Consumer Mortgage Protection Act FAQ
*** Please note that the Consumer Mortgage Protection Act (Act) was amended on March 15, 2016. The amendments are effective June 13, 2016. ***
Note: The Consumer Mortgage Protection Act, MCL 445.1631 et seq., does not provide the Director the authority to promulgate administrative rules or otherwise officially interpret the meaning of the statute. However, the Director may render his opinion on any matter. Readers should be apprised, however, that the Director's opinion might not be shared by the Attorney General of Michigan or county prosecutors, and might not be upheld by a court of law.
Mortgage brokers and lenders, as well as consumers, are encouraged to read the Act carefully and fully understand the rights and responsibilities of applicants, mortgage brokers, and mortgage lenders under the Act and to seek advice from their legal counsel as needed.
- What is the effective date of the amended Act?
The amended Act is effective as of June 13, 2016.
- Which Sections of the Act were amended or repealed?
Sections 2, 6, and 13 were amended. Section 7 of the Act was repealed.
- What types of transactions are included as mortgage loan transactions under the Act?
The Act covers loan transactions, home improvement contracts that are secured by first liens, subordinate liens, or other liens, and land contracts on real property located in Michigan and used by the applicant or borrower as its principal dwelling, and which real property is designed for occupancy by 4 or fewer families. However, the statute does not cover the following loan transactions:
- Loans in which the loan proceeds are used to purchase a dwelling. These loans are sometimes referred to as "purchase money loans."
- Reverse mortgages loans.
- Open-end credit in which the lender reasonably expects the borrower to access multiple advances.
In essence, the Act covers first lien mortgage loans (other than those to acquire a dwelling), closed end refinance transactions, subordinate lien mortgage transactions, home improvement contracts in which a first or subordinate lien is taken on real property (other than home equity lines of credit), and land contracts in refinance transactions.
- To whom does the statute apply?
The Act must be read carefully. Some sections of the Act apply to a "person." A person is defined as any individual, corporation, limited liability company, partnership, association, governmental entity, or any other legal entity. Other sections of the Act apply to "lenders." The term lender, however, is not defined in the Act. Generally, a lender would include any "person" lending money for a mortgage loan as the term "mortgage loan" is defined in the Act.
- What documents or information constitute an "application" for a mortgage loan?
The term "application" is not defined in the Act. It is the Director's opinion, however, that documents or information become an application when a lender has sufficient information with which to make a credit decision regarding a specified parcel of real property.
- Do the provisions of the Act apply to mortgage brokers that are not mortgage lenders?
Mortgage brokers that are not mortgage lenders are persons, as the term "person" is used in the Act. Consequently, the Act applies to mortgage brokers that are not mortgage lenders to the same extent it applies to persons. Further, it is the Director's opinion that the Act is contemplated to apply to mortgage brokers that are not mortgage lenders to the same extent the Act applies to "lenders."
- Section 6 of the Act requires a "lender" to provide a copy of the special information booklet at the time a person applies for a mortgage loan. Is a mortgage "broker" that is not also a licensed lender required to provide the booklet?
The Act requires that the special information booklet described in 12 CFR 1024.6, issued under the authority of the Real Estate Settlement Procedures Act of 1974 (RESPA), Public Law 93-533, be given at the time of application. It is the opinion of the Director that, taken in context, Section 6 of the Act applies to brokers of mortgage loans that are not otherwise lenders.
- RESPA, as implemented by Regulation X, specifically exempts a lender from needing to provide the special information booklet on refinance transactions. Is a lender exempt from providing the booklet on a refinance transaction under Section 6?
No. A lender must provide a copy of the special information booklet at the time a person applies for a mortgage loan, including refinance transactions, as described in Section 6.
- If a mortgage broker that is not the lender in a transaction, covered by the Act, provides the special information booklet, is the lender also required to provide the special information booklet?
The statute does not excuse lenders from complying with the Act merely because another person provides the special information booklet. However, if the lender in the transaction can provide evidence that the special information booklet was provided at the time of application by the mortgage broker, the Director will presume the lender complied with the Act.
- If a mortgage broker "shops" a mortgage loan application among multiple lenders, is each lending institution required to provide the special information booklet? At what point in time is the booklet required to be provided?
The Act provides no guidance on these points. It is the Director's opinion, however, that lenders obtaining mortgage loan applications from brokers should provide the special information booklet to the applicant at the time the lender obtains an application from a mortgage broker. However, if the lender(s) can provide evidence that the special information booklet was provided at the time of application by the mortgage broker, the Director will presume the lender complied with the Act.
- If a lender takes an application over the telephone or via its website, or obtains an application indirectly through a mortgage broker, how can the lender comply with the requirement to provide the special information booklet at the time of application?
The Act does not contemplate these matters. It is the Director's opinion, however, that lenders taking applications over the telephone should provide the special information booklet at the earliest possible time following the receipt of an application. Additionally, it is the Director's opinion that lenders taking mortgage loan application information via the lender's website should provide the special information booklet in an electronic format not later than immediately following the receipt of a mortgage loan application.
- Are lenders required to obtain an acknowledgement of receipt of the special information booklet from applicants?
The Act does not require lenders to obtain an acknowledgement of receipt of the special information booklet from applicants. However, it is the Director's opinion that lenders must be able to demonstrate that they have, in fact, provided the special information booklet.
- Where can one obtain a copy of the special information booklet?
A copy of the special information booklet can be obtained from the Consumer Financial Protection Bureau’s website under Downloadable Resources. (http://www.consumerfinance.gov/owning-a-home/)
- Are lenders required to provide a list of the nearest available HUD-approved credit counseling agencies as previously required under the Act?
No. Section 7 of the Act which required a lender to provide a list of HUD approved credit counseling agencies was repealed. However, Lenders must note Section 1024.20 of Regulation X mandates a list of counseling agencies be provided on certain mortgage transactions.
- What action may the Director take if she or he determines a person has brokered, made, or serviced a loan in violation of the Act?
Pursuant to authority in the Act, the Director may do one of the following:
- Refer the matter to the Attorney General or a county prosecutor for legal action.
- Initiate an administrative enforcement action pursuant to a licensing or chartering statute under which the person is otherwise regulated.
- Forward a complaint to another appropriate regulatory or investigatory authority.
- May a city or county, or other unit of local government, enact an ordinance regulating the mortgage brokering, licensing, or servicing business?
The Act prohibits local units of government from regulating mortgage activities.
The answers provided are not meant to be a substitute for legal advice.