November 6, 2008, Introduced by Reps. Johnson, Tobocman, Jackson, Robert Jones, Valentine, Leland, Gonzales and Cushingberry and referred to the Committee on Banking and Financial Services.
A bill to require mortgage lenders and mortgage servicers to
provide certain notices and information; to provide for the
establishment of a program to prevent home foreclosures; to provide
for the establishment of an information database; to provide for
the powers and duties of certain state governmental officers and
entities; and to provide remedies.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the "home
foreclosure prevention act".
Sec. 2. As used in this act:
(a) "Acts as a mortgage servicer" means engages, whether for
compensation or gain from another or on its own behalf, in the
business of receiving scheduled periodic payments from a borrower
pursuant to the terms of a mortgage loan, including money for an
escrow account, and paying principal, interest, and other payments
with respect to the money received from the borrower as is required
under the mortgage loan, mortgage servicing loan documents, or
servicing contract.
(b) "Commissioner" means the commissioner of the office of
financial and insurance regulation.
(c) "Mortgage lender" means a person engaged in the business
of making mortgage loans for compensation or gain and a mortgage
lender as that term is defined in section 1a of the mortgage
brokers, lenders, and servicers licensing act, 1987 PA 173, MCL
445.1651a.
(d) "Mortgage loan" means a loan secured by a first or
subordinate mortgage of or a land contract for the purchase of real
property located in this state, used or improved for use as a
principal dwelling or primary residence, and designed for occupancy
by 4 or fewer families.
(e) "Mortgage servicer" means a person who directly or
indirectly acts as a mortgage servicer, who is a servicer, as that
term is defined in 12 USC 2605, with respect to mortgage loans, or
who is a mortgage servicer as that term is defined in section 1a of
the mortgage brokers, lenders, and servicers licensing act, 1987 PA
173, MCL 445.1651a.
(f) "Subprime loan" means a mortgage loan originated after
December 31, 2001 and before January 1, 2008 to which both of the
following apply:
(i) The difference between the annual percentage rate for the
loan and the yield on United States treasury securities with
comparable periods of maturity is either equal to or greater than 3
percentage points if the loan is secured by a first lien mortgage
or deed of trust or 5 percentage points if the loan is secured by a
subordinate lien mortgage or deed of trust. Without regard to
whether the loan is subject to or reportable under the home
mortgage disclosure act of 1975, 12 USC 2801 to 2811, the
difference between the annual percentage rate and the yield on
treasury securities with comparable periods of maturity shall be
determined using the same procedures and calculation methods
applicable to loans that are subject to the reporting requirements
of the home mortgage disclosure act of 1975, 12 USC 2801 to 2811,
with the yield on treasury securities being determined as of the
fifteenth day of the month before the application for the loan.
(ii) The difference between the annual percentage rate for the
loan and the conventional mortgage rate is either equal to or
greater than 1.75 percentage points if the loan is secured by a
first lien mortgage or deed of trust or 3.75 percentage points if
the loan is secured by a subordinate lien mortgage or deed of
trust. As used in this subparagraph, "conventional mortgage rate"
means the most recent daily contract interest rate on commitments
for fixed-rate first mortgages published by the board of governors
of the federal reserve system in the federal reserve statistical
release H.15, or a publication that supersedes that release, during
the week before the week in which the interest rate for the loan is
set.
Sec. 3. At least 45 days before filing a judicial foreclosure
action under chapter 31 of the revised judicature act of 1961, 1961
PA 236, MCL 600.3101 to 600.3185, or publishing a notice of
foreclosure by advertisement under section 3208 of the revised
judicature act of 1961, 1961 PA 236, MCL 600.3208, to foreclose a
mortgage on a primary residence that secures a subprime loan, the
mortgage servicer for the loan shall send written notice by mail to
the last known address of the borrower to inform the borrower of
the availability of resources to avoid foreclosure. The notice
shall include all of the following:
(a) An itemization of all past due amounts that cause the loan
to be in default.
(b) An itemization of any other charges that must be paid to
bring the loan current.
(c) The earliest date that proceedings to foreclose the
mortgage may be commenced.
(d) A statement that the borrower may have options available
other than foreclosure and that the borrower may discuss available
options with the mortgage lender, the mortgage servicer, or a
counselor approved by the United States department of housing and
urban development.
(e) The address, telephone number, and other contact
information for the mortgage lender, the mortgage servicer, or the
agent for either of them who is authorized to attempt to work with
the borrower to avoid foreclosure.
(f) The name, address, telephone number, and other contact
information for 1 or more counseling agencies approved by the
United States department of housing and urban development or the
Michigan state housing development authority operating to assist
borrowers in this state to avoid foreclosure.
(g) The address, telephone number, and other contact
information for the consumer complaint section of the office of
financial and insurance regulation.
