SB-1552, As Passed House, December 3, 2008

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 1552

A bill to amend 1981 PA 125, entitled

"The secondary mortgage loan act,"

by amending the title and sections 1, 2, 6, 6a, 6b, 11, 13, 20, 22,

and 27 (MCL 493.51, 493.52, 493.56, 493.56a, 493.56b, 493.61,

493.63, 493.70, 493.72, and 493.77), the title and sections 6, 11,

13, 20, 22, and 27 as amended and section 6a as added by 1997 PA

91, sections 1 and 6b as amended by 2002 PA 392, and section 2 as

amended by 2007 PA 46, and by adding sections 2a, 2b, 2c, 2d, and

26a.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

An act to regulate secondary mortgage loans; to regulate

secondary mortgage brokers, lenders, servicers, and loan officers;

to prescribe powers and duties of certain state agencies and

officials; to require certain fees; to provide for the

establishment of a revolving fund; to provide for the promulgation

of rules; and to provide remedies and prescribe ~~civil fines and~~

penalties.

Sec. 1. (1) This act shall be known and may be cited as "the

secondary mortgage loan act".

(2) As used in this act:

(a) "Broker" means a person who, directly or indirectly, does

1 or both of the following:

(i) Serves or offers to serve as an agent for a person

attempting to obtain a secondary mortgage loan.

(ii) Serves or offers to serve as an agent for a person who

makes or offers to make a secondary mortgage loan.

(b) "Commissioner" means the commissioner of the office of

financial and insurance ~~services~~ regulation of the department of

~~consumer and industry services and any~~ energy, labor, and economic

growth or his or her authorized representatives. ~~of the~~

~~commissioner.~~

a licensee or registrant or a person who has the authority to

participate in the direction, directly or indirectly through 1 or

more other persons, of the management or policies of a licensee or

registrant.

(d) "Depository financial institution" means a state or

nationally chartered bank, state or federal chartered savings and

loan association, savings bank, or credit union, or any other

institution whose deposits are insured by an agency of the federal

government.

(e) "Exclusive broker" means a person that brokers secondary

mortgage loans solely to 1 licensee or registrant, is compensated

solely by that licensee or registrant, and is indemnified by the

licensee or registrant as provided in section 6. The actions or

practices of an exclusive broker in brokering a secondary mortgage

loan are the actions or practices of the licensee or registrant.

(f) "Executive officer" means an officer, member, or partner

of a licensee or registrant. ~~, including~~ The term includes the

chief executive officer, president, vice president, chief financial

officer, controller, or compliance officer, or an individual

holding any other similar position.

(g) "Financial licensing act" means ~~the consumer financial~~

~~services act, 1988 PA 161, MCL 487.2051 to 487.2072, and any act~~

~~listed~~ any of the financial licensing acts, as that term is defined

in section 2 of the consumer financial services act, 1988 PA 161,

MCL 487.2052.

(h) "Lender" means a person who, directly or indirectly, makes

or offers to make secondary mortgage loans.

(i) "Licensee" means a person licensed or required to be

licensed under this act. ~~A licensee does not include a depository~~

~~financial institution.~~

(j) "Loan servicing customer" means a mortgagor whose

secondary mortgage loan is being serviced by a servicer.

(k) "Open-end credit" means credit extended under a plan in

which both of the following apply:

(i) The licensee or registrant reasonably contemplates repeated

transactions.

(ii) The amount of credit that may be extended to the borrower

during the term of the plan is generally made available to the

extent that any part of the outstanding balance is repaid.

(l) "Originate" means any of the following:

(i) To negotiate, arrange, or offer to negotiate or arrange a

secondary mortgage loan between a lender and 1 or more individuals.

(ii) To place, assist in placing, or find a secondary mortgage

loan for 1 or more individuals.

(m) (l) "Person" means an individual, corporation, limited

liability company, partnership, association, or other legal entity.

(n) ~~(m)~~ "Registrant" means a person that is registered or

required to ~~be registered under this act. A registrant does not~~

~~include a~~ register as a broker, lender, or servicer under this act.

The term does not include a secondary mortgage loan officer

registrant or depository financial institution.

(o) ~~(n)~~ "Secondary mortgage loan" means a loan that ~~is not to~~

~~be repaid within 90 days,~~ has a term of 90 days or more; that is

made to a person for personal, family, or household purposes; , and

that is secured by a mortgage ~~upon~~ on an interest in real property

that is used as a dwelling ~~if the property~~ and is subject to a lien

of 1 or more ~~prior~~ outstanding mortgages. ~~The~~ A secondary mortgage

loan may be secured by other collateral in addition to real

property. Notwithstanding the place of execution, nominal or real,

of a secondary mortgage loan, if the real property that secures the

loan is located in this state, ~~the~~ a secondary mortgage loan is

subject to this act and all other applicable laws of this state.

(p) "Secondary mortgage loan officer" means an individual who

is an employee or agent of a broker, lender, or servicer; who

originates secondary mortgage loans; and who is not an employee of

a depository financial institution or a subsidiary or affiliate of

a depository financial institution.

(q) "Secondary mortgage loan officer registrant" means either

of the following:

(i) An individual who is currently registered under section 2a

or 2c.

(ii) An individual who is not required to register to perform

services of a secondary mortgage loan officer under section 2a(9).

(r) ~~(o)~~ "Service" means the collection or remittance for a

lender, noteowner, or noteholder , or ~~the~~ a licensee's own account

of 4 or more installment payments of the principal of, interest of,

or an amount placed in escrow under a secondary mortgage loan,

mortgage servicing agreement, or an agreement with ~~the~~ a mortgagor.

(s) ~~(p)~~ "Servicer" means a person who, directly or indirectly,

services or offers to service secondary mortgage loans.

