Mortgage Loan Industry Standards - Public Acts 59-71 of 2008
- Public Act 59
- Public Act 60
- Public Act 61
- Public Act 62
- Public Act 63
- Public Act 64
- Public Act 65
- Public Act 66
- Public Act 67
- Public Act 68
- Public Act 69
- Public Act 70
- Public Act 71
MAR Position: SUPPORT
Legislation to strengthen the regulation of the mortgage loan industry in Michigan has recently been signed into law. This bipartisan, bicameral legislative package (Senate Bills 826-833, House Bills 5287-5291) provides licensing and education requirements, along with mandatory background checks for mortgage loan officers in Michigan. It also allows the Office of Financial and Insurance Services (OFIS) to keep better track of individuals within the industry as they may move around. Given increased real estate fraud and foreclosures in this state, these bills are a big step forward in addressing the root of these problems. This legislative package represents a compromise from many facets of the real estate community, including banks, credit unions and mortgage brokers. The passage of the loan officer licensing legislation is a positive step in halting mortgage fraud, while keeping industry standards high.
STATUS: 4/3/08 Signed by Governor
Moratorium Legislation
MAR Position: Support
WHAT: House Bills 4440 and 4441, create an 18-month window in which buyers can lock into the seller’s current tax bill without realizing the “pop up”, a move that can provide significant tax savings for buyers.
House Bill 4440 gives a boost to the housing industry by providing property tax relief along with stimulating the economy. The bill provides an 18-month moratorium on sales of principal residences, effective retroactively from March 1, 2007, to September 1st, 2008. House Bill 4441 is tie-barred to House Bill 4440, and was introduced to ease the projected loss of revenue during the 18 month suspension. This bill would increase the real estate transfer tax by .1% bringing the state rate for .75% to .85%. It is important to note that this is only for the 18 month period. A portion of the .1% is dedicated specifically to public safety (i.e. police, fire and first responders).
WHY: The Michigan Association of REALTORS® has a long-standing opposition to the transfer tax and any increases associated with it. However, the MAR Public Policy committee feels this is a fair trade off for the 18 month moratorium that still provides significant tax savings for home buyers in Michigan.
Both House Bills 4440 and 4441 passed the House last week, and are on their way to the Senate. The MAR remains concerned about the cliff at the end of the 18 month moratorium, and is working closely with legislative leadership in both chambers on a long term “pop up” relief plan to ease the prospective drop off in activity at the end of the 18 months.
Again, please note that the 18 month moratorium is retroactive back to March 1st of this year. Those working with buyers and sellers, please be advised of the retroactivity and that the bills should not shift the market, nor sway their decisions at this time. MAR staff is working with House and Senate leadership for the fastest resolution possible to avoid any potential negative effects this may have. We will continue to update you with any news or progress.
STATUS:
Although these bills passed out of the House,
the Senate Finance Committee met to take testimony on House Bill 4440. For the first time, the Michigan Department of Treasury testified that the cost to the state budget would approach $90 million dollars over the next four years. Given recent policy concerns about the lack of state revenue, this was not welcome news.
Although no vote was taken, we are predicting with some certainty that the bill is dead. Do not plan on seeing this change to Michigan’s property tax structure.
On a more optimistic note, our efforts to establish long-term reforms beyond this fiscal year, such as a reduction in new taxable values based on community averages, are looking promising. “Our discussion of the ‘pop-up’ issue has spurred interest in positively influencing Michigan’s real estate markets through tax policy,” Martin said. “While legislative gears grind slowly, we expect to see several proposals considered throughout this coming year.”
Tax on Services
MAR Position: Oppose
WHAT: Senate Bill 307, introduced by Senator Liz Brater, includes the Governor’s proposal of a 2% tax on services. Since the inception of this proposal, the MAR has taken a strong opposition to the plan, and the MAR Board of Directors voted unanimously to oppose any tax on services.
House Bill 4368, introduced by Representative George Cushingberry, is the House version of SB 307, which contains taxing the real estate industry. The MAR continues to fight against the 2% tax proposal as well as any tax on services plan.
WHY: This proposal is part of Governor Granholm’s revenue enhancement plan to fill the over $900 million state budget hole.
