HOUSE BILL No. 4587

 

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:

 

†††† 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.

 

†††† 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. 4585(request no.

 

01100'09).

 

†††† (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).