House Introduced Bill 6121

HOUSE BILL No. 6121

May 23, 2002, Introduced by Reps. Richner, Bishop, Bisbee, Middaugh and Rivet and referred to the Committee on Commerce.

A bill to prohibit certain lending practices; to require

disclosure of certain information for home loans; to prescribe

certain duties and obligations of the lender in a home loan

transaction; to prescribe the powers and duties of certain state

agencies and officials; and to prescribe penalties and provide

for remedies.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

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

2
"consumer mortgage protection act".

3
Sec. 2. As used in this act:

4
(a) "Commissioner" means the commissioner of the office of

5
financial and insurance services of the department of consumer

6
and industry services.

07254'02 f * SAT 2

1
(b) "Depository institution" means a bank, savings and loan

2
association, savings bank, or a credit union chartered under

3
state or federal law.

4
(c) "Home improvement installment contract" means an agree-

5
ment of 1 or more documents covering the sale of goods or fur-

6
nishing of services to a buyer for improvements to the buyer's

7
principal dwelling located in this state used for occupancy of 4

8
or fewer families under which the buyer promises to pay in

9
installments all or any part of the price of the goods or

10
services.

11
(d) "Mortgage loan" means a loan or home improvement

12
installment contract secured by a first or subordinate mortgage

13
or any other form of lien or a land contract covering real prop-

14
erty located in this state used as the borrower's principal

15
dwelling and designed for occupancy by 4 or fewer families.

16
Mortgage loan does not include any of the following:

17
(i) Loans in which the proceeds are used to acquire the

18
dwelling.

19
(ii) Reverse-mortgage transactions.

20
(iii) An open-end credit plan being a loan in which the

21
lender reasonably contemplates repeated advances.

22
(e) "Person" means an individual, corporation, partnership,

23
association, governmental entity, or any other legal entity.

24
(f) "Reverse-mortgage" means a nonrecourse loan under which

25
both of the following apply:

26
(i) A mortgage or other form of lien securing 1 or more

27
advances is created in the borrower's principal dwelling.

07254'02 f * 3

1
(ii) The principal, interest, or shared appreciation or

2
equity is payable only after the borrower dies, the dwelling is

3
transferred, or the borrower ceases to occupy the dwelling as a

4
principal dwelling.

5
(g) "Regulated lender" means a depository institution or a

6
licensee or a registrant under the consumer financial services

7
act, 1988 PA 161, MCL 487.2051 to 487.2072, 1984 PA 379,

8
MCL 493.101 to 493.114, the motor vehicle sales finance act, 1950

9
(Ex Sess) PA 27, MCL 492.101 to 492.141, the secondary mortgage

10
loan act, 1981 PA 125, MCL 493.51 to 493.81, or the mortgage bro-

11
kers, lenders, and servicers licensing act, 1987 PA 173,

12
MCL 445.1651 to 445.1684, and a seller under the home improvement

13
finance act, 1965 PA 332, MCL 445.1101 to 445.1431.