STATUS: The Michigan Association of REALTORS® helped tremendously in the defeat of a tax on services not once, but twice in 2007. Along with a Call to Action sent from our members to the legislature, and joining forces in the “Ax the Tax” Coalition, the real estate community banded together and voiced their opposition to the burdensome tax on their business. The tax on services was repealed, and an MBT surcharge was implemented in its place to generate the projected revenue.
Pop Up Tax Legislation
MAR Position: Qualified Support
WHAT: Recently, Michigan Speaker of the House Andy Dillon and his Democratic caucus announced a plan that they say will aide in boosting Michigan’s slowed housing market, while stimulating the economy. In this plan, dubbed the “Homeowner Protection and Stimulus Plan”, specific legislation was introduced easing the tax burden that comes with the uncapping of property taxes upon sale, otherwise known as the “pop up” tax. House Bill 4440 creates an 18-month window in which buyers can lock into the seller’s current tax bill without realizing the “pop up”, a move that can provide significant tax savings for buyers.
House Bill 4441 is tie-barred to House Bill 4440, and was introduced to ease the projected loss of revenue during the 18 month suspension. This bill would increase the real estate transfer tax by .1% bringing the state rate for .75% to .85%. It is important to note that this is only for the 18 month period. A portion of the .1% is dedicated specifically to public safety (i.e. police, fire and first responders).
WHY: The Michigan Association of REALTORS® has a long-standing opposition to the transfer tax and any increases associated with it. However, the MAR Public Policy committee feels this is a fair trade off for the 18 month moratorium that still provides significant tax savings for home buyers in Michigan.
STATUS:
Although the intent of the bill package was to stimulate the economy, numbers provided by the Michigan Department of Treasury projected it would actually cost the state a substantial amount of money, not bring it in. In essence, these bills have been shelved, but we remain in discussions with the legislature on long-term solutions, and numerous conversations continue about property tax relief.
SBT Replacement – SB 94, now Public Act 36 of 2007
MAR Position: Oppose
What: Weeks of intense negotiation came to fruition as the Michigan legislature passed Senate Bill 94 to create the Michigan Business Tax (MBT) and replace the old Single Business Tax (SBT) that was scheduled for repeal on December 31st. The new business tax, like the existing SBT, will be imposed on businesses with annual gross receipts in excess of $350,000. The new structure is composed of a modified gross receipts tax (at a rate of 0.8%) and a business income tax (at a rate of 4.95%). The Department of Treasury estimates that the new tax will replace all $1.9 billion currently brought in by the SBT.
The Michigan Association of REALTORS® struck several victories in the creation of this new tax structure to keep taxation on real estate brokerages low. The Governor’s earliest proposals brought a 900% tax increase on our industry. But, successful negotiations brought key amendments so that, at worst, we are brought back in line with the rest of the business community. These important policy points included:
- changing the tax base to eliminate taxation on “net worth”
- subtracting agent and cooperating brokerage commissions from the gross receipts base calculation
- providing “compensation credit” to a broker for all agents’ commission payments at a rate of .37%
- (note that this is limited to 65% of that business’ total tax liability)
- eliminating double taxation of profits for those brokerages organized as Limited Liability Corporations.
WHY: The current Single Business Tax (SBT) is set to expire on December 31st of this year.
STATUS: The new MBT passed both the Senate and the House with large majorities in each chamber. The bill reached to Governor’s office, where she signed on, and it has officially been called Public Act 36 of 2007
Mortgage Fraud Protection Legislation
WHAT: Recently,a bipartisan group of legislators in the Michigan House of Representatives introduced a series of bills that aim to protect real estate practicioners and consumers alike. House Bills 4054, 4055, 4083, 4409, 4410 and 4411 make up thepackage of legislation that seeks to clamp down on the growing problem of mortgage and appraisal fraud in Michigan. The bills are a reintroduction of legislation that passed out of the Michigan House last session but failed to win approval in the Michigan Senate due to time constraints. Please find a brief description of each bill here:
HB 4054 - Would amend the Occupational Code to prohibit a real estate appraiser from developing an appraisal for a real estate related financial transaction based on a client's precondition about the appraisal's outcome.