Sec. 2. (1) A person shall not act as a broker, lender, or

servicer without first obtaining a license ~~or registering~~ under

this act or registering under section 3a, unless 1 or more of the

following apply:

(a) The person is ~~solely performing~~ providing secondary

mortgage loan officer services as an employee or agent of only 1

broker, lender, or servicer and is registered as a secondary

mortgage loan officer registrant if that registration is required

under this act.

(b) The person is an exclusive broker. This subdivision does

not apply after March 31, 2009.

services act, 1988 PA 161, MCL 487.2051 to 487.2072.

(d) The person acts as a lender but makes or negotiates 2 or

fewer secondary mortgage loans in a calendar year.

(e) The person acts as a servicer but services 10 or fewer

secondary mortgage loans in a calendar year.

(f) The person is an individual and an employee of a

professional employer organization, as that term is defined in

~~section 4 of the single business tax act, 1975 PA 228, MCL 208.4~~

section 113 of the Michigan business tax act, 2007 PA 36, MCL

208.1113, solely acting as a secondary mortgage loan originator of

only 1 broker or lender. The broker or lender shall do all of the

following:

(i) Direct and control the activities of the individual under

this act.

(ii) Be responsible for all activities of the individual and

assume responsibility for the individual’s actions that are covered

by the proof of financial responsibility deposit required under

section 6.

(2) By October 31, 1997, a servicer that was exempt from

regulation under this act shall either file with the commissioner

an application for a license or registration under section 3 or

discontinue all activities subject to this act.

(3) Except for a state or nationally chartered bank, savings

bank, or an affiliate of a bank or savings bank, a person subject

to this act shall not include in its name or assumed name the words

"bank", "banker", "banc", "bankcorp", "bancorp", or any other words

or phrases that would imply that the person is a bank, is engaged

in the business of banking, or is affiliated with a bank or savings

bank. It is not a violation of this subsection for a licensee to

use the term "mortgage banker" or "mortgage banking" in its name or

assumed name.

(4) A person subject to this act whose name or assumed name on

January 1, 1997 contained a word prohibited by subsection (3) may

continue to use that name or assumed name.

Sec. 2a. (1) Beginning April 1, 2009, an employee or agent of

a licensee or registrant, other than an individual described in

subsection (9), shall not perform services of a secondary mortgage

loan officer unless he or she registers or otherwise complies with

this section.

(2) A licensee or registrant that employs or offers to employ,

or engages or offers to engage as an agent, an individual, other

than an individual described in subsection (9), as a secondary

mortgage loan officer to originate secondary mortgage loans after

March 31, 2009 shall conduct a criminal history check of that

individual. All of the following apply to the criminal history

check of an individual required under this subsection:

(a) The department of state police and the federal bureau of

investigation shall perform the criminal history check required

under this subsection.

(b) The individual who is the subject of the criminal history

check shall have his or her fingerprints taken by a law enforcement

agency or by another person that the commissioner determines is

qualified to take fingerprints; pay the agency or person the fees

required by the department of state police under section 3 of 1935

PA 120, MCL 28.273, and by the federal bureau of investigation, for

processing fingerprints and completing a criminal history check;

and request that the agency or person forward the fingerprints, a

request for a criminal history check of the individual in the

format and as prescribed by the department of state police, and the

fees to the department of state police.

fingerprints and appropriate fee to the federal bureau of

investigation for a national criminal history check.

(d) After receiving a proper request and the required fees

under this subsection, the department of state police shall conduct

the criminal history check and provide the licensee or registrant

with the results of the criminal history check. The results shall

contain any criminal history record information concerning the

individual maintained by the department of state police and the

results of the federal bureau of investigation's criminal history

check.

(e) The licensee or registrant shall submit the results of the

criminal history check described in subdivision (d) to the

commissioner with the application for secondary mortgage loan

officer registration described in subsection (4) or for purposes of

subsection (5).

(f) The criminal history check required under this subsection

may be conducted by the licensee or registrant, requested of and

performed by the department of state police and the federal bureau

of investigation, and submitted to the commissioner at any time on

or after January 1, 2009.

(g) If a criminal arrest fingerprint card is subsequently

submitted to the department of state police and matches against a

fingerprint that was submitted under this subsection and stored by

the department of state police in its automated fingerprint

identification system (AFIS) database, the department of state

police shall notify the commissioner.

(3) Beginning April 1, 2009, if an individual, other than an

individual described in subsection (9), is employed or engaged as

an agent to originate secondary mortgage loans by a licensee or

registrant, that individual shall apply for secondary mortgage loan

officer registration under this section within 90 days after he or

she begins providing services as an employee or agent of the

licensee or registrant, by submitting the application described in

subsection (4), in writing, and including with the application the

annual operating fee established under section 6a(6).

(4) The commissioner shall prescribe the form of application

for registration as a secondary mortgage loan officer. Subject to

subsection (8), the application form shall require that an

applicant provide at least all of the following to the

commissioner:

(a) The name and home address of the applicant.

(b) A statement as to whether the applicant has ever been

convicted of, or pled no contest to, any of the following:

(i) A misdemeanor involving embezzlement, forgery, fraud, a

financial transaction, or securities.

(ii) A felony.

application denied, or a license, registration, or similar

authority revoked or suspended, to practice any profession or

occupation in any jurisdiction, including, but not limited to,

licensure or registration as a broker, lender, or servicer in which

the applicant held more than 25% of the ownership interest or as a

secondary mortgage loan officer.

(d) Except for an application described in subsection (7),

proof in the form of a certificate of completion or other evidence

acceptable to the commissioner that the applicant has completed at

least 24 hours of live professional classroom instruction in this

state in an introductory course in residential mortgage lending

that is sponsored or provided by a person, and taught by an

instructor, approved by the commissioner. The 24 hours of

instruction shall include at least 3 hours of live classroom

instruction concerning state and federal laws and regulations

governing residential mortgage lending, the content of which has

been approved by the commissioner.

(e) Evidence acceptable to the commissioner that the applicant

correctly answered at least 75% of the questions on an examination

approved by the commissioner that tests an applicant's knowledge of

the contents of the introductory course in residential mortgage

lending described in subdivision (d).

