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2002 House Bill 6121

Public Act 660 of 2002

  1. Introduced by Rep. Andrew Richner (R) on May 23, 2002, to prohibit lenders making certain high-cost home loans ("sub-prime" loans) from charging fees for products or services that are not provided, or compensating, coercing or intimidating an appraiser to get a higher appraisal. The bill also prohibits misleading statements, including statements about the cost of a loan, the ability of the borrower to repay it, or the value of the property, and requires the lender to consider whether the type of audience to which the statement is directed can reasonably be expected to comprehend it. It requires the Office of Financial and Insurance Services develop and make available model programs for financial education to teach personal financial management skills and the basic principles of saving, borrowing, investing, and protecting against fraud. The bill preempts local governments from regulating in this area. The bill is part of a legislative package comprised of House Bills 6121 to 6127.
    • Referred to the House Commerce Committee on May 23, 2002.
    • Substitute offered by Rep. David Woodward (D) on December 4, 2002, to replace the previous version of the bill with one which would mandate much more restrictive regulation on sub-prime lending. For the nature of these regulations, see the many other Woodward amendments to this bill. The substitute also removes a preemption on local regulations on sub-prime lending, and requires lenders to provide credit counseling to applicants. The substitute failed 50 to 46 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Substitute offered by Rep. Jason Allen (R) on December 4, 2002, to replace the previous version of the bill with one recommended by the committee which reported it. The substitute incorporates changes resulting from committee testimony and deliberation. These reflect various compromises on regulations which do not make it impossible for lenders to make loans to less creditworthy borrowers. The substitute passed by voice vote in the House on December 4, 2002.
    • Amendment offered by Rep. Joseph Rivet (D) on December 4, 2002, to prohibit a sub prime mortgage loan with a term of less than a years to have a monthly payments which together do not fully amortize the outstanding principal balance. The amendment passed by voice vote in the House on December 4, 2002.
    • Amendment offered by Rep. Douglas Bovin (D) on December 4, 2002, to prohibit a lender from financing various forms of credit insurance in a sub-prime mortgage loan. The amendment passed by voice vote in the House on December 4, 2002.
    • Amendment offered by Rep. Michael Switalski (D) on December 4, 2002, to prohibit a lender from inserting on a sub-prime mortgage loan application false and misleading information intended to deceive a third party that the an unqualified borrower is qualified. The amendment passed by voice vote in the House on December 4, 2002.
    • Amendment offered by Rep. Andy Neumann (D) on December 4, 2002, to prohibit a sub-prime mortgage lender from conditioning the payment of an appraisal on it reaching a predetermined value, or on the closing of the loan which is the reason for the appraisal. The amendment passed by voice vote in the House on December 4, 2002.
    • Amendment offered by Rep. Gretchen Whitmer (D) on December 4, 2002, to prohibit a mortgage loan note shall not contain blanks regarding payments, interest rates, maturity date, or the amount borrowed, to be filled in after the note is signed by the borrower. The amendment passed by voice vote in the House on December 4, 2002.
    • Amendment offered by Rep. Joseph Rivet (D) on December 4, 2002, to require a lender on a sub-prime mortgage loan to give the borrower a copy of a "borrowers bill of rights" containing various advice to borrowers regarding their ability to obtain detailed information on terms, costs, commissions, and other issues related to the loan. The amendment passed by voice vote in the House on December 4, 2002.
    • Amendment offered by Rep. A.T. Frank (D) on December 4, 2002, to require a lender on a sub-prime mortgage loan to give the borrower a "consumer caution and home ownership counseling notice" containing various advice and information regarding the loan, and regarding the rights and responsibilities of borrowers, and the consequences of default. The amendment passed by voice vote in the House on December 4, 2002.