HB 4055 - Would amend the Mortgage Brokers, Lenders, and Services Licensing Act to prohibit a professional regulated under the act from coercing or inducing a real estate appraiser to inflate the value of real property used as a collateral for a mortgage loan.
HB 4083 - Would amend the Mortgage Brokers, Lenders, and Services Licensing Act to prohibit a professional regulated under the act from coercing or inducing a real estate appraiser to inflate the value of real property used as a collateral for a secondary mortgage loan.
HB 4409 - Would amend the Penal Code to provide a definition of the crime of residential mortgage fraud.
HB 4410 - Would amend the Code of Criminal Procedures to add residential mortgage fraud to the sentencing guidelines for felonies.
HB 4411 - Would amend the Michigan Consumer Protection Act to add committing residential mortgage fraud to the list of unfair, unconscionable, or deceptive acts or practices in the conduct of trade of commerce.
HB 4083 – This legislation is introduced to address fraud on second mortgages. It prohibits mortgage brokers and lenders from coercing or inducing appraisers to inflate value of real property offered as collateral for a secondary mortgage loan.
WHY: Given the recent statistics that Michigan ranks 5th in the nation in mortgage fraud, this legislation is aimed at addressing Michigan’s rising problem and increase penalties on those who are engaged in the activity.
STATUS: 1/22/2007 - the bills were introduced and referred to the Banking and Financial Services Committee in the House
Agency Responsibility Legislation, now Public Act 90 and 91 of 2008
MAR Position: SUPPORT
House Bill 4416, introduced by Rep. Tonya Schuitmaker, amends section 2512 of the Occupational Code to require that when a broker enters into an exclusive agency relationship shall, at a minimum, provide the following services to his or her client:
- When the real estate broker is representing a seller or lessor, the marketing of the client's property in the manner agreed upon in the service provision agreement.
- Acceptance of delivery and presentation of offers and counteroffers to buy, sell, or lease the client's property or the property the client seeks to purchase or lease.
- Assistance in developing, communicating, negotiating, and presenting offers, counteroffers, and related documents or notices until a purchase or lease agreement is executed by all parties and all contingencies are satisfied or waived.
- After execution of a purchase agreement by all parties, assistance as necessary to complete the transaction under the terms specified in the purchase agreement.
- Furnishing or causing to be furnished, a complete and detailed closing statement as required by R 339.22311 of the Michigan administrative code.
STATUS: 4/9/08 Bill was signed by the Governor, and assigned Public Act 90 with Immediate Effect
House Bill 4417, introduced by Rep. Barb Farrah, amends the agency disclosure form by inserting the following under the subheading titled “Seller’s Agents”:
A seller's agent providing services under an exclusive service provision agreement owes the following duties to the client:
- Marketing of the client's property in the manner agreed upon in the agreement;
- Acceptance of delivery and presentation of offers and counteroffers to buy, sell, or lease the client's property;
- Assistance in developing, communicating, negotiating, and presenting offers, counteroffers, and related notices or documents until a purchase or lease agreement is executed by all parties and all contingencies are satisfied or waived;
- After execution of a purchase agreement, assistance as necessary to complete the transaction under the terms specified in the purchase agreement;
- Furnishing, or causing to be furnished, a complete and detailed closing statement.
From MAR’s perspective, this legislation is necessary to ensure the protection of the consumer and professionalism in the real estate industry.
Public Act 93 of 1993 and Public Act 236 of 2000 established buyers agency and designated agency that served to protect the public with clear disclosures and definitions of agency duties and contractual services. However, there is a loophole in current law that allows licensees to avoid performing specific fiduciary duties to their client by simply not accepting offers and evading all responsibilities to that client by contracting those duties away.
If passed, HB 4416 and HB 4417 would only apply when there is a listing contract that establishes an agency provision with a seller or buyer.
Examples of establishing agency are:
- Exclusive listing agreement
- Buyers Agency
In no way is MAR or the bills sponsors preventing the unbundling of services. Business models that offer discounted or unbundled services will still be in business and continue to operate if this legislation becomes law. This legislation is aiming to prevent individuals from pawning off advertising agreements as exclusive listing agreements. Agents who sign an exclusive listing agreement have responsibilities to their clients.