(f) The results of the criminal history check described in

subsection (2).

(g) The signature of the applicant and his or her declaration

that the information and statements made in or included with the

application are true, accurate, and complete.

(h) The signature of an executive officer on behalf of the

licensee or registrant that employs or offers to employ, or engages

or offers to engage as an agent, the applicant, and the executive

officer's certification on behalf of the licensee or registrant

that the information and statements in or included with the

application are true, accurate, and complete to the best of his or

her knowledge and belief.

(i) Any other information required by the commissioner.

(5) Beginning April 1, 2009, an applicant for secondary

mortgage loan officer registration may perform services as a

secondary mortgage loan officer while his or her application is

pending if all of the following are met:

(a) The licensee or registrant that is the employer or

principal of the applicant has completed the criminal history check

of the applicant described in subsection (2) and submitted the

results of that criminal history check to the commissioner.

(b) The criminal history check described in subdivision (a)

does not disclose that the applicant has been convicted of, or pled

no contest to, any of the following:

(i) A felony or misdemeanor involving embezzlement, forgery,

fraud, a financial transaction, or securities.

(ii) Within the 10-year period preceding the date of the

application, a felony other than a felony described in subparagraph

(i).

principal of the applicant has provided the commissioner with

written notice that the applicant is beginning to provide services

as a secondary mortgage loan officer for the licensee or

registrant.

(6) The commissioner shall not issue a registration to any of

the following:

(a) An applicant who has been convicted of, or pled no contest

to, any of the following:

(i) A felony or misdemeanor involving embezzlement, forgery,

fraud, a financial transaction, or securities.

(ii) Within the 10-year period preceding the date of the

application, a felony other than a felony described in subparagraph

(i).

(b) An applicant against whom the commissioner has issued a

prohibition order under section 14a.

the results of the criminal history check described in subsection

(2).

(d) An individual described in subsection (9).

(7) The commissioner must register a secondary mortgage loan

officer who meets all of the following:

(a) For the 5-year period immediately preceding the effective

date of the amendatory act that added this section, he or she was

employed or engaged as a secondary mortgage loan officer for at

least 4-1/2 years by 1 or more licensees, registrants, or persons

exempt from this act under section 29 or 29a.

(b) He or she was not the subject of any prohibition orders

issued by the commissioner under section 14a in the 5-year period

immediately preceding the effective date of the amendatory act that

added this section.

described in subsection (4)(e) and correctly answers at least 75%

of the questions on the examination.

(d) Before April 1, 2009, he or she submits an application

under subsection (4). However, the applicant is not required to

complete or submit proof of completion of the instruction described

in subsection (4)(d).

(e) He or she is not an applicant described in subsection (6).

(8) The commissioner may waive any of the requirements of this

section for secondary mortgage loan officer registration if the

applicant has a valid, similar license or registration from another

state that has a reciprocal agreement with the commissioner, except

subsection (6)(a) and (c).

(9) Beginning April 1, 2009, an individual who meets all of

the following may perform services of a secondary mortgage loan

officer without registering under or otherwise complying with this

section:

(a) Is an employee or agent of a broker, lender, or servicer

that is also a mortgage broker, mortgage lender, or mortgage

servicer under the mortgage brokers, lenders, and servicers

licensing act, 1987 PA 173, MCL 445.1651 to 445.1684.

(b) Is currently registered as a loan officer under the

mortgage brokers, lenders, and servicers licensing act, 1987 PA

173, MCL 445.1651 to 445.1684.

(10) An individual described in subsection (9) is considered a

secondary mortgage loan officer registrant for purposes of this

act.

Sec. 2b. (1) The commissioner may disclose, provide, or make

available to the public the names, business addresses, and business

telephone numbers of secondary mortgage loan officer registrants.

The commissioner shall not disclose, provide, or make available to

the public any other personal identifying information about

secondary mortgage loan officer registrants or applicants for

secondary mortgage loan officer registration.

(2) Beginning April 1, 2009, an individual employed or engaged

as an agent by a licensee or registrant as a secondary mortgage

loan officer shall not use the title or designation "loan officer",

"loan originator", "mortgage loan officer", "mortgage loan

originator", "secondary mortgage loan officer", or "secondary

mortgage loan originator" if he or she is not a secondary mortgage

loan officer registrant. A secondary mortgage loan officer

registrant and the employer or principal of a secondary mortgage

loan officer registrant shall not use the word "registered",

"certified", or any word of similar import in his or her title or

designation to identify him or her as an individual who has met the

registration requirements of this act unless use of that word is

approved by the office of financial and insurance regulation.

(3) Beginning April 1, 2009, a secondary mortgage loan officer

shall not directly or indirectly receive any compensation,

commission, fee, points, or other remuneration or benefits for

originating a secondary mortgage loan unless both of the following

are met:

(a) The secondary mortgage loan officer is a secondary

mortgage loan officer registrant or exempt under section 2a(9).

(b) The compensation, commission, fee, points, or other

remuneration or benefits are paid by the licensee or registrant for

which the secondary mortgage loan officer originated that secondary

mortgage loan.

(4) Beginning April 1, 2009, a broker, lender, or servicer

shall not directly or indirectly pay any compensation, commission,

fee, points, or other remuneration or benefits to any of the

following:

(a) A secondary mortgage loan officer who is not a secondary

mortgage loan officer registrant.

(b) A secondary mortgage loan officer registrant who is not an

employee or agent of that broker, lender, or servicer. As used in

this subdivision, "employee" means that term as defined in section

3401 of the internal revenue code, 26 USC 3401.

Sec. 2c. (1) A secondary mortgage loan officer registration is

valid for 1 calendar year and terminates on December 31 unless it

is renewed on or before that date.

