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Mortgage Compliance FAQ

How long should the licensee/registrant retain its records?

Is there a list of specific items that must be maintained in mortgage loan files?

Can mortgage files be maintained electronically?

Where can mortgage loan documents be stored?

Does Michigan have any state-specific loan disclosures?

Where can copies of Michigan-specific disclosures be found?

What laws does OFIR check for compliance with during an examination?

Can a mortgage broker close loans in its name?

Are referral fees to real estate agents, title companies, mortgage brokers, or others allowed in Michigan?
Are reverse mortgages covered under the Mortgage Brokers, Lenders, and Servicers Licensing Act (MBLSLA)?
What laws regulate advertising of mortgage loans?
 
Question How long should the licensee/registrant retain its records?
Answer The Mortgage Brokers, Lenders, and Servicers Licensing Act (MBLSLA), section 21(2), MCL 445.1671, requires the licensee/registrant to retain all first mortgage loan documents, in its possession or control, until the mortgage loan is transferred or assigned, or for a period of 3 years from the date of closing, whichever occurs first.  Therefore, if the licensee/registrant acts only as the broker, it must retain all documents, in its possession or control, related to the first mortgage transaction for 3 years from the date of closing. 

For loans where the licensee/registrant acts as the lender, and the loan is transferred or assigned, the MBLSLA requires the licensee/registrant to retain copies of the promissory note, mortgage, land contract, truth-in-lending disclosure statements, and settlement statements for 3 years after the date the mortgage loan is transferred or assigned.

The MBLSLA also requires the licensee/registrant to retain all documents pertaining to a rejected application for a mortgage loan for the period of time required by state and federal law.  OFIR interprets rejected applications to include withdrawn applications.  The Mortgage Lending Practices Act of 1977 and Regulation B require documents relating to denied/withdrawn applications be retained for a period of 25 months.       

The MBLSLA further requires all other books, accounts, records, and documents pertaining to the licensee/registrant's business be maintained for not less than 3 years after the conclusion of the fiscal year of the licensee/registrant in which the book, account, record, or document was created. 

The Secondary Mortgage Loan Act (SMLA), section 18, MCL 493.68, has document retention requirements similar to the MBLSLA.  The major difference is the time frame for which the documents must be maintained.  Documents kept pursuant to the SMLA are only required to be maintained for a period of 2 years.

   
Question

Is there a list of specific items that must be maintained in mortgage loan files?

Answer

No; there is not a specific list of documents the licensee/registrant should maintain.  OFIR recommends all documents pertaining to a mortgage loan file be maintained so that compliance with both state and federal law can be determined. 

More specifically, section 21(1) of the Mortgage  Brokers, Lenders, and Servicers Licensing Act (MBLSLA), MCL 445.1671, requires the licensee/registrant to maintain books, accounts, records, and documents to enable the commissioner to determine whether the business of the licensee/registrant is conducted in accordance with the act and rules promulgated under the act.  Further, section 22(a) of the MBLSLA, MCL 445.1672, requires the licensee/registrant to comply with other state and federal laws.

Likewise, section 17(1) of the Secondary Mortgage Loan Act (SMLA), MCL 493.67, requires the licensee/registrant to maintain books, accounts, records, and documents to enable the commissioner to determine whether the business of the licensee/registrant is conducted in accordance with the act and rules promulgated under the act.  Further, section 25 of the SMLA, MCL 493.75, requires the licensee/registrant to comply with federal law.

   
Question

Can mortgage files be maintained electronically?  

Answer

Yes.  The Mortgage Brokers, Lenders, and Servicers Licensing Act, section 21(1), MCL 445.1671, and the Secondary Mortgage Loan Act, section 17(2), MCL 493.67, allows mortgage files to be kept in an electronic format.

   
Question

Where can mortgage loan documents be stored?

Answer

Books and records of the licensee/registrant may be kept at a location of its choosing.  If the documents are not made available in the State of Michigan, the licensee/registrant is required to pay the reasonable travel, lodging, and meal expenses of the examiners that travel out-of-state to review them, as provided by the Mortgage Brokers, Lenders, and Servicers Licensing Act, section 21(1), MCL 445.1671, and the Secondary Mortgage Loan Act, section 17(3), MCL 493.67.  Keep in mind, the federal Safeguards Rule requires records to be maintained in a safe and secure manner to limit unauthorized access to nonpublic personal information.

   
Question

Does Michigan have any state-specific loan disclosures?

Answer

Yes.  The Consumer Mortgage Protection Act (CMPA) requires applicants for a refinance of a primary residence be supplied with a copy of the Borrowers Bill of Rights, the Consumer Caution and Home Ownership Counseling Notice, and a List of HUD-approved Credit Counseling Agencies. 

The Mortgage Lending Practices Act of 1977 requires lenders that have a physical presence in Michigan to make available for public distribution, at the institution's principal office and each branch office or service center, a pamphlet or document explaining in general terms the credit granting institution's criteria for the approval or denial of a loan application.  Rule 445.1004 requires the pamphlet be made available where loan applications or loan inquiries are routinely received by the lender and where the public may obtain a copy without the aid of an employee of the lender.  

The Mortgage Lending Practices Act of 1977 also requires lenders to post a "Notice to Inquirers and Loan Applicants" in a conspicuous place to reasonably apprise a loan inquirer or applicant of his or her rights under this act.  Rule 445.1005 requires the text of the written notice to be printed in 18-pt. or larger font and the heading to be printed in 48-pt. or larger capital letter boldfaced font.

   

Question 

Where can copies of Michigan-specific disclosures be found?

