HOUSE BILL No. 4585

 

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:

 

     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.".

 

     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.

 

01098'09).

 

     (b) Senate Bill No.____ or House Bill No. 4587(request no.

 

01099'09).

 

     (c) Senate Bill No.____ or House Bill No. 4586(request no.

 

01101'09).

 

     (d) Senate Bill No.____ or House Bill No. 4593(request no.

 

01103'09).

 

     (e) Senate Bill No.____ or House Bill No. 4590(request no.

 

01104'09).

 

     (f) Senate Bill No.____ or House Bill No. 4589(request no.

 

01105'09).

 

     (g) Senate Bill No.____ or House Bill No. 4591(request no.

 

01106'09).

 

     (h) Senate Bill No.____ or House Bill No. 4588(request no.

 

01107'09).