(2) Subject to subsection (6), to renew the secondary mortgage

loan officer registrations of any employees or agents of a licensee

or registrant, the licensee or registrant shall submit an

application for renewal before December 1 of the year of the

current secondary mortgage loan officer registrations. The licensee

or registrant shall include with the application the annual

operating fee established in section 6a(6) for each secondary

mortgage loan officer registrant included in the application.

(3) The commissioner shall prescribe the form of the

application for renewal of secondary mortgage loan officer

registrations under subsection (2) and the process for submitting

an application for renewal. The application form shall require that

an applicant provide at least all of the following information

about each secondary mortgage loan officer registrant included in

the application for renewal:

(a) The name, address, and current license or registration

number of the applicant.

(b) The name and home address of the secondary mortgage loan

officer registrant.

loan officer registrant.

(d) A statement as to whether the secondary mortgage loan

officer registrant has had an application denied, or a license,

registration, or similar authority revoked or suspended, to

practice any profession or occupation in any jurisdiction,

including, but not limited to, licensure or registration as a

broker, lender, or servicer in which the secondary mortgage loan

officer registrant held more than 25% of the ownership interest or

as a secondary mortgage loan officer.

(e) Except as provided in subsection (7), proof acceptable to

the commissioner that the secondary mortgage loan officer

registrant has in the immediately preceding calendar year completed

at least 6 hours of instruction in a course or courses relevant to

the residential mortgage lending industry, the content of which has

been approved by the commissioner. The 6 hours of instruction shall

include at least 1.5 hours related to legal and regulatory

compliance and at least 1 hour related to ethics and fraud

prevention. All of the following apply to the course or courses

described in this subdivision:

(i) A course may utilize a live instructor or be conducted by

electronic means, including, but not limited to, the internet,

digital broadcast, or satellite network. However, a course

conducted by electronic means must include a method of confirming a

secondary mortgage loan officer registrant's completion of the

course.

(ii) The course must be provided by a person approved by the

commissioner.

(f) Any other information required by the commissioner.

(4) Before a licensee or registrant submits an application for

renewal of a secondary mortgage loan officer registration for a

secondary mortgage loan officer registrant under subsection (2),

the secondary mortgage loan officer registrant shall provide an

affidavit to the licensee or registrant that discloses any criminal

conviction of or plea of no contest by the secondary mortgage loan

officer registrant occurring between 1 of the following, as

applicable, and the date of the affidavit:

(a) If the renewal application is for the secondary mortgage

loan officer registrant's first renewal of his or her secondary

mortgage loan officer registration, the date of the background

records check provided at the time of his or her initial

registration.

(b) If the renewal application is for the secondary mortgage

loan officer registrant's second or subsequent renewal of his or

her secondary mortgage loan officer registration, the date of the

most recent affidavit provided by the secondary mortgage loan

officer registrant to the licensee or registrant under this

subsection.

(5) The commissioner shall not renew the secondary mortgage

loan officer registration of any secondary mortgage loan officer

who has ever been convicted of, or pled no contest to, any of the

following:

(a) A felony or misdemeanor involving embezzlement, forgery,

fraud, a financial transaction, or securities.

(b) Within the 10-year period preceding the date of the

application for renewal, a felony other than a felony described in

subdivision (a).

(6) If an individual included in an application for renewal

under subsection (2) is not currently registered and his or her

secondary mortgage loan officer registration has not been renewed

for a period of more than 5 consecutive calendar years, the

individual must apply for a secondary mortgage loan officer

registration under section 2b as a new applicant. The applicant may

include in a renewal application under subsection (2) a request to

renew the secondary mortgage loan officer registration for a

secondary mortgage loan officer registrant who is not currently

registered if his or her secondary mortgage loan officer

registration has not been renewed for a period of fewer than 5

consecutive years.

(7) An applicant under subsection (2) for renewal of the

secondary mortgage loan officer registration of a secondary

mortgage loan officer registrant who has a valid, similar license

or registration from another state that has instructional

procedures and requirements for secondary mortgage loan officers

approved by the commissioner may satisfy subsection (3)(e) by

submitting proof that he or she is in compliance with the

instructional requirements of that state at the time of

application.

Sec. 2d. (1) A secondary mortgage loan officer registrant

shall provide written notice to the commissioner within 10 days

after any of the following occur:

(a) His or her employment or agency relationship with a

licensee or registrant is terminated.

(b) He or she begins employment or an agency relationship with

a licensee or registrant.

telephone number or personal electronic mail address he or she

previously provided to the commissioner.

(d) He or she is convicted of or pleads guilty or no contest

to any of the following:

(i) A misdemeanor involving embezzlement, forgery, fraud, a

financial transaction, or securities.

(ii) A felony.

(2) A licensee or registrant shall provide written notice to

the commissioner within 20 days after hiring or engaging an

individual as a secondary mortgage loan officer or terminating the

employment of or agency relationship with a secondary mortgage loan

officer.

Sec. 6. (1) Except as otherwise provided in this section, at

the time of filing an application for a license or registration or

renewal of a license or registration, an applicant shall do all of

the following:

(a) Provide proof of financial responsibility in the following

amounts:

(i) $25,000.00 for a license or registration to act as a broker

who receives funds from a prospective borrower before the closing

of the secondary mortgage loan or who acts as a lender. An

~~additional $20,000.00 is required for each exclusive broker through~~

~~which the applicant conducts business regulated by this act. In no~~

~~event shall the additional amount required by this subsection be in~~

~~excess of $1,000,000.00.~~

(ii) $125,000.00 for a license or registration to act as a

servicer. ~~An additional $20,000.00 is required for each exclusive~~

~~broker through which the applicant conducts business regulated by~~

~~this act. In no event shall the additional amount required by this~~

~~subsection be in excess of $1,000,000.00.~~

(iii) An additional $20,000.00 is required from an applicant

described in subparagraph (i) or (ii) for each exclusive broker

through which that applicant conducts business regulated under this

act. However, the aggregate of the additional amounts required from

an applicant under this subdivision shall not exceed $1,000,000.00.

