Michigan Laws 445.1623 – Procedure before sale or transfer of property securing residential window period loan containing due-on-sale clause; fees; grounds for enforcement of due-on-sale clause; failure to follow procedu
Current as of: 2024 | Check for updates
|
Other versions
(1) Before a sale or transfer of property securing a residential window period loan, which contains a due-on-sale clause, the following procedure shall be followed:
(a) The borrower, or the proposed buyer or transferee, shall provide written notice to the lender of the proposed sale or transfer, which notice shall include the name and address of the proposed buyer or transferee and a copy of the agreement of sale or other document under which the sale or transfer shall occur.
Terms Used In Michigan Laws 445.1623
- Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
- Contract: A legal written agreement that becomes binding when signed.
- Due-on-sale clause: means a contract provision which authorizes the lender, at its option, to declare due and payable sums secured by the lender's security instrument if all or any part of the property, or an interest in the property, securing the real property loan is sold or transferred without the lender's prior written consent. See Michigan Laws 445.1621
- in writing: shall be construed to include printing, engraving, and lithographing; except that if the written signature of a person is required by law, the signature shall be the proper handwriting of the person or, if the person is unable to write, the person's proper mark, which may be, unless otherwise expressly prohibited by law, a clear and classifiable fingerprint of the person made with ink or another substance. See Michigan Laws 8.3q
- Lender: means a person or governmental agency, other than the Michigan state housing development authority, making real property loans, including, but not limited to, an individual, a federal or state chartered savings and loan association or savings bank, a state or national bank, a federal or state chartered credit union, an insurance company, or other lender approved as a mortgagee under the national housing act, 12 U. See Michigan Laws 445.1621
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- Residential window period loan: means a window period loan which is 1 of the following:
(i) A loan secured by a lien on real property intended for occupancy by not more than 4 families. See Michigan Laws 445.1621Sale or transfer: means the conveyance of property, or of any right, title, or interest in property, whether legal or equitable, whether voluntary or involuntary, by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold interest with a term greater than 3 years, lease option contract, or any other method of conveyance of real property interest. See Michigan Laws 445.1621 Window period loan: means a real property loan which was made or assumed during a period beginning on January 5, 1977, and ending on October 15, 1982, other than a real property loan originated by a federal savings and loan association, a federal savings bank, a national bank, or a federally chartered credit union. See Michigan Laws 445.1621
(b) Within 5 business days after receipt of the notice required under subdivision (a), the lender may require by written notice mailed or delivered to the proposed buyer or transferee that the proposed buyer or transferee either provide the credit information customarily required by the lender in connection with a credit application or complete the lender’s customary credit application for a similar loan secured by similar property.
(c) Within 15 days after receipt of a written notice for credit information or for completion of the lender’s customary credit application, the proposed buyer or transferee shall provide the credit information or complete the application as requested by the lender.
(d) Within 20 days after receipt of the credit information or completion of the lender’s customary credit application, the lender shall determine whether the proposed buyer or transferee meets the lender’s customary credit standards for a similar loan secured by similar property, and shall notify the proposed buyer or transferee in writing, mailed or delivered, of the lender’s decision and, in the event of disapproval, the reasons for the disapproval.
(e) If the lender is not in the business of making real property loans, then the determination to be made by the lender under subdivision (d) shall be whether the proposed buyer or transferee meets the credit standards customarily applied by major institutional residential lenders within the geographic market for similar loans secured by similar properties.
(2) A lender may charge a reasonable fee to determine whether a proposed buyer or transferee meets its customary credit standards, which fee shall be paid by the proposed buyer or transferee at the time of submission of the credit information or application required by subsection (1)(c). If the lender determines that the proposed buyer or transferee meets the lender’s customary credit standards, the lender may charge the proposed buyer or transferee a loan processing fee in connection with and to be paid at the time of the amendment to the loan contract as provided in section 4. The total amount of the fees permitted by this subsection shall not exceed 1/2 of 1% of the outstanding balance of the residential window period loan plus the actual cost of an endorsement to the lender’s policy of title insurance plus the actual cost of transfer of any private mortgage insurance. Other than the fees provided by this subsection, a lender shall not charge any amount for any reason for a transaction governed by section 3 to 5.
(3) Except as provided in section 6, a lender may enforce a due-on-sale clause in a residential window period loan if any of the following apply:
(a) The borrower and the proposed buyer or transferee fail to follow in a timely manner the procedures set forth in subsection (1).
(b) The proposed buyer or transferee fails to timely pay a fee charged by the lender under subsection (2).
(c) The lender, in good faith and in accordance with its customary procedures for evaluating creditworthiness, determines that the proposed buyer or transferee does not meet the lender’s customary credit standards.
(d) Enforcement is justified by a threat to a legitimate interest of the lender, which includes preventing the impairment or loss of the lender’s security.
(4) A lender shall not enforce a due-on-sale clause under either this section or section 4 in a residential window period loan if the lender fails to follow in a timely manner the procedures set forth in subsection (1).