SB-0464, As Passed House, July 15, 2009

SUBSTITUTE FOR

SENATE BILL NO. 464

     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 2, 6,

6a, 6b, 11, 13, 20, and 22 as amended by 2008 PA 325, section 1 as

amended by 2009 PA 14, and section 27 as amended by 2008 PA 530;

and to repeal acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     TITLE

     An act to regulate secondary mortgage loans; to regulate

secondary mortgage brokers, lenders, and 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 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 regulation of the department of energy,

labor, and economic growth or his or her authorized

representatives.

     (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.

"Employee" means an individual who meets both of the following:

     (i) Has an employment relationship acknowledged by that

individual and the licensee or registrant that engages that

individual to originate secondary mortgage loans.

     (ii) Is treated as an employee by the licensee or registrant

that engages that individual to originate secondary mortgage loans

for compliance with federal income tax laws.

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

of a licensee or registrant. 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 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) "Licensed secondary mortgage loan officer" means a

secondary mortgage loan officer who is licensed as a mortgage loan

originator under the mortgage loan originator licensing act.

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

licensed under this act. As used in sections 2a, 2b, 2c, and 2d,

the term also includes a licensee under the consumer financial

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

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

secondary mortgage loan is being serviced by a servicer.

(l) (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.

(m) (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.

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

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

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

required to 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.

(p) (o) "Secondary mortgage loan" means a loan that 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 on an

interest in real property that is used as a dwelling and is subject

to a lien of 1 or more outstanding mortgages. 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, a secondary mortgage loan is subject

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

(q) (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) "Service" means the collection or remittance for a lender,

noteowner, or noteholder or 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 a mortgagor.

     (s) "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 under this act or

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

apply:

     (a) The person is providing secondary mortgage loan officer

services as an employee or agent of only 1 broker, lender, or

servicer and is registered as a licensed secondary mortgage loan

officer registrant if that registration is required under this act

the mortgage loan originator licensing act.

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

not apply after March 31, 2009.

(b) (c) The person is licensed under the consumer financial

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

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

or fewer secondary mortgage loans in a calendar year.

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

secondary mortgage loans in a calendar year.

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

professional employer organization, as that term is defined in

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. 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.

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

servicer.

     (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 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 that expires no

earlier than the date the license or registration expires, that is

issued by a depository financial institution, 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 under subsection (1). This subsection does not apply after

March 31, 2009.

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

(1) shall be conditioned upon the licensee or registrant conducting

its business as required 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.

(3) (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.

(4) (5) Claims may only be filed against a 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.

(5) (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.

(6) (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.

(7) (8) In the event that valid claims exceed the amount of 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.

(8) (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.

(9) (10) Net worth under subsection (9) (8) 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. 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

in accordance with generally accepted accounting principles. The

following assets 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 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 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,

expires on December 31 of each year. A person may renew a

registration or license 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 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, 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 an initial license or registration described in

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

initial annual operating fee for that license 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 reasonably

anticipated costs of the office of financial and insurance

regulation for administering and enforcing this act. The fee

schedule 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) 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 $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 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 from the fees described in this section

shall be deposited in the MBLSLA fund. As used in this subsection,

"MBLSLA fund" means the restricted account created under section

8(8) of the mortgage brokers, lenders, and servicers 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

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 under section 14.

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

registration , or secondary mortgage loan officer registration

under section 11.

     (h) Assess a civil fine under section 27.

     (i) Appoint a conservator 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

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 under section 15.

     (b) Administer oaths 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 an investigation, in the case of an investigation other than an

examination.

     Sec. 11. (1) A The commissioner shall give 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) 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 under 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 a licensee , or registrant , or

secondary mortgage loan officer registrant has done any of the

following:

     (a) Made a material misstatement in 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 an

annual operating fee, to maintain in effect 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 that, 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 , 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 , 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 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 without the consent of the commissioner. The sale,

transfer, assignment, or conveyance of more than 25% of the

outstanding voting stock of a licensee or registrant that is a

corporation, or more than 25% of the interest in a licensee or

registrant that is a limited liability company or partnership or

other unincorporated legal entity is considered a transfer of 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) A licensee or registrant shall not directly or

indirectly assess any charges or fees in connection with making 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 550.603, 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 the borrower has

the option to purchase.

     (b) If reasonable and necessary, the actual expenses incurred

in connection with making, closing, disbursing, extending,

readjusting, or renewing 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 authorized 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 under this section 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 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 in

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

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

mortgage loan transaction is also subject to the penalty and remedy

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

445.1864.

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

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

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

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

representative thereof who or which willfully or intentionally does

any of the following is guilty of a misdemeanor punishable by a

fine of not more than $15,000.00, imprisonment for not more than 1

year, or both:

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

or servicer without a license or registration required under this

act.

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

without a and is not a licensed secondary mortgage loan officer

registration required under this act the mortgage loan originator

licensing act.

     (c) Coerces or induces a real estate appraiser to inflate the

value of real property used as collateral for a secondary mortgage

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

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

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

selected for future appraisal work unless the appraiser agrees in

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

property.

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

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

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

property.

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

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

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

fine of not more than $3,000.00 for each violation, except that a

person shall not be fined more than $30,000.00 for a transaction

resulting in more than 1 violation, plus the costs of

investigation. The civil fine shall be sued for and recovered by

the commissioner and shall be collected and enforced by summary

proceedings by the attorney general.

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

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

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

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

practice is a violation of this act.

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

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

     (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. Sections 2a, 2b, 2c, 2d, and 26a of the

secondary mortgage loan act, 1981 PA 125, MCL 493.52a, 493.52b,

493.52c, 493.52d, and 493.76a, are repealed effective July 31,

2010.

     Enacting section 2. This amendatory act takes effect July 31,

2010.

     Enacting section 3. This amendatory act does not take effect

unless Senate Bill No. 462 of the 95th Legislature is enacted into

law.