Michigan's mortgage lending regulatory framework sits at the intersection of federal consumer protection law and state-specific licensing and enforcement. Understanding both levels helps Michigan borrowers know what protections they have and where those protections have gaps.
Department of Insurance and Financial Services (DIFS)
DIFS is Michigan's primary regulatory authority for mortgage brokers, lenders, and servicers. Under the Mortgage Brokers, Lenders, and Servicers Licensing Act (MCL 445.1651), any entity engaged in mortgage brokering, lending, or servicing residential mortgage loans in Michigan must be licensed by DIFS unless specifically exempted. Exemptions exist for depository institutions, certain nonprofits, and others, but most private lending operations require a license.
DIFS investigates consumer complaints, conducts examinations of licensees, and can impose civil penalties, license suspensions, and license revocations for violations. Borrowers who believe they've been harmed by a licensed entity can file complaints at michigan.gov/difs.
Mortgage Brokers, Lenders, and Servicers Licensing Act
This Act requires licensed entities to maintain net worth and surety bond requirements designed to ensure they can meet obligations to consumers. It prohibits misrepresentation, fraud, and deceptive practices. It requires disclosure of material facts and prohibits certain unfair practices in mortgage transactions. Violations are subject to civil penalties and can support private litigation by affected borrowers.
Michigan Consumer Protection Act (MCPA)
The MCPA prohibits unfair, unconscionable, and deceptive methods, acts, and practices in trade or commerce. Predatory lending conduct that meets MCPA thresholds gives borrowers a private right of action for actual damages, potential treble damages, and attorney fees. The MCPA has been applied to mortgage lending practices in Michigan courts.
Michigan Land Contract Law
Land contracts in Michigan are governed by MCL 565.351 et seq. These contracts allow sellers to finance property sales directly, with legal title retained by the seller until payoff. Michigan law provides some consumer protections for land contract buyers, including forfeiture notice requirements before a buyer can be dispossessed, but the protections are less robust than those in conventional mortgage transactions. Buyers in land contracts should understand their specific rights under the contract and state law.
Hard Money and Private Lending
Hard money lenders and private lenders in Michigan may or may not be required to hold a DIFS license depending on the number and nature of their lending transactions. Commercial lending is generally less regulated than residential. Borrowers in hard money and private lending transactions should be aware that regulatory protections are weaker and due diligence is correspondingly more important.
Related: predatory lending laws and borrower rights.