June 23, 2005, Introduced by Senators STAMAS and BISHOP and referred to the Committee on Banking and Financial Institutions.
A bill to amend 1987 PA 173, entitled
"Mortgage brokers, lenders, and servicers licensing act,"
by amending sections 1a, 2, and 4 (MCL 445.1651a, 445.1652, and
445.1654), section 1a as amended by 2002 PA 391, section 2 as
amended by 2002 PA 4, and section 4 as amended by 1996 PA 210.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1a. As used in this act, unless the context requires
otherwise:
(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) "Commissioner" means the commissioner of the office of
financial
and insurance services of the department of consumer and
industry
services labor and economic
growth or his or her
authorized agent.
(c) "Construction loan" means a mortgage loan for the purpose
of constructing a 1-to-4 family dwelling, which loan is approved
and closed before completion of the construction of the improvement
on the real property.
(d) "Control person" means a director or executive officer of
a licensee 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.
(e) "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.
(f) "Exclusive broker" means an individual who brokers
mortgage loans solely to 1 licensee or registrant, is compensated
solely by that licensee or registrant, and is indemnified by the
licensee or registrant as provided in section 4. The actions or
practices of an exclusive broker in brokering a mortgage loan are
the actions or practices of the licensee or registrant.
(g) (f)
"Executive officer" means an officer,
member, or
partner of a licensee or registrant, including chief executive
officer, president, vice president, chief financial officer,
controller, compliance officer, or any other similar position.
(h) (g)
"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) (h)
"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) (i)
"Individual investor" means a person
residing in
this state or having its principal place of business in this state,
other than 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, title I of
chapter
686, 54 Stat. 789, 15 U.S.C.
USC 80a-1 to
80a-3 and
80a-4
to 80a-64, pension or profit sharing plan, the assets
of
which 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, the federal national mortgage association, the
government national mortgage association, the federal home loan
mortgage corporation, or a mortgage lender or mortgage servicer.
(k) (j)
"License" means a license issued under
this act.
(l) (k)
"Licensee" means a person licensed or
required to be
licensed under this act.
(m) (l) "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.
(n) (m)
"Mortgage lender" means a person who,
directly or
indirectly, makes or offers to make mortgage loans.
(o) (n)
"Mortgage loan" means a loan secured by a
first
mortgage on real property located in this state and used, or
improved to be used, 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 to be used, 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.
(p) (o)
"Mortgage servicer" means a person who,
directly or
indirectly, services or offers to service mortgage loans.
(q) (p)
"Person" means an individual, corporation,
partnership, association, governmental entity, or any other legal
entity.
(r) (q)
"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.
(s) (r)
"Real estate salesperson" means a
salesperson
licensed under article 25 of the occupational code, 1980 PA 299,
MCL 339.2501 to 339.2518.
(t) (s)
"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, or mortgage servicer 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.
(u) (t)
"Registrant" means a person registered or
required
to be registered under this act.
(v) (u)
"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. 2. (1) A person shall not act as a mortgage broker,
mortgage lender, or mortgage servicer without first obtaining a
license or registering under this act, unless 1 or more of the
following apply:
(a)
The person is solely an
individual who is performing
services as an employee of only 1 mortgage broker, mortgage lender,
or mortgage servicer.
(b) The person is an exclusive broker.
(c) (b)
The person is exempted from the this act
under
section 25.
(d) (c)
The person is licensed as a class I licensee under
the consumer financial services act, 1988 PA 161, MCL 487.2051 to
487.2072.
(2) A person that is licensed to make regulatory loans under
the
regulatory loan act, of 1963, 1939 PA 21, MCL 493.1 to 493.25
493.24, or is licensed to make secondary mortgage loans under the
secondary mortgage loan act, 1981 PA 125, MCL 493.51 to 493.81, and
is registered with the commissioner shall file with the
commissioner an application for a license under section 3(1) or
shall discontinue all activities that are subject to this act.
(3)
Unless a residential mortgage originator is otherwise
licensed or registered as a mortgage broker under this act or is a
mortgage broker exempt from licensing or registration under this
act, a residential mortgage originator shall not receive directly
or indirectly any compensation, commission, fee, points, or other
remuneration or benefits from a mortgage broker, mortgage lender,
or mortgage servicer other than the employer of the residential
mortgage originator.
(4)
Unless a residential mortgage originator is otherwise
licensed or registered as a mortgage broker under this act or is a
mortgage broker exempt from licensing or registration under this
act, a mortgage broker, mortgage lender, or mortgage servicer shall
not pay directly or indirectly any compensation, commission, fee,
points, or other remuneration or benefits to a residential mortgage
originator other than an employee of the mortgage broker, mortgage
lender, or mortgage servicer. As used in this subsection and
subsection (3), "residential mortgage originator" means a person
who assists another person in obtaining a mortgage loan.