    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage lender from charge a fee for informing any person of the balance due to pay off a mortgage loan. The amendment failed 46 to 53 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage lender from charging a borrower to modify, renew, extend, or amend a mortgage loan or to defer any payment due under its terms. The amendment failed 49 to 49 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage loan from containing a provision that increases the interest rate after default. The amendment failed 52 to 47 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage loan from containing a a prepayment fee penalty; and prohibiting the lender from recommending or encouraging nonpayment on an existing loan in connection with a refinancing loan. The amendment failed 50 to 51 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage lender from making a mortgage loan unless the he reasonably believes the borrower can repay it given the borrowers current financial status. The amendment failed 51 to 51 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage lender from refinancing an existing mortgage loan with a new one when it does not provide a reasonable, tangible net benefit to the borrower. The amendment failed 50 to 50 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to require that if the discussions between a sub-prime mortgage lender and a borrower are conducted primarily in a language other than English, the lender must provide an additional copy of all required disclosures in the language in which the discussions were conducted. The amendment failed 50 to 52 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to require a lender on a sub-prime mortgage loan to give the borrower an oral and written description on terms, costs, commissions, and other issues related to the loan; and to give any future purchaser or assignee of the loan a statement regarding the purchaser's liability for any claims which the borrower could assert against the borrower. The amendment failed 47 to 51 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to authorize the attorney general, the office of financial and insurance services, or any party to a sub-prime mortgage loan to enforce the proposed provisions of the bill. Also, to allow a borrower to sue for a violator for actual, consequential and incidental damages; damages equal to the finance charges plus 10% of the amount financed; and reasonable costs and attorney fees. The amendment failed 47 to 50 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to establish penalties for violation of the proposed provisions of imprisonment for not more than 1 year or a fine of not more than $10,000, or both. The amendment failed 49 to 50 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage lender from requiring the advance collection of a premium on various forms of credit insurance, or the advance collection of a debt cancellation or suspension agreement fee related to a sub-prime mortgage loan. The amendment failed 48 to 51 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage lender from financing various forms of credit insurance, or the debt cancellation or suspension agreement fees in a sub-prime mortgage loan. The amendment failed 47 to 50 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage loan from containing a scheduled payment more than twice as large as the average of earlier scheduled payments unless it is adjusted to accomodate the seasonal or irregular income of a borrower. The amendment failed by voice vote in the House on December 4, 2002.
    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage loan from containing containing a payment schedule that results in an increase in the principal balance (negative amortization). The amendment failed 51 to 52 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage loan from containing terms under which more than two periodic payments are consolidated and paid in advance from the loan proceeds provided to the borrower. The amendment failed 50 to 52 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to provide a comprehensive definition of "points and fees" required to be disclosed on a sub-prime mortgage loan, including disclosures required under federal law, fees, prepayment fees, charges, insurance premiums included in the loan if any, and mortgage broker compensation if any. The amendment failed 48 to 50 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. David Woodward (D) on December 4, 2002, to prohibit a sub-prime mortgage lender from charging a fee to any person for disclosing the balance due on a mortgage loan. The amendment failed 50 to 49 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. Bill McConico (D) on December 4, 2002, to strip out the bill's preemption on local governments regulating in this area. The amendment failed 43 to 54 in the House on December 4, 2002.
      Who Voted "Yes" and Who Voted "No"

