HOUSE BILL No. 4065

 

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:

 

TITLE

 

†††† 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

 

"consumer 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.

 

†††† (e) (a) "Commissioner" means the commissioner of the office of

 

financial and insurance services regulation of the department of

 

consumer and industry services energy, labor, and economic growth.

 

†††† (b) "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 lender

 

reasonably 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

 

226.32(a)(1)(i).

 

†††† (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

 

loan.

 

†††† (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

 

3500.2.

 

†††† (p) (e) "Person" means an individual, corporation, limited

 

liability company, partnership, association, governmental entity,

 

or any other legal entity.

 

†††† (f) "Reverse-mortgage" means a nonrecourse loan under which

 

both of the following apply:

 

†††† (i) A mortgage or other form of lien securing 1 or more

 

advances is created in the borrower's principal dwelling.

 

†††† (ii) The principal, interest, or shared appreciation or equity

 

is 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

 

the following:

 

†††† (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

 

price differential.

 

†††† (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

 

creditor.

 

†††† (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


 

226.2.

 

†††† (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

 

fees threshold.

 

†††† (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


 

interest.

 

†††† (b) Bona fide and reasonable fees paid to a person other than

 

a creditor or an affiliate of the creditor for any of the

 

following:

 

†††† (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

 

(a).

 

†††† (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

 

institution.

 

†††† Sec. 3. (1) 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

 

refinanced loan.

 

†††† (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

 

competent jurisdiction.

 

†††† (ii) The property subject to the mortgage is in a foreclosure

 

proceeding.

 

†††† (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

 

bankruptcy.

 

†††† (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

 

lien.

 

†††† (vi) The borrower or a member of the immediate family of the

 

borrower has a medical problem requiring prompt medical services or

 

prescription drugs.

 

†††† (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


 

payments due.

 

†††† (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

 

dwelling.

 

†††† (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

 

subsection:

 

†††† (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

 

premiums.

 

†††† (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

 

loan:

 

†††† (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

 

home loan.

 

†††† (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

 

loan document.

 

†††† Sec. 4. (1) A person offering to make or making a mortgage

 

home loan shall not do either any of the following:

 

†††† (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.

 

†††† (2) 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.

 

†††† (2) (3) A person, appraiser, or real estate agent shall not

 

make, directly or indirectly, any false, deceptive, or misleading

 

statement or representation in connection with a mortgage home

 

loan, including, but not limited to, the borrower's ability to

 

qualify for a mortgage home loan or the value of the dwelling that

 

will secure repayment of the mortgage home loan.

 

†††† (3) (4) A lender creditor shall not insert or change

 

information on an application for a mortgage home loan if the

 

lender creditor knows that the information is false and misleading

 

and intended to deceive a third party that the borrower is

 

qualified for the loan when if in fact the third party would not

 

approve the loan without the insertion or change.

 

†††† (5) 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.

 

†††† (4) (6) A lender creditor shall not condition the payment of

 

an appraisal upon a predetermined value or the closing of the

 

mortgage home loan which that is the basis of the appraisal.


 

†††† (5) (7) A person shall not directly or indirectly compensate,

 

coerce, or intimidate an appraiser for the purpose of influencing

 

the independent judgment of the appraiser with respect to the value

 

of the dwelling offered as security for repayment of the mortgage a

 

home loan.

 

†††† (6) (8) 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.

 

†††† Sec. 5. 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

 

practices:

 

†††† (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

 

the borrower.

 

†††† (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

 

the borrower.

 

†††† (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.".

 

†††† Sec. 6. At the time a person applies for a mortgage home loan,

 

the lender creditor shall provide the applicant the following

 

document:

 

†††† "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

 

fees.

 

†††† 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

 

assistance.

 

†††† 9. You have the RIGHT to know the reason if your loan

 

application is turned down.".

 

†††† 10. You have the RIGHT to receive the HUD settlement costs

 

booklet "Buying Your Home"."

 

†††† Sec. 7. At the time a person applies for a mortgage home loan,

 

the lender creditor shall provide the applicant the following

 

written notice regarding the value of receiving credit counseling

 

before taking out a mortgage home 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

 

qualified 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 counselors.

 

†††† 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

 

that effect.

 

†††† (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


 

review.

 

†††† (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

 

action.

 

†††† (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

 

following:

 

†††† (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

 

damages.

 

†††† (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

 

fide error.

 

†††† (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

 

this section.

 

†††† (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

 

situated borrowers.

 

†††† (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

 

investigations of a person over whom which the commissioner has

 

regulatory authority as necessary to determine whether the person

 

is 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

 

brokering, making, servicing, or collecting mortgage home loans in

 

violation of this act, the commissioner shall do 1 or more of the

 

following:


 

†††† (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

 

investigatory authority.

 

†††† 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.

 

†††† (c) 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

 

investigation.

 

†††† Sec. 11. (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.

 

†††† Sec. 13. (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

 

state.

 

†††† Sec. 14. (1) The federal government and state solely regulate

 

the business of brokering, making, servicing, and collecting

 

mortgage home loans in this state and the manner in which any such

 

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

 

brokering, 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

 

preempted.

 

†††† (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

 

concerning home loans, lenders creditors, applicants, deposits, or

 

credit experiences, character, and criminal background checks of

 

employees, agents, customers, or other persons is preempted by this

 

act.

 

†††† (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,

 

making, 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,

 

servicing, or collecting mortgage home loans.

 

†††† (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

 

brokering, making, servicing, or collecting mortgage home loans.

 

†††† (5) 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,

 

making, 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

 

of 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

 

collecting of 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,

 

making, servicing, or collecting of mortgage home loans in this

 

state.