November 5, 2008, Introduced by Senators BROWN, RICHARDVILLE, SANBORN, BARCIA, BIRKHOLZ, PAPPAGEORGE, GARCIA and BASHAM and referred to the Committee on Banking and Financial Institutions.
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 labor
and economic growth or
his
or her authorized representatives. of
the commissioner.
(c) "Control person" means a director or executive officer of
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 or
agent 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.
(c) The person is licensed under the consumer financial
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) Beginning April 1, 2009, 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 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.
(c) The department of state police shall forward the
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).
(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.
(c) A statement as to whether the applicant 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 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, made under penalties of perjury, that the information
and statements made in or included with the application are true,
accurate, and complete.
(h) The signature of an 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 officer's declaration
on behalf of the licensee or registrant, made under penalties of
perjury, 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).
(c) The licensee or registrant that is the employer or
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.
(c) An applicant for whom the commissioner has not received
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.
(c) Within 8 months after the effective date of the amendatory
act that added this section, he or she takes the examination
described in subsection (4)(e) and correctly answers at least 75%
of the questions on the examination.
(d) Within 8 months after the effective date of the amendatory
act that added this section, 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.
(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.
(c) The current registration number of the secondary mortgage
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.
(c) There is a change in the home address or any personal
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.
(c) An amount in excess of the lower of the cost or market
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.
(c) In a format prepared and certified by an independent
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).
(c)
For amending or reissuing a license, or registration, or
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.
(c) Investigate complaints filed against licensees or
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.
(c) Interrogate a person under oath concerning the business
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.
(c) Failed after 10 days' written notice of default, to pay
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.
(c) A nonrefundable processing fee that is not more than 5% of
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.
(c) Directly or indirectly make a false, misleading, or
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
register the secondary mortgage loan officer.
(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 that willfully or intentionally
engages in this state in the business of making secondary mortgage
loans
without a license, as registration,
or secondary mortgage
loan officer registration required under this act, is guilty of a
misdemeanor
punishable by a fine of not more than $5,000.00,
$15,000.00
or imprisonment for not more than 3
years 1 year, or
both.
(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 for each offense. 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.
(c) Recover actual damages resulting from a violation of this
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.____ or House Bill No.____ (request no.
08018'08 *).
(b) Senate Bill No.____ or House Bill No.____ (request no.
08019'08).
(c) Senate Bill No.____ or House Bill No.____ (request no.
08020'08 *).
(d) Senate Bill No.____ or House Bill No.____ (request no.
08164'08).