HB-5020, As Passed House, April 30, 2008

 

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 5020

 

 

 

 

 

 

 

 

 

 

 

 

     A bill to amend 1987 PA 173, entitled

 

"Mortgage brokers, lenders, and servicers licensing act,"

 

by amending sections 1a and 29 (MCL 445.1651a and 445.1679),

 

section 1a as amended by 2008 PA 66 and section 29 as amended by

 

2008 PA 71.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 1a. As used in this act:

 

     (a) "Affiliate" means a person or group of persons that

 

directly or indirectly through 1 or more intermediaries controls,

 

is controlled by, or is under common control with another person

 

and engaged in a business or transaction regulated by this act.

 

     (b) "Board" means the mortgage industry advisory board created

 

in section 33.

 


     (c) "Commissioner" means the commissioner of the office of

 

financial and insurance services of the department of labor and

 

economic growth or his or her authorized agent.

 

     (d) "Construction loan" means a mortgage loan to construct a

 

1-to-4 family dwelling, that is approved and closed before

 

completion of the construction of the improvement on the real

 

property.

 

     (e) "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.

 

     (f) "Depository financial institution" means a state or

 

nationally chartered bank, a state or federally chartered savings

 

and loan association, savings bank, or credit union, or an entity

 

of the federally chartered farm credit system.

 

     (g) "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.

 

     (h) "Financial licensing act" means the consumer financial

 

services act, 1988 PA 161, MCL 487.2051 to 487.2072, and any of the

 

acts listed in section 2 of the consumer financial services act,

 

1988 PA 161, MCL 487.2052.

 

     (i) "Firm commitment" means an underwriting in which a broker-

 

dealer commits to buy the mortgage loan or the entire issue of

 


securities based upon or backed by 1 or more mortgage loans and

 

assumes all financial responsibility for any unsold securities.

 

     (j) "Individual investor" means a person that resides in this

 

state or has its principal place of business in this state. The

 

term does not include a bank, savings bank, savings and loan

 

association, credit union, trust company, insurance company,

 

investment company as defined in the investment company act of

 

1940, 15 USC 80a-1 to 80a-64, pension or profit sharing plan if the

 

assets of the plan are managed by a bank or trust company or other

 

institutional manager, financial institution, institutional

 

manager, broker-dealer that is a member of the New York stock

 

exchange or registered under the uniform securities act, 1964 PA

 

265, MCL 451.501 to 451.818, or the uniform securities act (2002),

 

MCL 451.2101 to 451.2703, the federal national mortgage

 

association, the government national mortgage association, the

 

federal home loan mortgage corporation, or a mortgage lender or

 

mortgage servicer.

 

     (k) "License" means a license issued under this act.

 

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

 

licensed under this act.

 

     (m) "Loan officer" means an individual who is an employee or

 

agent of a mortgage broker, mortgage lender, or mortgage servicer;

 

who originates 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.

 

     (n) "Loan officer registrant" means an individual who is

 

currently registered under section 2a.

 


     (o) "Mortgage 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 in an

 

attempt to obtain a mortgage loan.

 

     (ii) Serves or offers to serve as an agent for a person who

 

makes or offers to make mortgage loans.

 

     (p) "Mortgage lender" means a person who, directly or

 

indirectly, makes or offers to make mortgage loans.

 

     (q) "Mortgage loan" means a loan secured by a first mortgage

 

on real property located in this state and used, or improved for

 

use, as a dwelling and designed for occupancy by 4 or fewer

 

families or a land contract covering real property located in this

 

state used, or improved for use, as a dwelling and designed for

 

occupancy by 4 or fewer families. A mortgage loan does not include

 

a home improvement installment contract under the home improvement

 

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

 

     (r) "Mortgage servicer" means a person who, directly or

 

indirectly, services or offers to service mortgage loans.

 

     (s) "Originate" means any of the following:

 

     (i) To negotiate, arrange, or offer to negotiate or arrange a

 

mortgage loan between a mortgage lender and 1 or more individuals.