This subparagraph does not apply after March 31, 2009.

(b) Provide proof of financial responsibility by 1 of the

following:

(i) A corporate surety bond payable to the commissioner ~~which~~

that expires no earlier than the date the license or registration

expires, executed by a corporate surety approved by the

commissioner.

(ii) An irrevocable letter of credit upon which the applicant

for a license or registration is the obligor ~~, which~~ that expires

no earlier than the date the license or registration expires, that

is issued by a depository financial institution, ~~with terms~~ and the

terms of which are approved by the commissioner.

(2) A licensee or registrant that conducts business regulated

by this act through 1 or more exclusive brokers shall enter into an

indemnification agreement, subject to the approval of the

commissioner, to protect borrowers from monetary damages that may

result from doing business with the exclusive brokers through which

the licensee or registrant conducts business regulated by this act.

The indemnification shall be provided in the amount and form

required by under subsection (1). This subsection does not apply

after March 31, 2009.

(3) The bond or letter of credit required under subsection (1)

shall be conditioned upon the licensee or registrant conducting its

business as required by under this act and all the rules

promulgated under this act, and the payment of all money that

becomes due to borrowers, secondary mortgage loan applicants, and

the commissioner.

(4) The commissioner shall prioritize and pay claims against a

proof of financial responsibility filed with the commissioner under

this section in a manner that, in his or her discretion, best

protects the public interest.

(5) Claims may only be filed against a ~~licensee's or~~

~~registrant's~~ proof of financial responsibility filed with the

commissioner under this section by the commissioner and the

licensee's or registrant's borrowers, secondary mortgage loan

applicants, and loan servicing customers.

(6) Claims filed against a proof of financial responsibility

filed with the commissioner under this section by a borrower or

loan applicant shall involve only secondary mortgage loans or

secondary mortgage loan applications secured or to be secured by

real property used as a dwelling located in this state. The amount

of the claim shall not exceed actual fees in connection with a loan

application, overcharges of principal and interest, and excess

escrow collections by the licensee or registrant.

(7) The commissioner may file a claim against a proof of

financial responsibility filed with the commissioner under this

section for payment of fines or fees due and payable to the

commissioner and reimbursement of expenses incurred in

investigating the licensee or registrant and expenses incurred in

distributing proceeds of the proof of financial responsibility. A

claim filed under this subsection shall be paid in full prior to

payment of other claims against a proof of financial

responsibility, unless the commissioner, in his or her discretion,

waives in whole or in part the right to priority of payment.

(8) In the event that valid claims exceed the amount of ~~the~~ a

proof of financial responsibility filed with the commissioner under

this section, each claimant shall be entitled only to a pro rata

amount of his or her valid claim.

(9) A licensee that acts as a broker and that receives funds

from a prospective borrower before the closing of the secondary

mortgage loan shall maintain a net worth of not less than

$25,000.00. A licensee that acts as a lender shall maintain a net

worth of not less than $25,000.00. A licensee that acts as a

servicer shall maintain a net worth of not less than $100,000.00.

(10) Net worth under subsection (9) ~~shall be~~ is determined at

the conclusion of the fiscal year of the licensee immediately

preceding the date an application for a license, or renewal of a

license, is submitted to the commissioner. ~~Net worth shall be~~

~~disclosed~~ An applicant shall disclose its net worth on a form

prescribed by the commissioner or on a form prepared or reviewed by

a certified public accountant and ~~shall be computed~~ in accordance

with generally accepted accounting principles. The following assets

~~shall be~~ are excluded in the computation of net worth:

(a) That portion of an applicant's assets pledged to secure

obligations of any person other than ~~that of~~ the applicant.

(b) An asset, except a construction loans receivable, secured

by mortgages from related companies, due from officers or

stockholders of the applicant or persons in which the applicant's

officers or stockholders have an interest.

value of mortgage loans in foreclosure, or real property acquired

through foreclosure.

(d) An investment shown on the balance sheet in joint

ventures, subsidiaries, or affiliates ~~, which~~ that is greater than

the market value of the assets.

(e) Good will or value placed on insurance renewals or

property management contract renewals or other similar intangible

value.

(f) Organization costs.

Sec. 6a. (1) A registration or license, unless it is renewed,

~~shall expire~~ expires on December 31 of each year. A person may

renew a registration or license ~~may be renewed~~ by filing an

application for license or registration renewal and paying the

annual operating fee for the succeeding year. The application and

payment shall be received by the commissioner on , or before ,

~~December 15 of each year~~ a date prescribed by the commissioner.

(2) Not later than 90 days after close of the fiscal year of a

licensee or registrant, the licensee or registrant shall annually

deliver to the commissioner a financial statement for the fiscal

year prepared from the licensee's or registrant's books and

records. At the licensee's or registrant's option, the financial

statement may be any of the following:

(a) On a form prescribed by the commissioner.

(b) A report substantially similar to the form prescribed by

the commissioner, which the licensee or registrant represents to

the commissioner to be true and complete.

certified public accountant licensed by a regulatory authority of

any state or political subdivision of the United States.

(3) A registrant that is a licensee or registrant under the

mortgage brokers, lenders, and servicers licensing act, 1987 PA

173, MCL 445.1651 to 445.1684, and that timely files with the

commissioner the financial statement required under section 7 of

the mortgage brokers, lenders, and servicers licensing act, 1987 PA

173, MCL 445.1657, is exempt from the filing requirement of

subsection (2).

(4) At the time of making an initial application for a license

under this act, and at the time of making the first application for

a license after the suspension or revocation of a license, ~~the~~ an

applicant for a license shall pay to the commissioner a fee for

investigating the applicant for a license and the annual operating

fee established by the commissioner under subsection (5). To renew

a license or registration that has not been suspended or revoked,

the applicant shall only pay to the commissioner the annual

operating fee.

