paid on the
†††† (b) There is a beneficial change for the borrower in the new
loan, including, but not limited to, a reduction in the term of the
refinanced loan; the new loan refinances an adjustable rate
mortgage that is approaching the interest rate reset date; the new
loan converts an adjustable rate loan to a fixed rate loan; the new
loan converts a balloon loan to a loan without a balloon payment;
the new loan extends the term of the loan to reduce the amount of
the installment payments; or the new loan converts a non-fully
amortized loan to a fully amortized loan that requires principal
reduction with each payment. However, a new loan does not have a
reasonable, tangible net benefit under this subdivision if the loan
is refinanced into an adjustable rate loan with a fixed-rate term
of fewer than 3 years or if the borrower will not recoup the total
cost of the refinancing within 4 years.
†††† (c) The loan is to pay the balance of a land contract;
refinance a lease option; or remove or buy out another borrower
from a mortgage or from the title to a mortgaged dwelling, with a
court order or other evidence that the other borrower no longer
resides in that dwelling.
†††† (d) The new loan is for debt consolidation, curing of
delinquent debts, refinancing to a lower loan-to-value ratio, or
other financial improvement. However, this subdivision is not met
if the loan is refinanced into an adjustable rate loan with a
fixed-rate term of fewer than 3 years or if the borrower will not
recoup the total cost of the refinancing within 4 years.
†††† (e) Refinancing is necessary to respond to a bona fide
personal need of the borrower. For purposes of this subdivision,
there is a bona fide personal need if the borrower can provide
verifiable supporting documentation of any of the following:
†††† (i) The refinance transaction was ordered by a court of
†††† (ii) The property subject to the mortgage is in a foreclosure
†††† (iii) The refinance transaction is necessary to refinance a
construction loan into a permanent loan.
†††† (iv) The borrower is subject to an imminent threat of
†††† (v) The refinance transaction is necessary to remove a lien on
the property imposed by a federal, state, or local government
agency or court, including, but not limited to, a tax or mechanicís
†††† (vi) The borrower or a member of the immediate family of the
borrower has a medical problem requiring prompt medical services or
†††† (3) A creditor shall not recommend or encourage default or
encourage a borrower to stop making payments on an existing loan or
other debt before and in connection with the closing or planned
closing of a home loan that refinances all or any portion of that
existing loan or debt.
†††† (4) A creditor shall not do any of the following:
†††† (a) Charge a borrower a late payment fee unless the loan
documents specifically authorize the fee, the fee is not imposed
unless the payment is past due for 10 days or more, and the fee
does not exceed 5% of the amount of the late payment.
†††† (b) Charge more than 1 late payment fee with respect to any
single late payment.
†††† (c) Charge a late payment fee for a default on a loan payment
if the default is the result of the creditor or servicer deducting
a late payment fee from a previous payment made on the home loan.
However, a creditor may apply any payment made to any unpaid
balances of payments due in the order of maturity, even if the
result is a late payment fee accruing on 1 or more subsequent
†††† (5) A home loan may not contain a provision that permits the
creditor in its sole discretion to accelerate the indebtedness.
This subsection does not prohibit acceleration of the loan in good
faith due to the borrower's failure to abide by the material terms
of the loan.
†††† (6) A creditor shall not charge a fee for verbally informing a
person of the balance due to pay off a home loan. A creditor shall
not charge a person a fee for transmitting 1 written statement of
the balance due to pay off a home loan within a 12-month period. A
creditor may charge a fee that does not exceed $25.00 to provide a
second written statement of the balance due to pay off a home loan
within a 12-month period. If a person requests more than 2 written
statements of the balance due to pay off a home loan within a 12-
month period, a creditor may charge a reasonable fee for any
additional written statements transmitted to that person.
†††† (7) A creditor shall provide a written statement of the
balance due to pay off a loan under subsection (6) within 7
business days after the request is made.
†††† (8) Subject to subsection (9), a creditor shall not do any of
the following in connection with a home loan:
†††† (a) Steer, counsel, or direct a consumer to rates, charges,
principal amount, or prepayment terms that are not reasonably
advantageous to the borrower considering all of the circumstances,
including, but not limited to, the characteristics of the property
that secures or will secure the loan and the loan terms for which
the borrower qualifies.
†††† (b) Materially mischaracterize a borrower's credit history or
the home loans available to a borrower from the creditor.
†††† (c) Materially mischaracterize the appraisal value of a
†††† (d) If unable to suggest, offer, or recommend to a borrower a
reasonably advantageous home loan, discourage a borrower from
seeking a home loan from another creditor.
