Recent Changes to Michigan Lending Laws
by: Nicole Legere, Esq., Senior Counsel
An Amendment to the Mortgage Loan Definition
The state of Michigan recently passed Senate Bill 1283, which amended the Mortgage Brokers, Lenders, and Servicers Licensing Act. This act is responsible for regulating the licensure and/or registration of mortgage brokers, lenders and servicers. The new bill was passed in order to modify the definition of mortgage loan as it is applicable to mortgage brokers, lenders, and servicers.
Under the previous law, a mortgage loan was defined as 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.” The amendment changed this definition in order to specifically exclude “a loan transaction in which the proceeds are not used primarily for a personal, family or household purpose.”
Similarly, Michigan also passed Senate Bill 1284, which amended the Consumer Mortgage Protection Act. This act regulates the practice of making mortgage loans by prohibiting certain lending practices, and requiring specific informational disclosures.
The previous law defined a mortgage loan as “a loan or home improvement installment contract secured by a first or subordinate mortgage or any other form of lien or a land contract covering real property located in this state used as the borrower’s principal dwelling and designed for occupancy by 4 or fewer families…” The definition specifically excluded (1) loans in which the proceeds are used to acquire the dwelling (2) reverse mortgages, and (3) an open credit where the lender reasonably contemplates repeated advances. With the passing of Bill 1284, the list of exceptions is expanded to include (4) a loan in which the proceeds are not used primarily for a personal, family or household purpose.
These changes will make Michigan state law consistent with the Mortgage Loan Originator Licensing Act, federal disclosures, and other states which have already created the same exemption. The amendments are effective immediately.
MICHIGAN BILL 1172:
An Extension of Foreclosure by Advertisement Requirements
Additionally, Michigan Bill 1172 was also passed in order to extend a 2009 law which requires an attempt to negotiate revisions in the terms of delinquent loans before proceedings to foreclosure by advertisement.
Under this law, a party may foreclose by advertisement if all the following circumstances exist:
- A default in a condition of the mortgage occurred
- An action or proceeding at law has not been instituted to recover the debt secured by the mortgage, or such action has been discontinued
- The mortgage containing a power of sale has been properly recorded
- The party foreclosing is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage
- Notice was not mailed to the mortgagor
- After the notice is mailed, the time for the mortgagor to request a meeting has not yet expired
- Within 30 days of receiving notice the mortgagor requested a meeting with the designated individual and 90 days have not passed after the notice was mailed
- Time for the mortgagor to produce documents has not yet expired
- The mortgagor requested a meeting, and provided the required documents, and this meeting or negotiation has not taken place
- The mortgagor and mortgagee agreed to a loan modification and there is not a default under the terms of the modification
- Section 3205c(1) shows that the mortgagor is eligible for a loan modification
- With the passing of Bill 1172, lenders will continue to be required to fulfill all of the requirements listed above before they will be able to initiate a foreclosure by advertisement. The requirements were scheduled to expire on December 31, 2012, but they will now continue to be in effect until June 30, 2013.
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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