(5) If ~~the~~ an initial license or registration ~~would~~ described

in subsection (4) will have an effective date of July 1 or later,

the initial annual operating fee for that license ~~shall be~~ is 1/2

of the annual operating fee.

(6) The commissioner shall annually establish a schedule of

fees that are sufficient to pay, but not to exceed, the ~~financial~~

~~institutions bureau's~~ reasonably anticipated costs of the office of

financial and insurance regulation for administering and enforcing

this act. The fee schedule ~~is as follows~~ shall include all of the

following:

(a) For the investigation of an applicant for a license, a fee

of not less than $400.00 or more than $1,000.00.

(b) An Subject to subsection (5), an annual operating fee for

each licensee or registrant, based upon the number of secondary

mortgage loans the licensee or registrant brokered to other parties

that were closed during the previous calendar year, the number of

secondary mortgage loans closed by the licensee or registrant

during the previous calendar year, and the dollar volume of

secondary mortgage loans serviced by the licensee or registrant as

of December 31 of the previous calendar year. The annual operating

fee set by the commissioner under this subsection shall be based

upon information in reports filed under subsection (13).

secondary mortgage loan officer registration, a fee of not less

than ~~$50.00~~ $15.00 or more than $200.00.

(d) A licensee or registrant shall pay the actual travel,

lodging, and meal expenses incurred by employees of the ~~financial~~

~~institutions bureau~~ office of financial and insurance regulation

who travel out of state to examine or investigate the records of

the licensee or registrant and the cost of independent

investigators employed under section 6b(3)(e).

(e) An annual fee from or on behalf of each secondary mortgage

loan officer registrant in an amount established by the

commissioner. For purposes of this subdivision, the commissioner

shall establish an amount for the annual fee that is sufficient to

defray the estimated cost of administering and enforcing the

secondary mortgage loan officer registration provisions of this

act. This subdivision does not apply to a secondary mortgage loan

officer registrant described in section 2a(9).

(7) Fees received under this act are not refundable.

(8) If any fees or penalties provided for in this act are not

paid when required, the attorney general may maintain an action

against the delinquent licensee or registrant for the recovery of

the fees and penalties together with interest and costs.

(9) A licensee or registrant that fails to submit to the

commissioner the reports as required by subsections (2) and (13) is

subject to a penalty of $25.00 for each day a required report is

delinquent or $1,000.00, whichever is less.

(10) A license or registration renewal fee that is not

received on or before December 31 is subject to a penalty of $25.00

for each day the fee is delinquent or $1,000.00, whichever is less.

(11) Money received ~~under this act~~ from the fees described in

this section shall be deposited in the ~~state treasury and credited~~

~~to the financial institutions bureau to be used only for the~~

~~operation of the financial institutions bureau~~ MBLSLA fund. As used

in this subsection, "MBLSLA fund" means the restricted account

created under section 8(8) of the mortgage brokers, lenders, and

services licensing act, 1987 PA 173, MCL 445.1658.

(12) The annual operating fees set by the commissioner shall

not exceed the levels needed to cover the estimated cost of

enforcement of this act.

(13) On or before a date to be determined by the commissioner,

a licensee or registrant shall annually file with the commissioner

a report giving information, as required by the commissioner,

concerning the business and operations of the licensee or

registrant under this act during the immediately preceding calendar

year. In addition, the commissioner may require a licensee or

registrant to file special reports as the commissioner considers

reasonably necessary for the proper supervision of licensees or

registrants under this act. Reports required under this section

shall be in the form prescribed by the commissioner, signed, and

affirmed. A person who willfully and knowingly subscribes and

affirms a false statement in a report required under this

subsection is guilty of a felony, punishable by imprisonment for

not more than 15 years.

Sec. 6b. (1) The commissioner shall exercise general

supervision and control over brokers, lenders, and servicers doing

business in this state and secondary mortgage loan officers

originating secondary mortgage loans in this state.

(2) In addition to the other powers granted by this act, the

commissioner may do any of the following:

(a) Deny an application for a license, or registration, or

secondary mortgage loan officer registration.

(b) Conduct examinations and investigations of any person, as

necessary to enforce this act and the rules promulgated under this

act.

registrants.

(d) Advise the attorney general or the prosecuting attorney of

~~the county in which the business is conducted~~ a county in which a

broker, lender, or servicer is conducting business or in which a

secondary mortgage loan officer resides that the commissioner

believes a licensee, registrant, secondary mortgage loan officer

registrant, or other person is violating this act. The attorney

general or prosecuting attorney shall bring a legal action to

enjoin the operation of the business of the broker, lender, or

servicer or the originating of secondary mortgages by the secondary

mortgage loan officer or prosecute violations of this act.

(e) Bring an action in the Ingham county circuit court to

enjoin a person from participating in, continuing to practice, or

from engaging in a practice that is an unsafe or injurious practice

or that violates this act or a rule promulgated under this act.

(f) Order a person to cease and desist from a violation of

this act or a rule promulgated under this act ~~as provided~~ under

section 14.

(g) Suspend, revoke, or refuse to issue a license, or

registration, ~~as provided~~ or secondary mortgage loan officer

registration under section 11.

(h) Assess a civil fine ~~as provided~~ under section 27.

(i) Appoint a conservator ~~as provided~~ under section 12a.

(j) Issue an order to prohibit a person from being employed

by, an agent of, or control person of, a licensee or registrant as

~~provided~~ under section 14a.

(k) Censure a licensee, or registrant, or secondary mortgage

loan officer registrant.

(3) In the conduct of any examination or investigation under

this act, the commissioner may do any of the following:

(a) Issue a subpoena ~~as provided~~ under section 15.

(b) Administer oaths ~~as provided~~ under section 15.

and conduct of affairs of a person subject to this act, and require

the production of books, records, or papers relative to the

inquiry.