Examples of unbundling services would include:
- advertising or marketing
- handling open houses
- negotiating offers to conclusion
- serve as a transaction coordinator
STATUS: 4/9/08 Bill was signed by the Governor, and assigned Public Act 91 with Immediate Effect
Zoning Consolidation Act
MAR Position: Support
House Bill 4398, introduced by Rep. Kevin Elsenheimer (R-Bellaire), would consolidate Michigan’s three municipal zoning acts. This bill would ultimately streamline all provisions of city, township, and county regulations, greatly simplifying the process for local units of government. MAR has been a strong supporter of this legislation since it was first discussed in the Michigan Land Use Leadership Council in 2003. Legislators in both the House and Senate voted unanimously in favor of this legislation. If signed, the Michigan Zoning Enabling Act would offer many advantages when working on zoning issues on both the local and state level.
Status:
3.28.06 — Bill ordered enrolled
3.30.06 — Presented to the Governor
4.18.06 — Assigned Public Act 110 of 2006
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Methamphetamine Legislation (updated 2.19.08)
MAR Position: Support (cleanup standards)
Senate Bill 1115/Now Public Act 255 of 2006, introduced by Sen. Tom George (R-Portage), would create a new act to require the Michigan Department of State Police (MSP), upon receiving notice of the discovery of a methamphetamine lab, to post the location of the meth lab and the name of the law enforcement agency or other agency reporting the lab’s existence on their website. They would also have to include whether the remediation of each lab site had been completed according to the standards set by the DCH.
Status:
3.02.06 – Referred to Senate Committee on Judiciary
3.29.06 – Passed Senate; referred to House Judiciary Committee
5.17.06 – Reported; passed, Returned to Senate; passed
6.27.06 – Presented to Governor
7.26.06 – Assigned Public Act 255 with Immediate Effect
House Bill 5798 Now Public Act 260 of 2006, sponsored by Rep. Tonya Schuitmaker (R-Lawton), would require the DCH to develop a Cleanup of Clandestine Drug Labs guidance document that would include detailed protocol for the preliminary site assessment, remediation, and post-cleanup assessment of indoor environments and structures.
Status:
3.01.06 – Referred to House Committee on Health Policy
3.28.06 – Referred to 2nd reading with sub H-3
4.27.06 – Sub H-3 adopted; passed
5.02.06 – Referred to Senate Committee on Health Policy
5.30.06 – Reported with S-1; passed
6.27.06 – Presented to the Governor
7.12.06 – Assigned Public Act 260 of 2006 with Immediate Effect
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High School Site Plan Review (updated 12.13.06)
MAR Position: Support to include all schools
House Bill 5479, introduced by Rep. Phil Lajoy (R-Canton), would require public schools to submit site plans for the construction of a high school located in a township to the local zoning authority. Currently, school officials do not have to abide by or participate in local land use plans. Consequently, when school officials undertake school building programs, they make their decisions to build a new school, without taking into consideration their local governments’ plan for managed growth and development.
Status:
12.01.05 - Referred to Committee on Natural Resources, Great Lakes, Land Use and Environment
3.16.06 - Reported with recommendation without amendments
3.23.06 - Place on third reading
4.26.06 - Referred to Committee on Natural Resources and Environmental Affairs
6.21.06 - Reported; Placed on 3rd reading with Sub S-2; passed
6.22.06 - Bill ordered Enrolled
7.12.06 - Assigned PA 276 of 2006 with Immediate Effect
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Commercial Property Board of Review (updated 12.13.06)
MAR Position: Support
House bill 5854, sponsored by Rep. Fulton Sheen (R-Plainwell), was designed to make the operations of the local Boards of Review and the Tax Tribunal more efficient. It would allow certain business property assessment disputes to go directly to the Tax Tribunal, without first having to be protested before the Board of Review.