(5) A mortgage broker, mortgage lender, or mortgage servicer
that
was is exempt from regulation under this act and is a
subsidiary or affiliate of a depository financial institution or a
depository financial institution holding company that does not
maintain a main office or branch office in this state, shall
register under section 6 or shall discontinue all activities
subject to this act.
(6) Except for a state or nationally chartered bank, savings
bank,
or an affiliate of a bank or savings bank, the a person
subject to this act shall not include in its name or assumed name,
the words "bank", "banker", "banking", "banc", "bankcorp",
"bancorp", or any other words or phrases that would imply that the
person is a bank, is engaged in the business of banking, or is
affiliated with a bank or savings bank. It is not a violation of
this subsection for a licensee or registrant to use the term
"mortgage banker" or "mortgage banking" in its name or assumed
name. A person subject to this act whose name or assumed name on
January 1, 1995 contained a word prohibited by this section may
continue to use the name or assumed name.
Sec. 4. (1) Except as otherwise provided in this section, at
the time of filing an application for a license or renewal of a
license, the applicant shall do all of the following:
(a) Provide proof of financial responsibility in the following
amounts, as applicable:
(i) $25,000.00 for an applicant who acts as a mortgage broker
and who receives funds from a prospective borrower before the
closing of the mortgage loan or who acts as a mortgage lender.
(ii) If an applicant described in subparagraph (i) conducts
business using 1 or more exclusive brokers, an additional
$20,000.00 for each exclusive broker through which the applicant
conducts business regulated by this act. However, the total amount
required in this subparagraph shall not exceed $1,000,000.00.
(iii) (ii) $125,000.00 for an applicant who acts as a mortgage
servicer.
(iv) If an applicant described in subparagraph (iii) conducts
business using 1 or more exclusive brokers, an additional
$20,000.00 for each exclusive broker through which the applicant
conducts business regulated by this act. However, the total amount
required in this subparagraph shall not exceed $1,000,000.00.
(b) Provide proof of financial responsibility by 1 of the
following:
(i) A corporate surety bond payable to the commissioner,
executed by a corporate surety approved by the commissioner, which
expires no earlier than the date the license shall expire.
(ii) An irrevocable letter of credit upon which the applicant
is the obligor, which expires no earlier than the date the license
shall expire, issued by a bank, savings bank, savings and loan
association, or credit union the deposits of which are insured by
an agency of the federal government, and the terms of which letter
of credit are approved by the commissioner.
(2) A licensee or registrant that conducts business regulated
by this act using 1 or more exclusive brokers shall enter into an
indemnification agreement, subject to the approval of the
commissioner, to protect borrowers from monetary damages that may
result from doing business with the exclusive brokers through which
the licensee or registrant conducts business regulated by this act.
The indemnification shall be provided in the amount and form
required by subsection (1).
(3) (2)
The bond or letter of credit deposited under
subsection (1) shall be conditioned upon the conduct of the
business in accordance with the provisions of this act and all
rules promulgated by the commissioner, and the payment of all money
that becomes due.
(4) (3)
In place of depositing a bond or letter of credit,
an applicant may pay a nonrefundable administrative fee established
by the commissioner not to exceed $100.00 and furnish 1 of the
following as proof of financial responsibility:
(a) Deposit with the state treasurer, under terms prescribed
by the commissioner, obligations of the United States, or
obligations which are guaranteed fully as to principal and interest
by the United States, or any general obligations of any state or
any political subdivision of the United States, with a maturity
date of 3 years or less, in an amount equal to, or greater than,
the amount of the required bond. Interest earned under obligations
shall accrue to the account of the applicant.
(b) Deposit with the state treasurer, under terms prescribed
by the commissioner, a certificate of deposit of a federally
insured financial institution with a maturity date of 3 years or
less for an amount payable which is equal to, or greater than, the
amount of the required bond and which is not available for
withdrawal except by direct order of the commissioner. Interest
earned under the certificate shall accrue to the account of the
applicant.
(5) (4)
Upon application as prescribed by the commissioner,
the commissioner may reduce, waive, or modify the requirements
under this section for a mortgage servicer who services not more
than 300 mortgage loans and who does not collect money for the
purpose of paying taxes or insurance pursuant to the mortgage loan.
(6) (5)
The commissioner shall waive the requirements of
this section and section 5 upon application by a mortgage servicer
who is a licensed real estate broker or real estate salesperson,
services more than 75 land contracts, has a satisfactory record of
compliance with applicable state and federal law, and does not
engage in any other activity regulated by this act.