14
(h) "State and federal laws" means, individually and collec-

15
tively, 1 or more of the laws or regulations of this state or the

16
federal government which regulate or are applicable to a mortgage

17
loan or a person when brokering, making, servicing, or collecting

18
a mortgage loan, including, without limitation, the federal truth

19
in lending act, title I of the consumer credit protection act,

20
Public Law 90-321, 15 U.S.C. 1601 to 1608, 1610 to 1613, 1615,

21
1631 to 1635, 1637 to 1649, and 1661 to 1667f, real estate set-

22
tlement procedures act of 1974, Public Law 93-533, 88 Stat. 1724,

23
equal credit opportunity act, title VII of the consumer credit

24
protection act, Public Law 90-321, 15 U.S.C. 1691 to 1691f, fair

25
housing act, title VIII of the civil rights act of 1968, Public

26
Law 90-284, 82 Stat. 81, fair credit report act, title VI of the

27
consumer credit protection act, Public Law 90-321, 15 U.S.C. 1681

07254'02 f * 4

1
to 1681v, the homeowners protection act of 1998, Public Law

2
105-216, 112 Stat. 897, the fair debt collection practices act,

3
title VIII of the consumer credit protection act, Public Law

4
90-321, 15 U.S.C. 1601nt and 1692 to 1692o, consumer financial

5
services act, 1988 PA 161, MCL 487.2051 to 487.2072, mortgage

6
brokers, lenders, and servicers licensing act, 1987 PA 173,

7
MCL 445.1651 to 445.1684, the secondary mortgage loan act, 1981

8
PA 125, MCL 493.51 to 493.81, 1977 PA 135, MCL 445.1601 to

9
445.1614, and home improvement finance act, 1965 PA 332,

10
MCL 445.1101 to 445.1422.

11
Sec. 3. A person shall broker, make, or service mortgage

12
loans in accordance with all applicable state and federal laws.

13
Sec. 4. (1) A person offering to make or making a mortgage

14
loan shall not do either of the following:

15
(a) Charge a fee for a product or service if the product or

16
service is not actually provided to the customer.

17
(b) Misrepresent the amount charged by or paid to a third

18
party for a product or service.

19
(2) A person, appraiser, or real estate agent shall not

20
make, directly or indirectly, any false, deceptive, or misleading

21
statement or representation in connection with a mortgage loan

22
including, but not limited to, the borrower's ability to qualify

23
for a mortgage loan or the value of the dwelling that will secure

24
repayment of the mortgage loan.

25
(3) A statement or representation is deceptive or misleading

26
if it has the capacity to deceive or mislead a borrower or

27
potential borrower. The commissioner shall consider any of the

07254'02 f * 5

1
following factors in deciding whether a statement or

2
misrepresentation is deceptive or misleading:

3
(a) The overall impression that the statement or representa-

4
tion reasonably creates.

5
(b) The particular type of audience to which the statement

6
is directed.

7
(c) Whether it may be reasonably comprehended by the segment

8
of the public to which the statement is directed.

9
(4) A person shall not directly or indirectly compensate,

10
coerce, or intimidate an appraiser for the purpose of influencing

11
the independent judgment of the appraiser with respect to the

12
value of the dwelling offered as security for repayment of the

13
mortgage loan.

14
Sec. 5. The commissioner may conduct examinations and

15
investigations of a person over whom the commissioner has regula-

16
tory authority as necessary to determine whether the person is

17
brokering, making, servicing, or collecting mortgage loans as

18
required by this act.

19
Sec. 6. If the commissioner determines that a person is

20
brokering, making, servicing, or collecting mortgage loans in

21
violation of this act, the commissioner shall do 1 or more of the

22
following:

23
(a) Initiate a cause of action under section 7.

24
(b) If the person is chartered, licensed, registered, regu-

25
lated, or administered by the commissioner under a law of this

26
state, the commissioner shall enforce the penalties and remedies

27
under that law.

07254'02 f * 6

1
(c) Forward a complaint to the appropriate regulatory or

2
investigatory authority.

3
Sec. 7. The attorney general or the prosecuting attorney

4
for the county where an alleged violation occurred may bring an

5
action against a person to do 1 or more of the following:

6
(a) Obtain a declaratory judgment that a method, act, or

7
practice of the person is a violation of this act.

8
(b) Enjoin a person who is engaging or about to engage in a

9
method, act, or practice that is a violation of this act.

10
(c) Obtain a civil fine of not more than $10,000.00 for the

11
first offense and not more than $20,000.00 for the second and any

12
subsequent offense.

13
Sec. 8. (1) A person is not liable for a violation under

14
section 7 if the person shows that the violation was an uninten-

15
tional and bona fide error notwithstanding the maintenance of

16
procedures reasonably adopted to avoid the error. Examples of a

17
bona fide error include clerical, calculation, computer malfunc-

18
tion, programming, or printing errors. An error in legal judg-

19
ment with respect to a person's obligations under this act is not

20
a bona fide error.