Answer 

The List of HUD-approved Credit Counseling Agencies can be obtained at www.HUD.gov or by calling HUD directly.

The Borrowers Bill of Rights may be copied directly from section 6 of the Consumer Mortgage Protection Act (CMPA), MCL 445.1636.

The Consumer Caution and Home Ownership Counseling Notice may be copied directly from section 7 of the CMPA, MCL 445.1637.  Please note the notice within the CMPA contains an outdated phone number for HUD's counseling hotline.  The outdated number should be replaced with the correct phone number, 1-800-569-4287. 

The Notice to Inquirers and Loan Applicants may be downloaded from this site (http://www.michigan.gov/documents/cis_ofis_ pa135not_24820_7.pdf) or its language may be copied directly from section 5 of the Mortgage Lending Practices Act of 1977, MCL 445.1605.  The notice must contain OFIR's current phone number.  As of 9/29/2010, the telephone number is 1-877-999-6442.

The pamphlet or document describing the lender's criteria for approval or denial of a loan must be created by the lender and tailored to fit its criteria.  The pamphlet or other document must prominently state that a person has the right to make a loan inquiry and to file a "written application for a mortgage loan or home improvement loan and to receive a written response to the application.  

   

Question
What laws does OFIR check for compliance with during an examination?
Answer OFIR may check for compliance with all state and federal laws pertaining to mortgage activity, including, but not limited to:

Mortgage Brokers, Lenders, and Servicers Licensing Act (MCL 445.1651 - 445.1684)
Secondary Mortgage Loan Act (MCL 493.51 - 493.81)
Consumer Mortgage Protection Act (MCL 445.1631 - 445.1645)
Mortgage Lending Practices Act (MCL 445.1601 - 445.1614)
Mortgage Loan Originator Licensing Act (MCL 493.131 - 493.171) 
Regulation B
Regulation X
Regulation Z
Title 16 - Standards for Safeguarding Consumer Information (16  CFR 314.3)
Title 16 - Identity Theft Rules (16 CFR 681.1)

Copies of the state laws can be found on the OFIR website at
 http://www.michigan.gov/difs/0,4601,7-154-35299_10555_13167_13168---,00.html

Copies of the federal laws (Reg. B, X, and Z) can be found on the FDIC website at http://www.fdic.gov/regulations/laws/rules/6500-100.html

Copies of Title 16 can be found on the following website: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?sid=3ad5b48a02eb1707974872e00175bbb5&c=ecfr&tpl=/ecfrbrowse/Title16/16cfrv1_02.tpl
   
Question

Can a mortgage broker close loans in its name?

Answer

In order to close loans in its name, the licensee/registrant must have lender authority under its license/registration.  Section 25 of the Mortgage Brokers, Lenders, and Servicers Licensing Act, MCL 445.1675, exempts a mortgage lender that in the aggregate with any affiliates makes 10 or fewer mortgage loans in a calendar year. The Secondary Mortgage Loan Act, however, exempts a person acting as a lender on less than 3 secondary mortgage loans in a calendar year.

   
Question

Are referral fees to real estate agents, title companies, mortgage brokers, or others allowed in Michigan?

Answer

No. OFIR requires licensees/registrants to comply with Regulation X, which prohibits the payment of referral fees and kickbacks.

   
Question

Are reverse mortgages covered under the Mortgage Brokers, Lenders, and Servicers Licensing Act (MBLSLA)?

Answer

Yes.  The definition of a mortgage loan in the MBLSLA includes a reverse mortgage, as it is a loan secured by real property, if the property is located in this state and used, or improved for use, as a dwelling and designed for occupancy by 4 or fewer families.

   
Question

What laws regulate advertising of mortgage loans?

Answer

Mortgage Brokers, Lenders, and Servicers Licensing Act, section 22a, MCL 445.1672a - prohibits making a false, misleading, or deceptive advertisement regarding mortgage loans or the availability of mortgage loans.  Further, the licensee/registrant cannot advertise any size of loan, security required for a loan, rate of charge, or other condition of lending except with the full intent of making loans at those rates, or lower rates, and under those conditions. 

Secondary Mortgage Loan Act, section 26, MCL 493.76 - prohibits making a false, misleading, or deceptive advertisement regarding secondary mortgage loans or the availability of secondary mortgage loans.  Further, the licensee/registrant cannot advertise any size of loan, security required for a loan, rate of charge, or other condition of lending except with the full intent of making loans at those rates, or lower rates, and under those conditions.

Consumer Mortgage Protection Act, section 4(5), MCL 445.1634 - provides that a statement or representation is deceptive or misleading if it has the capacity to deceive or mislead a borrower or potential borrower.  The commissioner will consider any of the following factors in deciding whether a statement or representation is deceptive or misleading:

  • the overall impression that the statement or representation reasonably creates
  • the particular type of audience to which the statement is directed
  • whether it may be reasonably comprehended by the segment of the public to which the statement is directed


Regulation Z, section 226.16 - (pertaining to open end credit) describes what information must be included in advertisements, additional requirements for home equity plans, and alternate disclosure for television or radio advertisements.  

Regulation Z, section 226.24 - (pertaining to closed end credit) describes what information must be included in certain advertisements, including credit secured by a dwelling, and prohibited acts or practices in advertisements for credit secured by a dwelling.

OFIR has provided additional guidance on deceptive advertising practices in a letter issued on November 24, 2003.  The letter can be found on our website at http://www.michigan.gov/documents/cis_ofis_adv_letter_80181_7.pdf.

   
 

The answers provided are not meant to be a substitute for legal advice.