†††† (9) Subsection (8) does not prohibit a creditor from providing
a borrower with accurate, unbiased, general information about
consumer home loans, underwriting standards, ways to improve credit
history, or any other matter relevant to a borrower.
†††† (10) A creditor shall not charge or collect any prepayment fee
or penalty on a home loan. A prepayment penalty provision in a home
loan is void and unenforceable.
†††† (11) A creditor shall not extend a home loan to a borrower
unless the creditor reasonably determines at the time the home loan
is consummated that the borrower is able to repay the loan
according to the loan terms. Subject to subsection (12), all of the
following apply to a creditor's determination under this
†††† (a) If the creditor making the home loan knows that 1 or more
mortgage loans secured by the same real property will be made
contemporaneously with the home loan to the same borrower, the
creditor must consider the borrower's ability to repay the combined
payments of all loans on the same real property.
†††† (b) The creditor may use any reasonable method to determine a
borrower's ability to repay the home loan, including, but not
limited to, consideration of any of the following:
†††† (i) The borrower's verified current and expected income,
current and expected obligations, employment status or type of
employment, history of employment, credit history, credit score,
residual income, or debt-to-income ratio.
†††† (ii) The amount of the monthly payment for the home loan,
including principal, interest, property taxes, and hazard insurance
†††† (iii) Other financial resources available to the borrower other
than the borrower's equity in the principal dwelling that secures
or will secure the home loan.
†††† (c) The creditor may use any of the following calculation
assumptions in evaluating a borrower's ability to repay the home
†††† (i) That the loan proceeds are fully disbursed on the date of
the loan closing.
†††† (ii) That the loan is to be repaid in substantially equal
monthly amortizing payments of principal and interest over the
entire term of the loan, with no balloon payment.
†††† (iii) That the interest rate over the entire term of the loan is
a fixed rate equal to the fully indexed interest rate at the time
of the loan closing, without considering any initial discounted
rate. As used in this subparagraph, the "fully indexed interest
rate at the time of the loan closing" is the interest rate that
would have applied at the time of closing if the initial interest
rate been determined by the application of the same interest rate
formula (for example, an interest rate index plus or minus a
margin) that applies under the terms of the loan documents to
subsequent interest rate adjustments, disregarding any limitations
on the amount by which the interest rate may change at any 1 time.
†††† (d) If the terms of the home loan permit negative
amortization, the repayment analysis shall be based on the initial
loan amount plus any balance increase that may accrue from the
negative amortization provision.
†††† (12) For purposes of subsection (11), the use of an automated
underwriting system that complies with the provisions of subsection
(11) to underwrite, approve, accept, or otherwise identify a home
loan as meeting acceptable credit standards constitutes a
reasonable method for determining a borrower's ability to repay a
†††† (13) It is an affirmative defense to an action under this act
by a borrower against a creditor if the creditor relied upon 1 or
more deliberate material misstatements, misrepresentations, or
omissions made by the borrower in a home loan application or other
4. (1) A person offering to make or making a
loan shall not do
either any of
†††† (a) Charge a fee for a product or service if the product or
service is not actually provided to the customer.
†††† (b) Misrepresent the amount charged by or paid to a third
party for a product or service.
†††† (c) Charge an application fee.
A lender in making a mortgage loan shall not finance as part
of the loan single premium coverage for any credit life, credit
disability, or credit unemployment.
A person, appraiser, or real estate
agent shall not
make, directly or indirectly, any false, deceptive, or misleading
or representation in connection with a
loan, including, but not limited to, the borrower's ability to
mortgage home loan or the value of the dwelling that
secure repayment of the
mortgage home loan.
A lender creditor shall
not insert or change
on an application for a
mortgage home loan if the
creditor knows that the information is false and misleading
and intended to deceive a third party that the borrower is
for the loan
when if in fact the third party would not
approve the loan without the insertion or change.
A statement or representation is deceptive or misleading if
it has the capacity to deceive or mislead a borrower or potential
borrower. The commissioner shall consider any of the following
factors in deciding whether a statement or misrepresentation
is deceptive or misleading: †††† (a)
The overall impression that the statement or representation
reasonably creates. †††† (b)
The particular type of audience to which the statement is directed. †††† (c)
Whether it may be reasonably comprehended by the segment of
the public to which the statement is directed.
