October 11, 2007, Introduced by Reps. Simpson, Tobocman, Sak, Angerer, Clack, Jackson, Miller, Accavitti, Byrnes, Melton, Young, Kathleen Law, Hopgood, Brown, Valentine, Hammel, Robert Jones, Mayes, Vagnozzi, Gonzales, Virgil Smith and Dean 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 of the department of consumer and
industry
services 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) "Conventional prepayment penalty" means a prepayment
penalty or fee that is collected or charged in a home loan and that
is authorized by law other than this act, if the home loan does not
have an annual percentage rate that exceeds the conventional
mortgage rate by more than 2 percentage points and does not permit
any prepayment fees or penalties that exceed 2% of the amount
prepaid.
(i) "Creditor" means a lender, as that term is defined in 24
CFR 3500.2, or a mortgage broker.
(j) In connection with a home loan, "excluded points and fees"
means 1 or both of the following:
(i) An amount that is not more than 1% 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 either bona fide discount points or a conventional
prepayment penalty.
(k) "High-cost home loan" means a home loan in which the terms
of the loan meet or exceed 1 or more thresholds.
(l) "Home loan" means an 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) "Mortgage broker" means that term as defined in 24 CFR
3500.2.
(n) "Nontraditional mortgage" means that term as described in
the interagency guidance on nontraditional mortgage product risks,
71 FR, p 58,609 (Oct. 4, 2006).
(o) (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.
(p) 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 in a table-funded transaction.
(iv) The cost of all premiums directly or indirectly financed
by the creditor for any credit life, credit disability, credit
unemployment, or credit property insurance, 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.
(q) "Rate spread home loan" means a loan that meets either of
the following:
(i) Is a loan described in and for which the rate spread must
be reported under 12 CFR 203.4(a)(12).
(ii) Is a high-cost home loan.
(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) "Threshold" means a rate threshold or a total points and
fees threshold.
(t) "Total loan amount" means the principal of the loan minus
those points and fees described in subdivision (i) 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.
(u) "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.
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.____ or House Bill No. 5295(request no.
04909'07 *).
(b) Senate Bill No.____ or House Bill No. 5296(request no.
04910'07 *).
(c) Senate Bill No.____ or House Bill No. 5297(request no.
04911'07 *).
(d) Senate Bill No.____ or House Bill No. 5298(request no.
04912'07 *).
(e) Senate Bill No.____ or House Bill No. 5299(request no.
04913'07 *).
(f) Senate Bill No.____ or House Bill No. 5300(request no.
05435'07).
(g) Senate Bill No.____ or House Bill No. 5301(request no.
05436'07).
(h) Senate Bill No.____ or House Bill No. 5302(request no.
05437'07).
(i) Senate Bill No.____ or House Bill No. 5303(request no.
05438'07).