March 17, 2009, Introduced by Reps. Switalski, Simpson, Slavens, Barnett and Liss and referred to the Committee on Banking and Financial Services.
†††† A bill to amend 2002 PA 660, entitled
"Consumer mortgage protection act,"
by amending sections 3 and 4 (MCL 445.1633 and 445.1634).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
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.
†††† 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. 4585(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.