A lender creditor shall
not condition the payment of
an appraisal upon a predetermined value or the closing of the
home loan which that is the basis of the
A person shall not directly or
coerce, or intimidate an appraiser for the purpose of influencing
the independent judgment of the appraiser with respect to the value
the dwelling offered as security for repayment of
the mortgage a
A mortgage home loan
note shall not contain blanks
regarding payments, interest rates, maturity date, or amount
borrowed to be filled in after the note is signed by the borrower.
A mortgage loan with a term of less than 5 years shall not
have a payment schedule with regular periodic payments that when
aggregated do not fully amortize the outstanding principal balance.
This section does not apply to loans with maturities of less
than 1 year, if the purpose of the loan is a "bridge" loan connected
with the acquisition or construction of a dwelling intended
to become the borrower's principal dwelling. In addition
to the other requirements of this act, a high-cost home loan is
subject to the following additional limitations and prohibited
†††† (a) A creditor shall not directly or indirectly finance any
points or fees in excess of 2% of the loan amount in connection
with a high-cost home loan.
†††† (b) A creditor shall not include in the loan documents for a
high-cost home loan or charge a borrower in a high-cost home loan
any prepayment fees or penalties.
†††† (c) A high-cost home loan shall not contain a scheduled
payment that is more than twice as large as the average of earlier
scheduled payments. This subdivision does not apply when the
payment schedule is adjusted to the seasonal or irregular income of
†††† (d) A high-cost home loan shall not include payment terms
under which the outstanding principal balance or accrued interest
will increase at any time over the course of the loan because the
regularly scheduled periodic payments do not cover the full amount
of interest due.
†††† (e) A high-cost home loan shall not contain a provision that
increases the interest rate after default. This subdivision does
not apply to interest rate changes in a variable rate loan
otherwise consistent with the provisions of the loan documents, if
the change in the interest rate is not triggered by the event of
default or the acceleration of the indebtedness.
†††† (f) A high-cost home loan shall not include terms under which
more than 2 periodic payments required under the loan are
consolidated and paid in advance from the loan proceeds provided to
†††† (g) A creditor shall not make a high-cost home loan without
first receiving certification from a counselor from an independent
nonprofit organization approved by the United States department of
housing and urban development, by a state housing financing agency,
or by the regulatory agency that has jurisdiction over the
creditor, that the borrower has received counseling on the
advisability of the loan transaction. A counselor or counseling
agency that is affiliated with a mortgage broker or mortgage
lender, as those terms are defined in section 1a of the mortgage
brokers, lenders, and servicers licensing act, 1987 PA 173, MCL
445.1651a, is not considered an independent nonprofit organization
for purposes of this subsection.
†††† (h) A creditor shall not pay a contractor under a home-
improvement contract from the proceeds of a high-cost home loan,
unless the instrument is payable to the borrower or jointly to the
borrower and the contractor or, at the election of the borrower,
through a third-party escrow agent in accordance with terms
established in a written agreement signed by the borrower, the
creditor, and the contractor before the disbursement.
†††† (i) A creditor shall not charge a borrower a fee or other
amount to modify, renew, extend, or amend a high-cost home loan or
to defer any payment due under the terms of a high-cost home loan.
†††† (j) A high-cost home loan document that creates a debt or an
interest in property to secure a debt shall include the following
notice, printed conspicuously on the face of the document:
†††† "Notice: This is a high-cost home loan subject to special
rules under state law. A purchaser or assignee of this high-cost
home loan may be liable for all claims and defenses of the borrower
with respect to the home loan.".
6. At the time a person applies for a
mortgage home loan,
lender creditor shall provide the applicant the following
†††† "BORROWERS BILL OF RIGHTS
†††† 1. You have the RIGHT to shop for the best loan for you and
compare the charges of different mortgage brokers and lenders.
†††† 2. You have the RIGHT to be informed about the total cost of
your loan including the interest rate, points, and other fees.
†††† 3. You have the RIGHT to obtain a "Good Faith Estimate" of all
loan and settlement charges before you agree to the loan or pay any
†††† 4. You have the RIGHT to know what fees are nonrefundable if
you decide to withdraw your loan application.
†††† 5. You have the RIGHT to ask your mortgage broker to explain
exactly what the mortgage broker will do for you.
†††† 6. You have the RIGHT to know how much the mortgage broker is
getting paid by you and the lender for your loan.
†††† 7. You have the RIGHT to ask questions about charges and loan
terms that you do not understand.
†††† 8. You have the RIGHT to a credit decision that is not based
on your race, color, religion, national origin, sex, marital
status, age, or whether any income is derived from public
†††† 9. You have the RIGHT to know the reason if your loan
application is turned down.".
