April 29, 2004, Introduced by Rep. DeRoche and referred to the Committee on Commerce.
A bill to amend 1966 PA 326, entitled
"An act to regulate the rate of interest of money; to provide
exceptions; to prescribe the rights of parties; and to repeal
certain acts and parts of acts,"
by amending section 1c (MCL 438.31c), as amended by 1990 PA 94.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 Sec. 1c. (1) Interest charged by a broker or dealer
2 registered under title I of the securities exchange act of 1934,
3 chapter 404, 48 Stat. 881, 15 U.S.C. 78a to 78l, 78m to 78o,
4 78o-3 to 78dd-1, 78ee to
78hh, and 78ll 78kk to 78mm, for
5 carrying a debit balance in an account for a customer is not
6 subject to the limitations of this act if the debit balance is
7 payable on demand and secured by stocks or bonds.
8 (2) The parties to a note, bond, or other evidence of
9 indebtedness, executed after August 11, 1969, the bona fide
10 primary security for which is a first lien against real property,
1 or a land lease if the tenant owns a majority interest in the
2 improvements, or the parties to a land contract, may agree in
3 writing for the payment
of any rate of interest. , but the note,
4 mortgage, contract, or
other evidence of indebtedness shall not
5 provide that the rate
of interest initially effective may be
6 increased for any
reason.
7 (3) In
connection with the a transaction described in
8 subsection (2), except a loan, insured or guaranteed by the
9 federal government or any
an agency of the federal government,
10 if the security is a single family dwelling unit, the lender
11 shall not do any of the following:
12 (a) Directly or indirectly require as a condition of the
13 making of the loan, a deposit to be maintained by the borrower,
14 other than an escrow
account or a deposit account which that is
15 established pursuant to
subsection (13) (14).
16 (b) Directly or indirectly impose or collect, as a condition
17 of the making of the loan, a payment from a seller or borrower in
18 the nature of a discount, point, or similar system, except that a
19 lender may impose and collect, as a condition of making a loan,
20 all fees, discounts, points, or other charges that lenders are
21 permitted or required to impose, collect, or pay in order to
22 qualify the loan for sale, in whole or in part, or in order to
23 obtain a purchase commitment, under any program authorized by
24 federal statute or regulation.
25 (c) Charge a
prepayment fee or penalty in excess of 1% of
26 the amount of any
prepayment made within 3 years of the date of
27 the loan, or any
prepayment fee or penalty at all thereafter, or
1 prohibit prepayment at
any time.
2 (4) (3)
Subsection (2) shall Subsections (2) and (3) do not
3 impair the validity of a transaction or rate of interest lawful
4 without regard to subsection
(2) those subsections.
5 (5) (4) Subsection
(2) shall does not authorize or permit
6 a rate of interest in
excess of the rate set forth in Act
7 No. 259 of the Public
Acts of 1968, being sections 438.41 to
8 438.42 of the Michigan
Compiled Laws 1968 PA 259, MCL
438.41 to
9 438.42.
10 (6) Subsections (2) and (3) do not apply to a loan, mortgage,
11 credit sale, or advance that is described in section 501(a)(1) of
12 title V of the depository institutions deregulation and monetary
13 control act of 1980, Public Law 96-221, 12 U.S.C. 1735f-7 nt.
14 (7) (5)
The provisions of subsection (2) shall Subsections
15 (2) and (3) apply only to
loans a loan made by lenders a
16 lender approved as a mortgagee under the national housing act,
17 chapter 847, 48 Stat. 1246, or regulated by the state or by a
18 federal agency, who
are and that is authorized by state or
19 federal law to make such
those loans. (6) Notwithstanding
20 subsection (5),
lenders or vendors not qualified to make loans
21 under A lender who is not approved or regulated and
authorized
22 as described in this
subsection (5) or a land contract vendor
23 may make, or may have
made, a mortgage loans and loan or land
24 contracts specified contract described in subsection (2) on or
25 after August 16, 1971, which
if the mortgage loans and loan
26 or land contracts
provide contract provides for a rate of
27 interest not to that
does not exceed 11% per annum, which
1 interest shall be
inclusive of year, including
all amounts
2 defined as the "finance charge" in section 106 of the truth in
3 lending act, title I of the consumer credit protection act,
4 Public Law 90-321, 15 U.S.C. 1605, and the regulations
5 promulgated under that act, 12 C.F.R. part 226.
