March 17, 2009, Introduced by Reps. Melton, Simpson, Slavens, Liss and Barnett and referred to the Committee on Banking and Financial Services.
A bill to amend 2002 PA 660, entitled
"Consumer mortgage protection act,"
by amending section 5 (MCL 445.1635).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
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.".
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 95th Legislature are
enacted into law:
(a) Senate Bill No.____ or House Bill No. 4592(request no.
(b) Senate Bill No.____ or House Bill No. 4587(request no.
(c) Senate Bill No.____ or House Bill No. 4586(request no.
(d) Senate Bill No.____ or House Bill No. 4593(request no.
(e) Senate Bill No.____ or House Bill No. 4590(request no.
(f) Senate Bill No.____ or House Bill No. 4589(request no.
(g) Senate Bill No.____ or House Bill No. 4591(request no.
(h) Senate Bill No.____ or House Bill No. 4588(request no.