You have the RIGHT to receive the HUD settlement costs booklet
"Buying Your Home"."
7. At the time a person applies for a
mortgage home loan,
lender creditor shall provide the applicant the following
written notice regarding the value of receiving credit counseling
taking out a
loan and a list of the nearest
available HUD-approved credit counseling agencies:
†††† "CONSUMER CAUTION AND HOME OWNERSHIP COUNSELING NOTICE
†††† If you obtain this loan, the lender will have a mortgage on
your home. You could lose your home, and all money you have
invested in it, if you do not meet your obligations under the loan,
including making all your payments.
†††† Mortgage loans rates and closing costs and fees vary based on
many factors, including your particular credit and financial
circumstances, your earnings history, the loan-to-value requested,
and the type of property that will secure your loan. Higher rates
and fees may be applicable depending on the individual
circumstances of a particular consumer's application.
†††† You should shop around and compare loan rates and fees. This
particular loan may have a higher rate and total points and fees
than other mortgage loans. You should consider consulting a
qualified independent credit counselor or other experienced
financial adviser regarding the rate, fees, and provisions of this
mortgage loan before you proceed. For information on contacting a
credit counselor, ask your lender
or call the United States
Department of Housing and Urban Development's counseling hotline
at 1-888-466-3487 for a list of
†††† You are not required to complete any loan agreement merely
because you have received these disclosures or have signed a loan
application. If you proceed with this mortgage loan, you should
also remember that you may face serious financial risks if you use
this loan to pay off credit card debts and other debts in
connection with this transaction and then subsequently incur
significant new credit card charges or other debts.
†††† Property taxes and homeowner's insurance are your
responsibility. Not all lenders provide escrow services for these
payments. You should ask your lender about these services.
†††† Your payments on existing debts contribute to your credit
ratings. You should not accept any advice to ignore your regular
payments to your existing creditors.".
†††† Sec. 7a. (1) Any person who purchases or is otherwise assigned
a high-cost home loan is subject to all affirmative claims and any
defenses with respect to the loan that the borrower could assert
against the original creditor of the loan. However, this subsection
does not apply if the purchaser or assignee demonstrates by a
preponderance of the evidence that it meets all of the following:
†††† (a) At the time of the purchase or assignment of the subject
loans, has in place policies that expressly prohibit its purchase
or acceptance of assignment of any high-cost home loans.
†††† (b) Requires by contract that a seller or assignor of home
loans to the purchaser or assignee represents and warrants 1 of the
following to the purchaser or assignee:
†††† (i) That the seller or assignor will not sell or assign any
high-cost home loans to the purchaser or assignee.
†††† (ii) That the seller or assignor is a beneficiary of a
representation and warranty from a previous seller or assignor to
†††† (c) Exercises reasonable due diligence at the time of purchase
or assignment of home loans or within a reasonable period of time
after the purchase or assignment of those home loans, intended by
the purchaser or assignee to prevent the purchaser or assignee from
purchasing or taking assignment of any high-cost home loans.
However, for purposes of this subdivision, reasonable due diligence
shall provide for sampling and shall not require loan-by-loan
†††† (2) Limited to an amount equal to the monthly payments already
made under the loan agreement, any finance charges other than those
already collected in the monthly payments made under a home loan,
forfeiture of future interest on the loan, reasonable costs, and
reasonable attorney fees, a borrower acting only in an individual
capacity may assert claims that the borrower could assert against
the creditor of the home loan against any subsequent holder or
assignee of the home loan as follows:
†††† (a) Within 5 years of the closing of a high-cost home loan, a
violation of this act in connection with the loan as an original
†††† (b) At any time during the term of a high-cost home loan,
after an action to collect on the home loan or foreclose on the
collateral securing the home loan has been initiated or the debt
arising from the home loan has been accelerated or the home loan
has become 60 days in default, any defense, claim or counterclaim,
or action to enjoin foreclosure or preserve or obtain possession of
the home that secures the loan.
†††† (3) The provisions of this section are effective
notwithstanding any other provision of law. However, this section
shall not be construed to limit the substantive rights, remedies,
or procedural rights available to a borrower against any creditor,
assignee, or holder under any other law. The rights conferred on
borrowers by subsections (1) and (2) are independent of each other
and do not limit each other.
†††† Sec. 7b. (1) Subject to subsections (8) and (9), in a civil
action, if a person is found by a preponderance of the evidence to
have violated this act, the court may award the borrower all of the
†††† (a) Actual damages, including consequential and incidental
damages. A borrower is not required to demonstrate reliance in
order to receive actual damages.