6 (8) (7) The
parties to a purchase money mortgage or a
7 second mortgage may agree in writing for the payment of a rate of
8 interest not to that
does not exceed 11% per annum year. A
9 second mortgage made
pursuant to described in this subsection
10 shall be made in
compliance comply with Act No. 125 of the
11 Public Acts of 1981,
being sections 493.51 to 493.81 of the
12 Michigan Compiled Laws
the secondary mortgage loan act,
1981
13 PA 125, MCL 493.51 to 493.81, except for section 2 of that act,
14 MCL 493.52. As used in this subsection:
15 (a) "Purchase money mortgage" means a mortgage secured by a
16 first lien or junior lien taken or retained by the seller of real
17 property to secure all or part of the purchase price of the
18 property.
19 (b) "Second mortgage" means a mortgage from which the
20 proceeds of a loan or other extension of credit made by a third
21 person are secured by a mortgage on the real property for which
22 the mortgagor has used the proceeds of the loan or other
23 extension of credit to pay all or part of the purchase price of
24 the property.
25 (c) "Third person" means any of the following:
26 (i) A salesperson acting as an agent for a residential
27 builder, or a residential builder, licensed under article 24 of
1 the occupational code, Act
No. 299 of the Public Acts of 1980,
2 as amended, being
sections 339.2401 to 339.2412 of the Michigan
3 Compiled Laws 1980 PA 299, MCL 339.2401 to 339.2412, when
if
4 the loan or extension of credit is made or negotiated in
5 connection with the sale of a residential structure constructed
6 by that builder.
7 (ii) A real estate broker or real estate salesperson licensed
8 under article 25 of the
occupational code, Act No. 299 of the
9 Public Acts of 1980,
as amended, being sections 339.2501 to
10 339.2515 of the
Michigan Compiled Laws 1980 PA
299, MCL 339.2501
11 to 339.2518, and engaged in the sale of real estate as a
12 principal vocation, when
if the loan or extension of credit is
13 made or negotiated in connection with a real estate sale where
14 the real estate broker or salesperson affiliated with the broker
15 represents either the buyer or seller.
16 (9) (8) Subject
to the title transfer provisions of
17 sections 30c and 30d of
the mobile home commission act, Act
18 No. 96 of the Public
Acts of 1987, being sections 125.2330c and
19 125.2330d of the
Michigan Compiled Laws 1987 PA
96,
20 MCL 125.2330c and 125.2330d, the parties to an extension of
21 credit which that
is secured by a lien on a mobile home taken
22 or retained by the seller of a mobile home to secure all or part
23 of the purchase price of
the mobile home and which that is not
24 a retail installment transaction may agree in writing to a rate
25 of interest that does
not to exceed 11% per annum, which
26 interest shall be
inclusive of year, including
all amounts
27 defined as the "finance charge" in section 106 of the truth in
1 lending act, title I of the consumer credit protection act,
2 Public Law 90-321, 15 U.S.C. 1605, and the regulations
3 promulgated under that act, 12 C.F.R. part 226. This subsection
4 shall does not prohibit an extension of credit
secured by a
5 lien on a mobile home and made on terms and at a rate of interest
6 specifically authorized by another law of this state or the
7 United States. As used in this subsection:
8 (a) "Mobile home" means mobile home as defined in section 2
9 of the mobile home
commission act, Act No. 96 of the Public Acts
10 of 1987, being section
125.2302 of the Michigan Compiled Laws
11 1987 PA 96, MCL 125.2302.
12 (b) "Retail installment transaction" means a retail
13 installment transaction as defined in section 2 of the retail
14 installment sales act, Act
No. 224 of the Public Acts of 1966,
15 being section 445.852
of the Michigan Compiled Laws 1966
PA 224,
16 MCL 445.852.
17 (10) (9) A
mortgage loan or land contract made under this
18 act shall not provide for a rate of interest added or deducted in
19 advance and interest on the mortgage loan or land contract shall
20 be computed from time to time only on the basis of unpaid
21 balances.
22 (11) (10) A
party to a transaction subject to this act
23 shall be is entitled to have his or her rights under
this act
24 enforced or protected by injunctive order of a court.
25 (12) (11) The
parties to a note, bond, or other
26 indebtedness of $100,000.00 or more, the bona fide primary
27 security for which is a lien against real property other than a
1 single family residence, or the parties to a land contract of
2 such that amount and nature, may agree in writing
for the
3 payment of any rate of interest.
4 (13) (12) Interest
charged by a trust created or organized
5 in the United States forming a part of a stock bonus, pension, or
6 profit sharing plan which
that satisfies the requirements of
7 section 401(a) of the internal revenue code of 1986 on a loan to
8 a participating employee or beneficiary of the trust is not
9 subject to the limitations of this act.