Status:
3.14.06 - Referred to Committee on Tax Policy
3.29.06 - Referred to second reading
4.26.06 - Placed on 3rd Reading
5.02.06 - Referred to Senate Committee on Finance
5.16.06 - Reported; placed on 3rd reading; passed
5.31.06 - Assigned Public Act 174 with Immediate Effect
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The Price of Government - Getting the results we need in an age of permanent fiscal crisis
The Michigan Association of REALTORS®, in partnership with the Michigan Chamber of Commerce, funded an initiative in 2005 to change the way the state of Michigan approaches the budget process. The Price of Government by David Osborne and Peter Hutchinson outlines a process by which government sets priorities and then budgets for the purchases of services based on the current income of the state. Those programs “above the line” of tax revenue are funded, based on priority, and those below that line are cut. This is a methodology known as “budgeting for outcomes.” Our partnership has funded Peter Hutchinson’s consulting firm to come to Michigan and help the legislature work its way through this process.
Our goal: Encourage the legislature to pass a balanced budget based on funding the priorities of government, while opposing any and all tax increases that would target the real estate industry, property owners, or other sectors of the economy.
Now that the 2005-06 budget has been passed, it is time to look back and to the future. MAR’s goal was achieved as the House and Senate did not adopt any new tax increases for 2006 and are now focused on tax cuts to help jump start economic growth in Michigan.
While the outcome was favorable, there is still more work to be done. This year the House adopted the principles outlined in POG, but the Senate reverted back to traditional budgeting methods. Structural change in government does not occur over night. Feedback from legislators and their continued support will be crucial in sustaining the principles of POG, fiscal responsibility, and the fight against tax and fee increases.
If you’d like to learn more about MAR’s role in this partnership, call MAR’s public policy department at 800.454.7842.
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Expanding Income Threshold for Summer Deferral
MAR Position: SUPPORT
Public Act 24 of 2005, introduced by Rep. Tory Rocca (R-Sterling Heights), raises the income threshold from $25000 to $35000 per household for qualifying individuals. These individuals include blind, disabled, qualifying veterans, and qualifying seniors. This legislation reflects a cost of living change for those individuals on fixed incomes that have been disqualified from the program since the last income threshold increase in 1992. This new law allows individuals who qualify to defer payment of summer property taxes billed in September 2005 until February 2006.
Governor Jennifer Granholm and the Department of Treasury had initially opposed this legislation in committee because of an estimated statewide loss of $4 million to school districts. Due to unanimous support in the House and Senate, and from MAR on behalf of home owners, this legislation was signed by the governor on May 23rd.
Status:
March 16, 2005 – Passed in the House of Representatives Yeas 109 Nays 0
May 4, 2005 – Passed in the Senate Yeas 38 Nays 0
May 24, 2005 – Became law with Governor’s signature
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Incorrect Uncapping of Property
MAR Position: SUPPORT
Public Act 23 of 2005, introduced by Rep. Bruce Caswell (R-Hillsdale) allows a property’s value to be readjusted and a new tax bill issued for any mistaken uncapping that occurs where there has been no transfer. This is a rare occurrence that happens around the state and the language puts in statute what is currently already done “illegally” by boards of review. Under this law, the taxable value of the property would have to be readjusted at the July or December board of review.
Under Article IX, Section 3 of the State Constitution, the State equalized valuation (assessment) of a parcel of property must be based on 50% of its true cash value. Assessed value, however, is not usually the same as taxable value, which determines the amount of taxes the owner must pay. Under Article IX, Section 3, taxable value (adjusted for additions and losses) may not increase or is “capped” from one year to the next by more than 5% of the increase in the consumer price index, whichever is lower, until there is a transfer of ownership. At that time, the assessment is "uncapped" and the parcel again is taxed at 50% of its true cash value.
This legislation received bi-partisan support in the House and Senate and became law without the governor’s signature on May 24th.
Status:
March 23, 2005 – Passed in the House of Representatives Yeas 109 Nays 0
May 4, 2005 – Passed in the Senate Yeas 35 Nays 0
May 24, 2005 – Became law without the Governor’s signature
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On-line Continuing Education Act
MAR Position: SUPPORT
Public Act 70 of 2005, introduced by Senator Michelle McManus (R-Lake Leelanau), created the "On-line Continuing Education Act" to provide that an occupational regulatory agency requiring a program of continuing education as part of a program for renewal of a license, would be required to allow at least half of the required credit hours of continuing education to be earned through on-line or electronic media meeting standards acceptable to the regulatory agency.
