October 11, 2007, Introduced by Reps. Tobocman, Angerer, Sak, Simpson, Clack, Johnson, Jackson, Miller, Accavitti, Byrnes, Melton, Young, Kathleen Law, Hopgood, Brown, Valentine, Hammel, Robert Jones, Vagnozzi, Donigan, Dean and Virgil Smith 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, credit unemployment, or credit property
insurance, 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, including, but not
limited to, the terms of both the new and refinanced loans, the
cost of the new loan, and the borrower's circumstances.
(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 or to provide a
release upon prepayment. A creditor shall not charge a person a fee
for transmitting a written statement of the balance due to pay off
a home loan or to provide a release upon prepayment unless that
person has already requested 3 or more written statements in the
preceding 12-month period. If a person requests more than 3 written
statements in 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 payoff balance under subsection
(6) within 7 business days after the request.
(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) Mischaracterize a borrower's credit history or the home
loans available to a borrower.
(c) 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 a reasonable creditor would believe at the time the loan is
closed that the borrower is able to make the scheduled payments
associated with the loan. All of the following apply to a
determination of a borrower's ability to pay under this subsection:
(a) The determination includes, but is not limited to,
consideration of the borrower's income, current obligations,
employment status, the debt to income ratio of the borrower's
monthly gross income, and whether the borrower has sufficient
residual income and other available financial resources other than
the borrower's equity in the principal dwelling that secures or
will secure the home loan.
(b) All of the following calculation assumptions applicable to
the loan are used in evaluating the borrower's ability to repay:
(i) For a nontraditional mortgage, other than a rate spread
home loan, the monthly payment amounts, based on, at a minimum, the
fully indexed rate, assuming a fully amortizing repayment schedule.
(ii) For a rate spread home loan, the maximum monthly payments
that could be due under the terms of the home loan being offered
for the first 7 years of the loan term and the changes in payments
that would result from differences in the payments toward principal
of the loan.
(iii) For a home loan product that permits negative
amortization, the repayment analysis is based on the initial loan
amount plus any balance increase that may accrue from the negative
amortization provision.
(iv) The borrower's other expenses, including private mortgage
insurance premiums, property taxes and hazard insurance, debt
cancellation, and scheduled payments for all other debt.
(v) Verification of all sources of income by tax returns,
payroll receipts, financial records, or any reasonable alternative
or third-party verification.
(12) As used in this section and section 4a, "fully indexed
rate" means the index rate prevailing at the time the
nontraditional mortgage is originated plus the margin that will
apply after the expiration of an introductory interest rate. As
used in this subsection:
(a) "Index rate" means a published index rate to which the
interest rate on the nontraditional mortgage is tied.
(b) "Margin" means the number of percentage points a creditor
adds to the index value to calculate the nontraditional mortgage
interest rate at each adjustment period.
Sec.
4. (1) A person offering to make or making a mortgage
home loan shall not do either 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.
(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 94th Legislature are
enacted into law:
(a) Senate Bill No.____ or House Bill No. 5294(request no.
02456'07 *).
(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).