For

For Immediate Release

March 2, 2005

Contact for Press: Andy Schor (517) 335-1700

Contact for Public: Consumer Line (877) 999-6442

The Office of Financial and Insurance Services (OFIS) today announced that it will be using new information gathering and resource targeting techniques to regulate the Michigan mortgage industry in a continuing effort to identify and target for enforcement of those licensees that are engaging in predatory practices. OFIS released its mandatory annual report for the mortgage industry to complete on January 27, 2005.    The report this year, though, includes a new series of questions designed to assess the risk of each mortgage licensee or registrant.  Completed reports were due to OFIS by February 28, 2005.

“Purchasing a home is the largest single investment most consumers will make, and this effort will help us identify bad actors,” said OFIS Commissioner Linda A. Watters.   “ This initiative will enable us to continue to pursue aggressive enforcement of Michiganlaws, while at the same time targeting our resources more effectively at those operating at the fringes.”

Commissioner Watters is committed to address each consumer complaint of fraud, unlicensed activity or predatory practices, and said that complaints are being reported at an accelerating pace.  OFIS is the front line of defense against bad actors engaging in unscrupulous practices and handles complaints of mortgage flipping, predatory lending, appraisal fraud, equity stripping, etc.

Currently, an OFIS investigation could involve a targeted exam during which an investigator reviews loan files for compliance with state and federal law.   Obtaining additional annual report  information will also provide OFIS examiners with the ability to prioritize mortgage industry examinations by the general risk the company presents.  This is based on the activities reported—rather than having merely a complaint-based system.

Watters said, “Agency resources to combat predatory practices simply haven’t kept pace with the flood of new licensees over the last dozen years.  In addition to seeking additional staff to be more proactive in this area, we are working on creative ways to identify and take enforcement against bad actors before they harm large numbers of consumers.”

OFIS currently has 5,071 licensees/registrants that operate in the Michiganmortgage marketplace.  Complaints of unlicensed activity are growing at an alarming rate.  In 2004, OFIS received 1,176 complaints from consumers, which represent an increase of 69%  from 2001.  64 of these complaints were found to warrant agency investigation, which is an increase of 12% from 2001.

Michigan’s two mortgage statutes are the Mortgage Brokers, Lenders, and Servicers Licensing Act, P.A. 173 of 1987 (MBLSLA) and The Secondary Mortgage Loan Act, P.A. 125 of 1981 (SMLA).  MBLSLA deals with first lien position mortgages and the SMLA deals with lien positions that are other than first position, for example, second or third mortgages.

The population of active first and second mortgage company licensee/registrants was 544 and 250 in 1995, respectively.   The population in 2003 was 2,928 and 1,362.  This is an increase of 438% and 444% in 8 years.  In 1980, banks, credit unions and other depository institutions did approximately 80% of 1-4 family mortgage lending.  Today, about 50% of 1-4 family mortgage lending is conducted by brokers and lenders licensed or registered in Michigan. 

In conjunction with this effort, OFIS is providing free quarterly regulatory information seminars and other proactive initiatives to educate mortgage industry licensees/registrants on   relevant provisions of Michiganlaw and regulations.