  2. Passed 71 to 35 in the House on December 4, 2002, to prohibit lenders making certain high-cost home loans ("sub-prime" loans) from charging fees for products or services that are not provided; requiring a loan applicant to leave blank spaces on an application, or changing the application information to deceive a third party about a borrower's qualifications; financing single premium insurance coverage; and compensating, coercing or intimidating an appraiser to get a higher appraisal. The bill also prohibits misleading statements, including statements about the cost of a loan, the ability of the borrower to repay it, or the value of the property, and requires the lender to consider whether the type of audience to which the statement is directed can reasonably be expected to comprehend it. It requires the Office of Financial and Insurance Services develop and make available model programs for financial education to teach personal financial management skills and the basic principles of saving, borrowing, investing, and protecting against fraud. The bill preempts local governments from regulating in this area. The bill is part of a legislative package comprised of House Bills 6121 to 6127.
    Who Voted "Yes" and Who Voted "No"

  3. Received in the Senate on December 5, 2002.
    • Referred to the Senate Banking and Financial Institutions Committee on December 5, 2002.
    • Substitute offered by Sen. Martha G. Scott (D) on December 12, 2002, to replace the previous version of the bill with one which would mandate much more restrictive regulation on sub-prime lending. The substitute also removes a preemption on local regulations on sub-prime lending, and requires lenders to provide credit counseling to applicants. The substitute failed by voice vote in the Senate on December 12, 2002.
  4. Passed 25 to 10 in the Senate on December 12, 2002, to prohibit lenders making certain high-cost home loans ("sub-prime" loans) from charging fees for products or services that are not provided; requiring a loan applicant to leave blank spaces on an application, or changing the application information to deceive a third party about a borrower's qualifications; financing single premium insurance coverage; and compensating, coercing or intimidating an appraiser to get a higher appraisal. The bill also prohibits misleading statements, including statements about the cost of a loan, the ability of the borrower to repay it, or the value of the property, and requires the lender to consider whether the type of audience to which the statement is directed can reasonably be expected to comprehend it. It requires the Office of Financial and Insurance Services develop and make available model programs for financial education to teach personal financial management skills and the basic principles of saving, borrowing, investing, and protecting against fraud. The bill preempts local governments from regulating in this area. The bill is part of a legislative package comprised of House Bills 6121 to 6127.
    Who Voted "Yes" and Who Voted "No"

  5. Signed with partial veto by Gov. John Engler on December 23, 2002.

Comments

Senator Scott's third statement  by Admin003 on December 18, 2002 
Senator Scott's third statement is as follows:
I want to remind my colleagues, as a member of the Banking and Financial Institutions Committee, we had much
testimony, and it wasn't just in the inner cities. We had testimony from around this state of people who, I would think,
were influential who really fell prey to predatory lending. Let's be careful. We do need to have information, and anyone
who is involved in this should have the time to find some time to give the information that is needed.
There were teachers, educators, who have fallen prey to predatory lending. There is a lot of fine print, and I want to
remind my colleagues that it is not just the inner cities; it is around this state. I would hope we would not pass this bill
at this time. We can work on a new bill next year.

Senator Scott's second statement  by Admin003 on December 18, 2002 
Senator Scott's second statement is as follows:
I oppose this bill, House Bill No. 6121. The executive order passed last week cuts $53.1 million in payment to local
governments, money that is badly needed to pay for public safety programs. Now we are asked to deal another
legislative blow to the autonomy of local governments by passing House Bill No. 6121. This bill would forbid local
governments from enacting laws against predatory lending to protect their own citizens. Almost all predatory loans are
made to poor, minority, and older people in Michigan cities.
If this bill passes, the Legislature will be remembered for going against one of the majority party’s sacred principles:
Let local citizens govern themselves. We always scream when the federal government imposes some new rules of laws
that strike against Michigan's autonomy. Now we are asked to compound our own hypocrisy by passing House Bill
No. 6121.
I'd ask you to vote against this bill because it pre-empts the rights of local governments to protect their own citizens
against predatory lending. We can do better next year, and hopefully, will be willing to work on this bill. We want
something that will protect the majority of the citizens in this state. I ask you to vote against this bill.

Senator Scott's "journal statement "  by Admin003 on December 18, 2002 
Senator Scott's first statement is as follows:
My substitute I am offering would establish greater consumer protection against predatory lending practices. The
substitute would prohibit repeated refinancing, or flipping, of high-cost loans, requiring counseling for first-time
borrowers on the advisability and the appropriateness of a home loan and prohibit lending against consideration of the
borrowers ability to pay. It would also require additional disclosure to better inform borrowers of the term of the loan
and provide victims of predatory lending with a private right of action so that they may pursue relief.
For too long the state has allowed financial predators to prey on vulnerable citizens. It is time to pass tough and
meaningful legislation to crack down on these abusive practices. I would ask my colleagues to vote against this.

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