 

     (ii) To place, assist in placing, or find a mortgage loan for 1

 

or more individuals.

 

     (t) "Person" means an individual, corporation, limited

 

liability company, partnership, association, governmental entity,

 

or any other legal entity.

 

     (u) "Real estate broker" means a broker or associate broker

 


licensed under article 25 of the occupational code, 1980 PA 299,

 

MCL 339.2501 to 339.2518.

 

     (v) "Real estate salesperson" means a salesperson licensed

 

under article 25 of the occupational code, 1980 PA 299, MCL

 

339.2501 to 339.2518.

 

     (w) "Register" means filing a notice with the commissioner on

 

a form prescribed by the commissioner that notifies the

 

commissioner of the intent to engage in the activities of a

 

mortgage broker, mortgage lender, mortgage servicer, or loan

 

officer in this state and the payment of any fees required under

 

this act, along with the other documents, proofs, and fees required

 

by the commissioner.

 

     (x) "Registrant" means a person that is registered under

 

section 6 or required to register under section 6. The term does

 

not include a loan officer registrant.

 

     (y) "Service" means the collection or remittance, or the right

 

or obligation to collect or remit, for a lender, noteowner,

 

noteholder, mortgage servicer, or the licensee's or registrant's

 

own account of 4 or more installment payments of the principal,

 

interest, or an amount placed in escrow under a mortgage loan,

 

mortgage servicing agreement, or an agreement with the mortgagor.

 

     Sec. 29. (1) An owner, partner, member, officer, director,

 

trustee, employee, agent, broker, or other person, or a

 

representative acting on the authority of that person that

 

willfully or intentionally does any of the following is guilty of a

 

misdemeanor punishable by a fine of not more than $15,000.00 or

 

imprisonment for not more than 1 year, or both:

 


     (a) Engages in this state in the business of a mortgage

 

broker, mortgage lender, or mortgage servicer without a license or

 

registration required under this act or acts as a loan officer in

 

this state without a loan officer registration required under this

 

act.

 

     (b) Transfers or assigns a mortgage loan or a security

 

directly representing an interest in 1 or more mortgage loans

 

before the disbursement of 75% or more of the proceeds of the

 

mortgage loan to, or for the benefit of, the borrower. This

 

subdivision does not apply to any of the following:

 

     (i) A land contract not considered to be an equitable mortgage.

 

     (ii) A loan made under a state or federal government program

 

that allows the lender to escrow more than 25% of the loan proceeds

 

for a limited period of time.

 

     (iii) A construction loan.

 

     (iv) A 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 mortgage loan.

 

     (c) Transfers or assigns a mortgage loan or a security

 

representing an interest in 1 or more mortgage loans to an

 

individual investor unless 1 or more of the following apply:

 

     (i) The transfer or assignment is made through a broker-dealer

 

which is a member of the New York stock exchange.

 

     (ii) The transfer or assignment is made through a broker-dealer

 

who meets all of the following criteria:

 


     (A) The broker-dealer is registered under the uniform

 

securities act, 1964 PA 265, MCL 451.501 to 451.818, or the uniform

 

securities act (2002), MCL 451.2101 to 451.2703.

 

     (B) The broker-dealer is not an affiliate of the mortgage

 

lender unless the person acquired the broker-dealer registration,

 

directly or indirectly, before September 1, 1987 under the uniform

 

securities act, 1964 PA 265, MCL 451.501 to 451.818, was affiliated

 

with a mortgage lender before September 1, 1987, and has

 

continuously maintained that registration subsequent to September

 

1, 1987. For purposes of this subparagraph, if an aggregate of more

 

than 10% of the outstanding voting stock or interest in a

 

corporation, unincorporated organization, partnership, or other

 

legal entity that is a broker-dealer or mortgage lender is sold,

 

transferred, assigned, or otherwise conveyed subsequent to

 

September 1, 1987, the registration shall be considered to not have

 

been continuously maintained.

 

     (C) The broker-dealer acquired the mortgage loan or security

 

on a firm commitment.