†††† (b) For a violation of section 3 or 4, statutory damages in an
amount equal to the monthly payments already made under the loan
agreement, any finance charges other than those already collected
in the monthly payments made under the loan and forfeiture of
future interest on the loan.
†††† (c) If the violation is malicious or reckless, punitive
†††† (d) Costs and reasonable attorney fees.
†††† (2) The attorney general, the prosecuting attorney for the
county where an alleged violation occurred, or a borrower may bring
an action against a person for injunctive, declaratory, and any
other equitable relief to enforce compliance with this act.
†††† (3) The right of rescission granted under the truth in lending
act, 15 USC 1601 to 1667f, for a violation of that law is available
to a borrower by way of recoupment against a party foreclosing on
the home loan or collecting on the loan, at any time during the
term of the loan. This subsection does not limit any recoupment
right available to a borrower under any other law.
†††† (4) For purposes of this section, a creditor or assignee in a
home loan who fails to comply with the provisions of this act while
acting in good faith is not in violation of this act if that
creditor or assignee establishes either of the following:
†††† (a) Within 60 days of the loan closing, and before receiving
any notice of the compliance failure, the creditor or assignee made
appropriate restitution to the borrower and appropriate adjustments
to the loan.
†††† (b) Within 90 days of the loan closing and before receiving
any notice of the compliance failure, and the compliance failure
was not intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably adapted to
avoid those errors, the borrower is notified of the compliance
failure, appropriate restitution is made to the borrower, and
appropriate adjustments are made to the loan. As used in this
subsection, a "bona fide error" includes, but is not limited to, a
computer malfunction or a clerical, calculation, computer
programming, or printing error. An error of legal judgment with
respect to a person's obligations under this section is not a bona
†††† (5) The remedies provided in this section are cumulative and
are not the exclusive remedies available to a borrower. A borrower
is not required to exhaust any administrative remedies provided
under this act or any other applicable law before proceeding under
†††† (6) A provision in an agreement for a home loan that allows a
person to require a borrower, individually or on behalf of
similarly situated borrowers, to assert any legal claim or defense
in a forum located outside of this state or limits in any way a
claim or defense the borrower may have is void and unenforceable.
†††† (7) A person shall not attempt in bad faith to avoid the
application of this act by dividing any home loan transaction into
separate parts, structure a home loan transaction as an open-end
loan for the purpose of evading this act if the loan would have
been a high-cost home loan if the loan had been structured as a
closed-end loan, or engage in any other subterfuge with the intent
of evading this act.
†††† (8) A borrower may only assert a claim under this act on his
or her own behalf and may not assert claims on behalf of similarly
†††† (9) A borrower who is illegally residing in the United States
may not assert a claim under this act.
†††† Sec. 8. (1) The commissioner may conduct examinations and
of a person over
the commissioner has
regulatory authority as necessary to determine whether the person
brokering, making, servicing, or collecting
mortgage home loans
as required by this act.
†††† (2) The commissioner may promulgate reasonable rules under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, as necessary to implement and administer this act.
†††† (3) The commissioner may provide guidance to any person over
which the commissioner has regulatory authority on the application
of and compliance with this act.
†††† Sec. 9. If the commissioner determines that a person is
making, servicing, or collecting
mortgage home loans in
violation of this act, the commissioner shall do 1 or more of the
†††† (a) Initiate a cause of action under section 10.
†††† (b) If the person is chartered, licensed, registered,
regulated, or administered by the commissioner under a law of this
state, the commissioner shall enforce the penalties and remedies
under that law.
†††† (c) Forward a complaint to the appropriate regulatory or
†††† Sec. 10. (1) The attorney general or the prosecuting attorney
for the county where an alleged violation occurred may bring an
action against a person to do 1 or more of the following:
†††† (a) Obtain a declaratory judgment that a method, act, or
practice of the person is a violation of this act.
†††† (b) Enjoin a person who is engaging or about to engage in a
method, act, or practice that is a violation of this act.
Obtain a civil fine
of not more than $10,000.00 for the first
offense and not more than $20,000.00 for the second and any subsequent
offense under subsection (2).
