Bill Text: MI HB4688 | 2009-2010 | 95th Legislature | Introduced
Bill Title: Trade; securities; adoption of new uniform securities act (2002); update uniform securities act references in mortgage brokers, lenders, and servicers licensing act. Amends secs. 1a & 29 of 1987 PA 173 (MCL 445.1651a & 445.1679).
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2009-04-29 - Referred To Committee On Banking And Financial Institutions [HB4688 Detail]
Download: Michigan-2009-HB4688-Introduced.html
HOUSE BILL No. 4688
March 25, 2009, Introduced by Rep. Johnson and referred to the Committee on Commerce.
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 529.
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),
2008 PA 551, 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), 2008 PA 551, 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 is not considered to 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 mortgage loans or securities
representing an interest in 1 or more mortgage loans, 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), 2008 PA 551, 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.
(d) Coerces or induces a real estate appraiser to inflate the
value of real property used as collateral for a 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.
(2) Subject to subsections (4) and (5), if the commissioner
finds that a licensee, registrant, or loan officer registrant has
violated, or directly or indirectly counseled, aided, or abetted in
a violation, of 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 $3,000.00
for each violation, except that the licensee, registrant, or loan
officer registrant or the person shall not be fined more than
$30,000.00 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 is 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.