21
(2) A person is not liable for a violation under section 7

22
if, within 60 days after discovery of the violation and before

23
the institution of an action under section 7, the person notifies

24
the borrower or buyer of the violation and corrects the violation

25
in a manner that, to the extent it is reasonably possible to do

26
so, restores the borrower or buyer to the position in which the

07254'02 f * 7

1
borrower or buyer would have been if the violation had not

2
occurred.

3
(3) The person alleged to have violated this act has the

4
burden of proving that he or she is not liable as provided under

5
this section.

6
Sec. 9. This act does not limit the authority of the com-

7
missioner, the attorney general, or a county prosecutor to

8
enforce any law under which a person is chartered, organized,

9
licensed, registered, regulated, or otherwise authorized to do

10
business in this state.

11
Sec. 10. (1) No later than March 1, 2003, the office of

12
financial and insurance services shall develop and make available

13
to local units of government, financial institutions, and other

14
interested persons 1 or more model programs for financial

15
education.

16
(2) The program required under this section shall be

17
designed to teach personal financial management skills and the

18
basic principles involved with saving, borrowing, investing, and

19
protection against predatory and other fraudulent lending

20
practices.

21
Sec. 11. (1) The federal government and state solely regu-

22
late the business of brokering, making, servicing, and collecting

23
mortgage loans in this state and the manner in which any such

24
business is conducted.

25
(2) Any charter, ordinance, resolution, regulation, rule, or

26
other action by a municipal corporation or other political

27
subdivision of this state to regulate, directly or indirectly,

07254'02 f * 8

1
the brokering, making, servicing, or collecting of mortgage loans

2
constitutes a statutory conflict with the uniform operation

3
throughout the state of residential mortgage lending and is

4
preempted.

5
(3) Any charter, ordinance, resolution, regulation, rule, or

6
other action by a municipal corporation or other political subdi-

7
vision of this state that attempts to regulate the brokering,

8
making, servicing, or collecting of mortgage loans constitutes a

9
statutory conflict and is preempted, including, without limita-

10
tion, if the ordinance, resolution, regulation, or other action

11
does either of the following:

12
(a) Disqualifies a person, or its subsidiaries or affili-

13
ates, from doing business with the municipal corporation or other

14
political subdivision based upon the acts or practices of the

15
person or its subsidiaries or affiliates in brokering, making,

16
servicing, or collecting mortgage loans.

17
(b) Imposes reporting requirements or other obligations upon

18
a person, or its subsidiaries or affiliates, based upon the

19
person's, or its subsidiaries' or affiliates', acts or practices

20
in brokering, making, servicing, or collecting mortgage loans.

21
(4) If any provision of this section, or any application of

22
any provision of this section, is for any reason held to be ille-

23
gal or invalid, the illegality or invalidity shall not affect any

24
legal and valid provision or application of this section, and the

25
provisions and applications of this section shall be severable.

26
Sec. 12. (1) The laws of this state relating to the

27
brokering, making, servicing, and collecting of mortgage loans

07254'02 f * 9

1
prescribe rules of conduct upon citizens generally, comprise a

2
comprehensive regulatory framework intended to operate uniformly

3
throughout the state under the same circumstances and conditions,

4
and constitute general laws of this state.

5
(2) Silence in the statutes of this state with respect to

6
any act or practice in the brokering, making, servicing, or col-

7
lecting of mortgage loans shall not be interpreted to mean that

8
the state has not completely occupied the field or has only set

9
minimum standards in its regulation of brokering, making, servic-

10
ing, or collecting of mortgage loans.

11
(3) It is the intent of the legislature to entirely preempt

12
municipal corporations and other political subdivisions from the

13
regulation and licensing of persons engaged in the brokering,

14
making, servicing, or collecting of mortgage loans in this

15
state.

07254'02 f * Final page. SAT