(d) Have free access during regular business hours to the

offices, places of business, or other location where the licensee,

registrant, or an affiliate of a licensee or registrant, maintains

business-related documents, and to the books, accounts, papers,

records, files, documents, safes, and vaults of a licensee or

registrant. The information obtained during the examination or

investigation is exempt from the freedom of information act, 1976

PA 442, MCL 15.231 to 15.246, and shall not be available for public

inspection or copying or divulged to any person except as follows:

(i) To the attorney general.

(ii) To a regulatory agency.

(iii) In connection with an enforcement action brought under

this or another applicable act.

(iv) To law enforcement officials.

(v) To persons authorized by the Ingham county circuit court

to receive the information.

(e) Employ independent investigators to conduct a part or all

of ~~the~~ an investigation, in the case of an investigation other than

an examination.

Sec. 11. (1) A notice shall be given to a licensee,

registrant, secondary mortgage loan officer registrant, or

applicant of the commissioner's intention to enter an order to

suspend or revoke a license, or registration, or secondary mortgage

loan officer registration or to refuse to issue a license, or

registration, or secondary mortgage loan officer registration. The

notice shall be in writing , and served personally , or sent by

certified mail to the licensee, registrant, secondary mortgage loan

officer registrant, or applicant.

(2) ~~The~~ A licensee, registrant, secondary mortgage loan

officer registrant, or applicant may request a hearing to contest

the intention to enter an order or refusal under subsection (1)

within 20 days after service of the notice. If a hearing regarding

suspension, revocation, or refusal to issue a license, or

registration, or secondary mortgage loan officer registration is

not requested, the commissioner shall enter a final order regarding

the suspension, revocation, or refusal to issue a license, or

registration, or secondary mortgage loan officer registration. The

hearing shall be conducted in accordance with the provisions of the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328. The commissioner may suspend, revoke, or refuse to issue or

renew a license, or registration, or secondary mortgage loan

officer registration if he or she finds that the licensee, or

registrant, or secondary mortgage loan officer registrant or an

owner, director, officer, member, partner, stockholder, employee,

or agent of ~~the~~ a licensee, or registrant, or secondary mortgage

loan officer registrant has done any of the following:

(a) Made a material misstatement in ~~the~~ an application.

(b) Engaged in fraud, deceit, or material misrepresentation in

connection with any transaction subject to this act.

~~the~~ an annual operating fee, to maintain in effect ~~the~~ a bond as

required by the commissioner, or to comply with a demand, ruling,

or requirement of the commissioner lawfully made under this act.

(d) Either knowingly or without the exercise of due care to

prevent it, violated this act or a rule promulgated under this act.

(3) The commissioner may suspend, revoke, or refuse to renew a

license, or registration, or secondary mortgage loan officer

registration upon a finding of a fact or condition which, if the

fact or condition had existed at the time of the original

application for the license, or registration, or secondary mortgage

loan officer registration, clearly would have warranted the

commissioner to refuse to issue the license, or registration, or

secondary mortgage loan officer registration originally.

(4) A licensee, or registrant, or secondary mortgage loan

officer registrant may surrender a license, or registration, or

secondary mortgage loan officer registration by delivering to the

commissioner the license, or registration, ~~certificate~~ or secondary

mortgage loan officer registration with written notice that the

licensee, or registrant, or secondary mortgage loan officer

registrant surrenders the license, or registration, or secondary

mortgage loan officer registration. The surrender, suspension, or

revocation of a license, or registration, or secondary mortgage

loan officer registration under this act shall not affect the

licensee's, or registrant's, or secondary mortgage loan officer

registrant's civil or criminal liability for acts committed in

violation of this act. The surrender of a license, or registration,

or secondary mortgage loan officer registration does not affect a

proceeding to suspend or revoke a license, or registration, or

secondary mortgage loan officer registration.

(5) Except as otherwise provided by law, a surrender,

suspension, or revocation of a license, or registration, ~~shall~~ or

secondary mortgage loan officer registration does not impair or

affect the obligation of a preexisting contract between the

licensee, or registrant, or secondary mortgage loan officer

registrant and another person.

(6) A licensee, or registrant, or secondary mortgage loan

officer registrant whose license, or registration, or secondary

mortgage loan officer registration certificate has been destroyed

or lost may comply with this section by submitting to the

commissioner a notarized affidavit of the loss accompanied by

written notice that the licensee, or registrant, or secondary

mortgage loan officer registrant surrenders the license, or

registration, or secondary mortgage loan officer registration.

Sec. 13. (1) A license, or registration, or secondary mortgage

loan officer registration remains in force until the date of

expiration or until surrendered, revoked, or suspended under this

act. The commissioner may reinstate a suspended license, or

registration, or secondary mortgage loan officer registration or

issue a new license, or registration, or secondary mortgage loan

officer registration to a licensee, or registrant, or secondary

mortgage loan officer registrant whose license, or registration, or

secondary mortgage loan officer registration has been revoked if

the conditions under which the license, ~~or registrant~~ registration,

or secondary mortgage loan officer registration was revoked have

been corrected and the commissioner is satisfied, as the result of

an investigation, that the conditions are not likely to recur.

(2) A person shall not transfer or assign a license or

registration ~~shall not be transferred or assigned~~ without the

consent of the commissioner.

~~(3)~~ The sale, transfer, assignment, or conveyance of more than

25% of the outstanding voting stock of a licensee or registrant

~~which~~ that is a corporation, or more than 25% of the interest in a

licensee or registrant ~~which~~ that is a limited liability company or

partnership or other unincorporated legal entity ~~, shall be~~ is

considered ~~to be~~ a transfer of ~~the~~ a license or registration for

purposes of this subsection.

Sec. 20. A licensee, or registrant, or secondary mortgage loan

officer registrant shall not make or offer to make a secondary

mortgage loan except on the terms and conditions authorized by this

act and the rules promulgated under this act.

