October 21, 2009, Introduced by Senators ANDERSON, WHITMER, CHERRY, BARCIA, CLARKE, OLSHOVE, BASHAM, SWITALSKI, HUNTER, SCOTT and BRATER 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 sections 24 and 27 (MCL 493.74 and 493.77), section 24
as amended by 2002 PA 392 and section 27 as amended by 2009 PA 77.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 24. (1) A licensee or registrant shall not transfer or
assign a secondary mortgage loan or a security directly
representing an interest in 1 or more secondary mortgage loans
before the disbursement of 75% or more of the proceeds of the
secondary mortgage loan to, or for the benefit of, the borrower.
This subsection shall not apply to any of the following:
(a) A land contract not considered to be an equitable
secondary mortgage.
(b) A loan made under a state or federal government program
that allows the lender to escrow more than 25% of the proceeds for
a limited period of time.
(c) A construction loan.
(d) A secondary mortgage loan that provides in writing that
the loan proceeds shall be disbursed to or for the benefit of the
borrower in installments or upon the request of the borrower or
upon the completion of renovations or repairs to the dwelling
situated on the real property subject to the secondary mortgage
loan.
(2) It is a violation of this act for a licensee or registrant
to do any of the following:
(a) Suppress or withhold from the commissioner any information
that the licensee or registrant possesses that would make the
licensee or registrant ineligible for licensing or registration
under this act or would warrant the commissioner's denial of a
license or registration application.
(b) Violate any provisions of 1966 PA 125, MCL 565.161 to
565.164, regulating the handling of mortgage escrow accounts by
mortgagees.
(c) Until proper disbursement is made, fail to place in a
trust or escrow account held by a depository financial institution
in a manner approved by the commissioner any money, funds,
deposits, checks, drafts, or other negotiable instruments received
by a broker, lender, or servicer that is the portion of a payment
on a secondary mortgage loan that the person is obligated to pay to
a third party. The deposits shall include amounts paid to the
holder of the secondary mortgage loan, amounts for property taxes
and insurance premiums, and amounts paid under an agreement that
requires, if the secondary mortgage loan is not closed, the amounts
paid shall be refunded to the prospective borrower, or if the
secondary mortgage loan is closed, the amounts paid shall be
applied to fees and costs incurred at the time the secondary
mortgage loan is closed. Fees and costs include, but are not
limited to, title insurance premiums and recording fees. Fees and
costs do not include amounts paid to cover costs incurred to
process the secondary mortgage loan application, to obtain an
appraisal, or to receive a credit report.
(d) Refuse to permit an examination or investigation by the
commissioner of the books and affairs of the licensee or
registrant, or refuse or fail, within a reasonable time, to furnish
any information or make a report that may be required by the
commissioner under this act.
(e) Be convicted of a felony, or any misdemeanor of which an
essential element is fraud.
(f) Refuse or fail to pay within a reasonable time expenses
assessed under this act.
(g) Fail to make restitution after having been ordered to do
so by the commissioner or an administrative agency, or fail to make
restitution or pay damages to persons injured by the licensee's or
registrant's business transactions after having been ordered to do
so by a court.
(h) Fail to make a secondary mortgage loan pursuant to, and in
accordance with, a written commitment to make a secondary mortgage
loan
issued to, and accepted by, a person when if the person has
timely and completely satisfied all the conditions of the
commitment
prior to before the expiration of the commitment.
(i) Require a prospective borrower to deal exclusively with
the licensee or registrant in regard to a secondary mortgage loan
application.
(j) Take a security interest in real property before closing
the secondary mortgage loan to secure payment of fees assessed in
connection with a secondary mortgage loan application.
(k) Except as otherwise provided under section 14e, knowingly
permit a person to violate an order that has been issued under this
act or any other financial licensing act that prohibits that person
from being employed by, an agent of, or a control person of the
licensee or registrant.
(l) Fail to disclose to each secondary mortgage loan applicant,
at the time the person applies for a secondary mortgage loan,
whether the licensee or registrant may assign, sell, or transfer
the servicing of the secondary mortgage loan at any time while the
secondary mortgage loan is outstanding.
(m) Fail to notify a borrower of any assignment, sale, or
other transfer of the servicing of the borrower's secondary
mortgage loan by the licensee or registrant, by providing written
notice that meets all of the following:
(i) Except as provided in subparagraph (ii) or subsection (3),
is delivered to the borrower at least 15 days before the effective
date of the transfer of the servicing of the secondary mortgage
loan.
(ii) Except as provided in subsection (3), is delivered to the
borrower not more than 30 days after the effective date of the
transfer of the servicing of the secondary mortgage loan if the
transfer is the result of any of the following:
(A) Termination of the contract for servicing the secondary
mortgage loan for cause.
(B) Commencement of bankruptcy proceedings by or against the
licensee or registrant servicing the secondary mortgage loan.