 

     (iii) The transfer or assignment is made to a person who the

 

transferor or assignor believes, or has reasonable grounds to

 

believe, is 1 of the following:

 

     (A) A business entity having either net income from operations

 

after taxes in excess of $100,000.00 in its last fiscal year or its

 

latest 12-month period, or a net worth in excess of $1,000,000.00

 

at the time of purchase.

 

     (B) An individual who, after the purchase, has an investment

 

of more than $50,000.00 in such loans or securities, including

 


installment payments to be made within 1 year after purchase by the

 

individual, has either personal income before taxes in excess of

 

$100,000.00 for his or her last fiscal year or latest 12-month

 

period and is capable of bearing the economic risk, or net worth in

 

excess of $1,000,000.00, and has the knowledge and experience in

 

financial and business matters that he or she is capable of

 

evaluating the merits and risks of the prospective investment, or

 

has obtained the advice of an attorney, certified public

 

accountant, or investment adviser registered under the investment

 

advisers act of 1940, or an investment adviser registered under the

 

uniform securities act, 1964 PA 265, MCL 451.501 to 451.818, or the

 

uniform securities act (2002), MCL 451.2101 to 451.2703, with

 

respect to the merits and risks of the prospective investment.

 

     (iv) A transferor or assignor does not maintain its principal

 

place of business in this state and the transferee or assignee is

 

not a resident of this state and does not maintain its principal

 

place of business in this state.

 

     (2) Subject to subsections (4) and (5), if the commissioner

 

finds that a licensee, registrant, or loan officer registrant has

 

violated this act or the rules promulgated under this act, the

 

commissioner may do 1 or more of the following:

 

     (a) Assess a civil fine against the licensee, registrant, or

 

loan officer registrant or a person who controls the licensee,

 

registrant, or loan officer registrant of not more than $1,000.00

 

for each violation, except that the licensee, registrant, or loan

 

officer registrant or the person shall not be fined more than

 

$10,000.00 for a transaction resulting in more than 1 violation,

 


plus the costs of investigation.

 

     (b) Suspend or revoke a license, registration, or loan officer

 

registration or refuse to issue a license or renew a license,

 

registration, or loan officer registration.

 

     (c) Require the licensee, registrant, or loan officer

 

registrant or a person who controls the licensee, registrant, or

 

loan officer registrant to make restitution to each injured

 

individual, if the commissioner finds that the violation of this

 

act or a rule promulgated under this act resulted in an injury to 1

 

or more individuals.

 

     (3) A civil fine assessed under subsection (2) may be sued for

 

and recovered by and in the name of the commissioner and may be

 

collected and enforced by summary proceedings by the attorney

 

general. Each individual injured by a violation of this act or a

 

rule shall constitute a separate violation. In determining under

 

subsection (2) the amount of a fine, whether to suspend or revoke a

 

license, registration, or loan officer registration, whether to

 

refuse to issue or renew a license or loan officer registration, or

 

the amount of restitution, the commissioner shall consider the

 

extent to which the violation was a knowing and willful violation,

 

the extent of the injury suffered because of the violation, the

 

corrective action taken by the licensee, registrant, or loan

 

officer registrant to ensure that the violation will not be

 

repeated, and the record of the licensee, registrant, or loan

 

officer registrant in complying with this act. Any proceedings

 

under this subsection are subject to the procedures of the

 

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

 


24.328.

 

     (4) Subsection (2) does not apply to a violation of this act

 

that results from a bona fide error that occurs notwithstanding the

 

adoption and observance of reasonable procedures intended to

 

prevent the occurrence of the error.

 

     (5) If a loan officer registrant violates section 22b(e)(ii),

 

the commissioner shall revoke his or her loan officer registration.

 

Revocation of a loan officer registration under this subsection

 

does not affect the commissioner's authority to pursue any other

 

remedy available under subsection (2) for that violation.

 

     Enacting section 1. This amendatory act does not take effect

 

unless House Bill No. 5008 of the 94th Legislature is enacted into

 

law.