HOUSE BILL No. 6435

 

September 7, 2006, Introduced by Reps. Casperson, Marleau, Amos, Vander Veen, Taub, Mortimer, Baxter, Emmons, Jones, Booher, David Law, Pastor and Shaffer and referred to the Committee on Banking and Financial Services.

 

     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 1996 PA 210.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 29. (1) A person, or any owner, partner, member, officer,

 

director, trustee, employee, agent, broker, or their representative

 

acting on the authority of  such  that person, who willfully or

 

intentionally does any of the following is guilty of a misdemeanor

 

punishable by a fine of not more than $5,000.00, or imprisonment

 

for not more than 3 years, 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.


 

     (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,  Act No. 265 of the Public Acts of 1964, being

 

sections 451.501 to 451.818 of the Michigan Compiled Laws  1964 PA

 

265, MCL 451.501 to 451.818.

 

     (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  Act No. 265

 

of the Public Acts of 1964  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  is not 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  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, 15 USC 80b-1 to 80b-21, or an

 

investment adviser registered under  Act No. 265 of the Public Acts

 

of 1964  the uniform securities act, 1964 PA 265, MCL 451.501 to

 

451.818, 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) Coerce or induce a real estate appraiser to inflate the

 

value of real property used as collateral for a mortgage loan 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) If the commissioner finds that a licensee or 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 a

 

person who controls the licensee or registrant of not more than

 

$1,000.00 for each violation, except that the licensee, registrant,

 

or a 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 or registration or refuse to

 

issue a license or renew a license or registration.

 

     (c) Require the licensee or registrant or a person who

 

controls the licensee or 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  is a separate violation. In determining

 

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

 

revoke a license or registration, whether to refuse to issue or

 

renew a license, 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 or

 

registrant to ensure that the violation will not be repeated, and

 

the record of the licensee or registrant in complying with this

 

act. Any proceedings under this subsection shall be subject to the

 

procedures of the administrative procedures act of 1969,  Act No.

 

306 of the Public Acts of 1969, being sections 24.201 to 24.328 of

 

the Michigan Compiled Laws  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.