HB-4688, As Passed House, April 28, 2009

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 4688

 

 

 

 

 

 

 

 

 

 

 

 

     A bill to amend 1987 PA 173, entitled

 

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

 

by amending section 29 (MCL 445.1679), as amended by 2008 PA 529.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     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.