This legislation takes effect July 1, 2007.
Status:
April 27, 2005 – Passed in the Senate Yeas 38 Nays 0
June 23, 2005 – Passed in the House of Representatives Yeas 106 Nays 0
August 31, 2005 – Became law with Governor’s signature
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Sellers Disclosure: Allergens
MAR Position: SUPPORT
Public Act 163 of 2005, introduced by Senator Cameron Brown (R-Sturgis), amends the seller's disclosure statement to include a statement that property inspections should take into account indoor air and water quality, as well as evidence of unusually high levels of potential allergens.
The following language will be added to the seller’s disclosure statement effective January 1, 2006:
BUYER SHOULD OBTAIN PROFESSIONAL ADVICE AND INSPECTIONS OF THE PROPERTY TO MORE FULLY DETERMINE THE CONDITION OF THE PROPERTY.
THESE INSPECTIONS SHOULD TAKE INDOOR AIR AND WATER QUALITY INTO ACCOUNT, AS WELL AS ANY EVIDENCE OF UNUSUALLY HIGH LEVELS OF POTENTIAL ALLERGENS INCLUDING, BUT NOT LIMITED TO, HOUSEHOLD MOLD, MILDEW AND BACTERIA.
Status:
June 22, 2005 – Passed in the Senate Yeas 37 Nays 0
September 20, 2005 – Passed in the House of Representatives Yeas 106 Nays 2
October 11, 2005 – Became law with Governor’s signature
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Private Wastewater Utilities
MAR Position: SUPPORT
Public Act 191 of 2005 , introduced by Senator Bruce Patterson (R-Canton), amends the Clean Water Assistance portionof the Natural Resources and Environmental Protection Act. Any activities of a private, investor-owned wastewater utility would have to comply with all applicable provisions of the Act, local zoning and other ordinances, and the construction and operation requirements of the Federal Water Pollution Control Act and the Federal Natural Environmental Policy Act.
Status:
May 10, 2005 – Passed in the Senate Yeas 38 Nays 0
June 23, 2005 – Passed in the House of Representatives Yeas 106 Nays 3
June 23, 2005 – Legislation returned to the Senate
October 18, 2005 – House Substitute adopted in Senate Yeas 37 Nays 1
November 8 – Legislation signed by Gov. Granholm
Public Act of 190 of 2005 , introduced by Senator Jason Allen (R-Traverse City), gives the Public Service Commission jurisdiction over private wastewater utilities.
Status:
May 10, 2005 – Passed in the Senate Yeas 38 Nays 0
June 23, 2005 – Passed in the House of Representatives Yeas 102 Nays 7
June 23, 2005 – Legislation returned to the Senate
October 18, 2005 – House Substitute adopted in Senate Yeas 37 Nays 1
November 8 – Legislation signed by Gov. Granholm
Public Act of 189 of 2005 , introduced by Senator Jason Allen (R-Traverse City), amends Public Act 299 of 1972, which provides for the assessment, collection and disposition of the costs of regulating public utilities, to include wastewater companies in the Act's definition of "public utility".
Status:
September 14, 2005 – Passed in the Senate Yeas 38 Nays 0
October 12, 2005 – Passed in the House of Representatives Yeas 105 Nays 0
November 8, 2005 – Signed by Gov. Granholm
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Property Tax Classification of Hunting Preserves (updated 12.13.06)
MAR Position: SUPPORT
House Bill 4468, introduced by Rep. John Stahl (R-North Branch), would amend the general property tax act to classify the operation of a hunting preserve as agricultural. The result of a recent Michigan Supreme Court case changed the property tax classification of hunting preserves to commercial, causing financial difficulties on the day to day operation of these facilities.
Status:
3.18.05 - Referred to House Committee on Tax Policy; reported
11.01.05 - Passed, Referred to Senate Committee on Agriculture, Forestry, and Tourism
6.01.06 - Reported with S-1; passed
6/29/06 - Presented to the Governor
7.12.06 - Assigned Public Act 278 of 2006 with Immediate Effect
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