HOUSE BILL No. 4592

 

March 17, 2009, Introduced by Reps. 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 the title and sections 1 and 2 (MCL 445.1631 and

 

445.1632).

 

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.

 

     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. 4587(request no.

 

1099'09).


 

     (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).