Sec. 4. (1) Within 3 business days after mailing the notice
required by section 3, the mortgage servicer shall file information
with the state court administrative office. The filing shall be in
an electronic format as designated by the state court
administrative office and shall contain the name and address of the
borrower and the date the notice was mailed to the borrower.
(2) As permitted by applicable federal law and law of this
state, optional information may be requested from a mortgage
servicer to facilitate further review by the commissioner under the
Michigan home foreclosure prevention program established under
section 5. The nature of the optional information requested shall
be determined in connection with the design of the database under
subsection (3). The optional information shall be used by the
commissioner to prioritize efforts to reach borrowers most likely
to avoid foreclosure and to prevent delay for defaults where
foreclosure is unavoidable.
(3) By January 1, 2009, the state court administrative office
shall establish an internal database to track information required
to be provided under this section. The commissioner shall design
and develop this database, in consultation with the state court
administrative office, in a manner to promote the Michigan home
foreclosure prevention program established under section 5. Except
as provided in section 8(2), only the state court administrative
office and the commissioner or the commissioner's designee shall
have access to the database.
Sec. 5. (1) The commissioner shall establish the Michigan home
foreclosure prevention program to seek solutions to avoid
foreclosures for certain subprime loans. In developing the program,
the commissioner may seek input from any person, including housing
counselors approved by the United States department of housing and
urban development or the Michigan state housing development
authority, community organizations, state agencies, mortgage
lenders, and mortgage servicers.
(2) The Michigan home foreclosure prevention program
established under this section may provide for the mediation of
foreclosure proceedings.
Sec. 6. The commissioner shall review information provided in
the database created under section 4 to determine whether a
subprime loan is appropriate for efforts to avoid foreclosure. If
the commissioner reasonably believes, based on a full review of the
loan information, the mortgage servicer's loss mitigation efforts,
the borrower's capacity and interest in staying in the home, and
other appropriate factors, that efforts under the Michigan home
foreclosure prevention program established under section 5 will
offer a reasonable prospect to avoid foreclosure, the commissioner
may do 1 or both of the following:
(a) Extend the earliest date to commence proceedings to
foreclose the mortgage as contained in the notice under section 3
for not more than 90 days. If the commissioner extends the date
under this subdivision, the commissioner shall notify the borrower,
mortgage servicer, and state court administrative office.
(b) Issue an order under the Michigan home foreclosure
prevention program ordering the mortgage servicer and the borrower
to participate in mediation.
Sec. 7. Except as provided in section 8(2), the data provided
to the state court administrative office under section 4 shall be
used exclusively for the Michigan home foreclosure prevention
program developed under section 5. The information provided to the
database is not a public record and not subject to the freedom of
information act, 1976 PA 442, MCL 15.231 to 15.246, except that a
mortgage lender or mortgage servicer shall have access to the
information submitted with regard to the lender or servicer's own
loans. Provision of information to the state court administrative
office for use by the commissioner is not a violation of applicable
law.
Sec. 8. (1) Until the Michigan home foreclosure prevention
program developed under section 4 is discontinued, a complaint to
judicially foreclose a mortgage on a primary residence that secures
a subprime loan filed after, or a notice to foreclose a mortgage on
a primary residence that secures a subprime loan published after,
December 14, 2008 shall contain a certification by the filer or
publisher that all of the following are true:
(a) Notice was provided as required by section 3.
(b) Information was provided as required by section 4.
(c) The filing or publication date is on or after the earliest
date to commence proceedings to foreclose the mortgage as contained
in the notice under section 3 and, if applicable, as extended by
the commissioner under section 6.
(2) A clerk of the circuit court, sheriff, deputy sheriff,
undersheriff, or other judicial officer acting under chapter 31 of
the revised judicature act of 1961, 1961 PA 236, MCL 600.3101 to
600.3185, for judicial foreclosures or under section 3216 of the
revised judicature act of 1961, 1961 PA 236, MCL 600.3216, for
foreclosures by advertisement may access the database established
under section 4 to confirm a certification provided under
subsection (1).
(3) If a certification under subsection (1) in a complaint to
foreclose a mortgage contains a materially inaccurate statement,
the action may be dismissed without prejudice and the plaintiff
ordered to pay costs incurred by the defendant in defending the
action.
(4) If a certification under subsection (1) in a notice of
foreclosure by advertisement contains a materially inaccurate
statement, the sale of the property under section 3216 of the
revised judicature act of 1961, 1961 PA 236, MCL 600.3216, shall
not be conducted until the party attempting to foreclose by
advertisement has complied with this act.
Enacting section 1. This act does not take effect unless
Senate Bill No.____ or House Bill No. 6614(request no. 08197'08 **)
of the 94th Legislature is enacted into law.