Consumer Mortgage Protection Act FAQ

The amended Act is effective as of June 13, 2016.

Sections 2, 6, and 13 were amended. Section 7 of the Act was repealed.

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.

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.

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.

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."

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.

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.

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.

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.

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.

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.

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/)

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.

Pursuant to authority in the Act, the Director may do one of the following:

1. Refer the matter to the Attorney General or a county prosecutor for legal action.
2. Initiate an administrative enforcement action pursuant to a licensing or chartering statute under which the person is otherwise regulated.
3. Forward a complaint to another appropriate regulatory or investigatory authority.

The Act prohibits local units of government from regulating mortgage activities.