10 (14) (13)
In Except as provided in subsection (15), in the
11 case of a mortgage or land contract, a lender or vendor may
12 require that an interest
bearing deposit account held in a
13 depository financial
institution may be established as a
14 condition of the making of the mortgage or land contract, subject
15 to the conditions specified in this subsection. The deposit
16 account shall be pledged
to the lender or seller vendor as
17 additional security for the mortgage or land contract. The
18 lender or seller vendor
shall withdraw from the deposit account
19 agreed upon specified amounts at agreed upon periodic times and
20 apply the withdrawals shall
be applied against the periodic
21 payments otherwise due
from the borrower or buyer pursuant to
22 under the terms of the mortgage or land contract. All interest
23 earned on the pledged deposit account shall be credited to the
24 deposit account. This
subsection shall only apply applies to
25 a loan the primary
security for which is where a dwelling to be
26 occupied by the owner is the primary security, or a land contract
27 given as consideration
for the sale of a dwelling which that is
1 to be occupied by the owner. The mortgage or land contract shall
2 specifically state the amounts by which the payments are
3 supplemented by withdrawals from the pledged account, the amounts
4 required from the borrower or buyer to make up the difference,
5 and the period of time during which the lender or vendor may
6 utilize withdrawals from
the pledge account. shall be utilized.
7 (15) (14) A
lender or seller vendor who offers 5 or more
8 mortgages or land contracts in any 1 calendar year may not
9 require a deposit account
established pursuant to under
10 subsection (13) (14)
as a condition of making a mortgage or
11 land contract on more than 20% of the mortgages or land contracts
12 made by the lender or seller
vendor in any 1 calendar year.
13 (16) (15) Notwithstanding
subsections (2), (2)(a), (13),
14 and (14) (3)(a), (14), and (15), in the case of a
mortgage loan
15 or land contract providing for biweekly payments, a regulated
16 depository financial institution or its service corporations,
17 subsidiaries, or affiliates may require, or may have required, as
18 a condition of the making of the mortgage loan or land contract,
19 that the borrower
maintain an interest bearing account with any
20 a depository institution for the purpose of making the biweekly
21 payments by automatic withdrawals from the account,
22 electronically or otherwise. If an institution does not offer
23 interest bearing transaction accounts, or if an institution does
24 not generally offer automatic withdrawals from interest bearing
25 accounts, the borrower may maintain a noninterest bearing
26 checking account may
be maintained for the purpose of making
27 the biweekly payments.
However, the borrower shall not be is
1 not required to maintain funds in the account in excess of an
2 amount sufficient to meet the required biweekly loan payments,
3 including required escrow payments for taxes and insurance, if
4 any, as they become due.
As used in this subsection: ,
5 "regulated
6 (a) "Affiliate" means a person other than a natural person
7 that directly or indirectly through 1 or more intermediaries is
8 controlled by or is under common control of a regulated
9 depository financial institution.
10 (b) "Regulated depository financial institution" means a
11 state or nationally chartered bank, or a state or federally
12 chartered savings and loan association or savings bank, or a
13 state or federally
chartered credit union. "Affiliate" means a
14 person other than a
natural person that directly or indirectly
15 through 1 or more
intermediaries is controlled by or is under
16 common control of a
regulated depository financial institution.
17 (17) Subject to subsection (18), the parties to a loan, land
18 contract, or other extension of credit may agree in writing to
19 any of the following:
20 (a) If the obligor fails to pay an installment when it is
21 due, the obligor is required to pay a late payment charge in an
22 amount to which the parties agree in writing.
23 (b) If the obligor pays all or any part of the principal
24 before it is due, the obligor is required to pay a prepayment fee
25 in an amount to which the parties agree in writing.
26 (c) If the obligor fails to pay the unpaid principal balance
27 at maturity, the rate of interest accruing on the unpaid
1 principal balance is increased to a rate to which the parties
2 agree in writing.
3 (d) If the obligor fails to pay any interest on the unpaid
4 principal balance when due, whether before or after default or
5 maturity, the accrued interest is added to the unpaid principal
6 balance and the amount added accrues interest. The parties may
7 agree to this at any time, including when the credit is
8 extended.
9 (18) All of the following apply to subsection (17):
10 (a) A late payment charge, prepayment fee, or increased rate
11 of interest described in subsection (17) is not a penalty.
12 (b) Subsection (17) does not apply to the extent that another
13 statute of this state prescribes a lower maximum amount for a
14 charge, fee, or rate of interest than that subsection describes.
15 (c) "Maturity" means the time when the unpaid balance is due
16 and payable in full, whether in accordance with the agreed-upon
17 payment schedule or by reason of acceleration due to an event of
18 default or other circumstance.