Sec. 22. (1) ~~Other~~ A licensee or registrant shall not directly

or indirectly assess any charges ~~and~~ or fees ~~shall not be made,~~

~~directly or indirectly,~~ in connection with ~~the~~ making of a

secondary mortgage loan, except for any of the following, which may

be included in the principal of the loan:

(a) Charges for credit life insurance or credit accident and

health insurance as defined in section 3 of the credit insurance

act, 1958 PA 173, MCL ~~550.601 to 550.624~~ 550.603, or any other

insurance under the insurance code of 1956, 1956 PA 218, MCL

500.100 to 500.8302, that is offered by the licensee or registrant

and that ~~may be purchased at the option of~~ the borrower has the

option to purchase.

(b) ~~Reasonable and necessary charges that are~~ If reasonable

and necessary, the actual expenses incurred ~~by the licensee,~~

~~registrant, or exclusive broker~~ in connection with ~~the~~ making,

closing, disbursing, extending, readjusting, or renewing of a

secondary mortgage loan . by any of the following, as applicable:

(i) The licensee.

(ii) The registrant.

(iii) An exclusive broker of the licensee or registrant. This

subparagraph does not apply after March 31, 2009.

the gross amount of the loan.

(d) Other charges as authorized by under the credit reform

act, 1995 PA 162, MCL 445.1851 to 445.1864.

(e) A reasonable annual fee for the privilege of receiving

open-end credit from the licensee or registrant.

(2) The charges authorized by under this section ~~shall be~~ are

in addition to interest authorized by law and are not a part of the

interest collected or agreed to be paid on the secondary mortgage

loan within the meaning of the law of this state that limits the

rate of interest ~~which~~ that may be exacted in a transaction. The

charges shall be paid only once by the borrower to the licensee or

registrant.

(3) Any insurance sold by a licensee or registrant ~~shall be~~ in

~~accordance~~ connection with a secondary mortgage loan must comply

with the insurance code of 1956, 1956 PA 218, MCL 500.100 to

500.8302, or the credit insurance act, 1958 PA 173 MCL 500.601 to

500.624, as applicable.

(4) If a licensee or registrant requires a borrower to

purchase hazard insurance, the licensee or registrant shall not

require the borrower to purchase the insurance through a particular

agency or agent or from a particular insurer.

(5) This section does not prohibit a licensee or registrant

from imposing the charges that are permitted by any federal lending

program designed to promote the making of secondary mortgage loans.

Sec. 26a. A secondary mortgage loan officer registrant shall

not do any of the following:

(a) Engage in fraud, deceit, or material misrepresentation in

connection with any transaction governed by this act.

(b) Intentionally, or due to gross or wanton negligence,

repeatedly fail to provide borrowers with any material disclosures

of information required by law.

deceptive advertisement regarding secondary mortgage loans or the

availability of secondary mortgage loans.

(d) Suppress or withhold from the commissioner any information

that the secondary mortgage loan officer possesses and that, if

submitted, would have made the secondary mortgage loan officer

ineligible for registration or renewal of his or her secondary

mortgage loan officer registration under this act at the time of

application and would have allowed the commissioner to refuse to

(e) Be convicted of, or plead no contest to, any of the

following:

(i) A misdemeanor involving embezzlement, forgery, fraud, a

financial transaction, or securities.

(ii) A felony.

(f) Refuse or fail to furnish any information or make any

report required by the commissioner to issue or renew a secondary

mortgage loan officer registration, or otherwise required by the

commissioner, within a reasonable period of time, as determined by

the commissioner, after requested by the commissioner.

Sec. 27. (1) In addition to the penalties provided by this

act, a violation of this act with respect to a particular secondary

mortgage loan transaction is also subject to the penalty and remedy

provisions of the credit reform act, 1995 PA 162, MCL 445.1851 to

445.1864.

(2) A person, association, nonprofit corporation, common law

trust, joint stock company, limited liability company, or any other

group of individuals, however organized, or any owner, partner,

member, officer, director, trustee, employee, agent, broker, or

representative thereof who or which willfully or intentionally

~~engages in this state in the business of making secondary mortgage~~

~~loans without a license as required under this act,~~ does any of the

following is guilty of a misdemeanor punishable by a fine of not

more than ~~$5,000.00~~ $15,000.00, imprisonment for not more than 3

~~years~~ 1 year, or both: .

(a) Engages in this state in the business of a broker, lender,

or servicer without a license or registration required under this

act.

(b) Acts as a secondary mortgage loan officer in this state

without a secondary mortgage loan officer registration required

under this act.

value of real property used as collateral for a secondary mortgage

loan, including, but not limited to, by doing any of the following:

(i) Representing or implying that a real estate appraiser will

not be selected to conduct an appraisal of the real property or

selected for future appraisal work unless the appraiser agrees in

advance to a value, range of values, or minimum value for the real

property.

(ii) Representing or implying that a real estate appraiser will

not be paid for an appraisal unless the appraiser agrees in advance

to a value, range of values, or minimum value for the real

property.

(3) A person who violates this act or directly or indirectly

counsels, aids, or abets in a violation is liable, in addition to

other penalties and forfeitures imposed by this act, for a civil

fine of not more than ~~$1,000.00~~ $3,000.00 for each ~~offense~~

violation, except that a person shall not be fined more than

$30,000.00 for a transaction resulting in more than 1 violation,

plus the costs of investigation. The civil fine shall be sued for

and recovered by the commissioner and shall be collected and

enforced by summary proceedings by the attorney general.

(4) Whether or not he or she seeks damages or has an adequate

remedy at law, a person, a county prosecutor, or the attorney

general may bring an action to do any of the following:

(a) Obtain a declaratory judgment that a method, act, or

practice is a violation of this act.

(b) Enjoin a person from engaging in, or who is about to

engage in, a method, act, or practice that violates this act.

act or $250.00, whichever is greater, together with reasonable

attorneys' fees and the costs of bringing the action.

Enacting section 1. This amendatory act does not take effect

unless all of the following bills of the 94th Legislature are

enacted into law:

(a) Senate Bill No. 1553.

(b) Senate Bill No. 1554.

(d) House Bill No. 6562.