†††† (2) In addition to any other remedies or penalties imposed by
this act, a creditor, a member, officer, director, or employee of a
creditor, or any other person that violates this act or an order
made or rule promulgated under this act, or directly or indirectly
counsels, aids, or abets in a violation, is responsible for a civil
fine of not more than $3,000.00 for each violation, except that a
person shall not be fined more than $30,000.00 for a transaction
resulting in more than 1 violation, plus the costs of
(1) A person is not liable for a violation under section
10 if the person shows that the violation was an unintentional
and bona fide error notwithstanding the maintenance of
procedures reasonably adopted to avoid the error. Examples of a bona
fide error include clerical, calculation, computer malfunction,
programming, or printing errors. An error in legal judgment
with respect to a person's obligations under this act is not
a bona fide error. †††† (2)
A person is not liable for a violation under section 10 if,
within 60 days after discovery of the violation and before the institution
of an action under section 10, the person notifies the borrower
or buyer of the violation and corrects the violation in a manner
that, to the extent it is reasonably possible to do so, restores
the borrower or buyer to the position in which the borrower
or buyer would have been if the violation had not occurred. †††† (3)
The person alleged to have violated this act has the burden
of proving that he or she is not liable as provided under this
section. A creditor, a
member, officer, director, or employee
of a creditor, or any other person that knowingly violates this act
or an order made or rule promulgated under this act is guilty of a
misdemeanor punishable by a fine of not more than $15,000.00,
imprisonment for not more than 1 year, or both.
†††† Sec. 12. (1) This act does not limit the authority of the
commissioner, the attorney general, or a county prosecutor to
enforce any law under which a person is chartered, organized,
licensed, registered, regulated, or otherwise authorized to do
business in this state.
†††† (2) The rights conferred by this act are independent of and in
addition to any other rights under state or federal law.
(1) No later than December 31, 2003, the office of financial
and insurance services shall develop and make available to
local units of government, financial institutions, and other interested
persons 1 or more model programs for financial education. †††† (2)
The program required under this section shall be designed to
teach personal financial management skills and the basic principles
involved with saving, borrowing, investing, and protection
against predatory and other fraudulent lending practices.
This act applies to any home
loan or other transactions
governed by this act concerning real property located in this
†††† Sec. 14. (1) The federal government and state solely regulate
the business of brokering, making, servicing, and collecting
home loans in this state and the manner in which any
that business is conducted.
†††† (2) Any charter, ordinance, resolution, regulation, rule, or
other action by a municipal corporation or other political
subdivision of this state to regulate, directly or indirectly, the
making, servicing, or collecting of
mortgage home loans
constitutes a statutory conflict with the uniform operation
throughout the state of residential mortgage lending and is
†††† (3) Any charter, ordinance, resolution, regulation, rule, or
other action by a municipal corporation or other political
subdivision of this state to collect information about, require
reporting of, pledges regarding, notices, or certifications
lenders creditors, applicants,
credit experiences, character, and criminal background checks of
employees, agents, customers, or other persons is preempted by this
†††† (4) Any charter, ordinance, resolution, regulation, rule, or
other action by a municipal corporation or other political
subdivision of this state that attempts to regulate the brokering,
servicing, or collecting of
mortgage home loans constitutes
a statutory conflict and is preempted, including, without
limitation, if the ordinance, resolution, regulation, or other
action does either of the following:
†††† (a) Disqualifies a person, or its subsidiaries or affiliates,
from doing business with the municipal corporation or other
political subdivision based upon the acts or practices of the
person or its subsidiaries or affiliates in brokering, making,
†††† (b) Imposes reporting requirements or other obligations upon a
person, or its subsidiaries or affiliates, based upon the person's,
or its subsidiaries' or affiliates', acts or practices in
making, servicing, or collecting
mortgage home loans.
If any provision of this section, or any application of any
provision of this section, is for any reason held to be illegal or
invalid, the illegality or invalidity shall not affect any legal and
valid provision or application of this section, and the provisions
and applications of this section shall be severable.
†††† Sec. 15. (1) The laws of this state relating to the brokering,
servicing, and collecting of
mortgage home loans prescribe
rules of conduct upon citizens generally, comprise a comprehensive
regulatory framework intended to operate uniformly throughout the
state under the same circumstances and conditions, and constitute
general laws of this state.
†††† (2) Silence in the statutes of this state with respect to any
act or practice in the brokering, making, servicing, or collecting
mortgage home loans shall not be interpreted to mean that the
state has not completely occupied the field or has only set minimum
standards in its regulation of brokering, making, servicing, or
mortgage home loans.
†††† (3) It is the intent of the legislature to entirely preempt
municipal corporations and other political subdivisions from the
regulation and licensing of persons engaged in the brokering,
servicing, or collecting of
mortgage home loans in this