(C) Commencement by the commissioner of conservatorship
proceedings under section 12a against the licensee or registrant
servicing the secondary mortgage loan before the transfer.
(iii) Includes all of the following information:
(A) The effective date of transfer of the servicing.
(B) The name, address, and a toll-free or collect call
telephone number of the transferee of the servicing.
(C) A name of and a toll-free or collect call telephone number
for an employee or a department of the licensee or registrant that
is the transferor of the servicing that the borrower may contact to
ask questions or obtain information relating to the transfer of the
servicing of the borrower's secondary mortgage loan.
(D) The name of and a toll-free or collect call telephone
number for an employee or a department of the person that is the
transferee of the servicing that the borrower may contact to ask
questions or obtain information relating to the transfer of the
servicing of the borrower's secondary mortgage loan.
(E) The date on which the licensee or registrant that is
servicing the secondary mortgage loan before the transfer will
cease to accept payments relating to the secondary mortgage loan
and the date on which the transferee will begin to accept those
payments.
(F) Any information concerning the effect the transfer may
have, if any, on the terms of or the continued availability of
mortgage life or disability insurance or any other type of
optional insurance and what action, if any, the borrower must
take to maintain coverage.
(G) A statement that the transfer of the servicing of the
secondary mortgage loan does not affect any term or condition of
the borrower's secondary mortgage or any other security instruments
executed by the borrower in connection with the secondary mortgage
loan, other than terms directly related to the servicing of the
secondary mortgage loan.
(n) Fail to notify a borrower of any assignment, sale, or
other transfer of the servicing of the borrower's secondary
mortgage loan to a licensee or registrant, by providing written
notice that meets all of the following:
(i) Except as provided in subparagraph (ii) or subsection (3),
is delivered to the borrower at least 15 days after the effective
date of the transfer of the servicing of the secondary mortgage
loan.
(ii) Except as provided in subsection (3), is delivered to the
borrower not more than 30 days after the effective date of the
transfer of the servicing of the secondary mortgage loan if the
transfer is the result of any of the following:
(A) Termination of the contract for servicing the secondary
mortgage loan for cause.
(B) Commencement of bankruptcy proceedings by or against the
licensee or registrant servicing the secondary mortgage loan.
(C) Commencement by the commissioner of conservatorship
proceedings under section 12a against the licensee or registrant
servicing the secondary mortgage loan after the transfer.
(iii) Includes all of the following information:
(A) The effective date of transfer of the servicing.
(B) The name, address, and a toll-free or collect call
telephone number of the transferor of the servicing.
(C) A name of and a toll-free or collect call telephone number
for an employee or a department of the licensee or registrant that
is the transferee of the servicing that the borrower may contact to
ask questions or obtain information relating to the transfer of the
servicing of the borrower's secondary mortgage loan.
(D) The name of and a toll-free or collect call telephone
number for an employee or a department of the person that is the
transferor of the servicing that the borrower may contact to ask
questions or obtain information relating to the transfer of the
servicing of the borrower's secondary mortgage loan.
(E) The date on which the person that was servicing the
secondary mortgage loan before the transfer will cease to accept
payments relating to the secondary mortgage loan and the date on
which the licensee or registrant will begin to accept those
payments.
(F) Any information concerning the effect the transfer may
have, if any, on the terms of or the continued availability of
mortgage life or disability insurance or any other type of
optional insurance and what action, if any, the borrower must
take to maintain coverage.
(G) A statement that the transfer of the servicing of the
secondary mortgage loan to the licensee or registrant does not
affect any term or condition of the borrower's secondary mortgage
or any other security instruments executed by the borrower in
connection with the secondary mortgage loan, other than terms
directly related to the servicing of the secondary mortgage loan.
(3) Subsection (2)(m)(i) and (ii) does not apply to any
assignment, sale, or other transfer of the servicing of a secondary
mortgage loan if the licensee or registrant making the secondary
mortgage loan provides written notice of the transfer to the
borrower at the closing of the secondary mortgage loan that meets
the requirements of subsection (2)(m)(iii). Subsection (2)(n)(i) and
(ii) does not apply to any assignment, sale, or other transfer of
the servicing of a secondary mortgage loan to a licensee or
registrant if the person making the secondary mortgage loan
provides written notice of the transfer to the borrower at the
closing of the secondary mortgage loan that meets the requirements
of subsection (2)(n)(iii).
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
and is not a licensed secondary mortgage loan officer under 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, other than a violation of section 24(2)(l), (m), or (n), or
$250.00, whichever is greater, together with reasonable attorneys'
fees and the costs of bringing the action.
(d) Recover actual damages resulting from a violation of
section 24(2)(l), (m), or (n), or $1,500.00, whichever is greater,
together with reasonable attorney fees and the costs of bringing
the action.
Enacting section 1. This amendatory act takes effect July 31,
2010.