Federal law and Michigan state law provide a framework of protections for mortgage borrowers. These protections don't eliminate predatory lending, but they create legal remedies, disclosure requirements, and regulatory oversight that informed borrowers can use to their advantage. Understanding the legal landscape is part of being an informed borrower.
Truth in Lending Act (TILA)
TILA requires lenders to disclose the Annual Percentage Rate (APR), the total amount financed, the total of payments, and the finance charge on any loan. These disclosures must be provided before the loan closes and must be presented in a format the borrower can compare across lenders. TILA violations can give borrowers the right to rescind a loan within three days of closing, or in cases of material violations, up to three years.
Real Estate Settlement Procedures Act (RESPA)
RESPA governs the settlement process for residential mortgage loans. It prohibits kickbacks between settlement service providers, requires a Loan Estimate and Closing Disclosure with standardized formatting, and protects borrowers from surprise fee increases between the Loan Estimate and closing. If actual closing costs exceed estimated costs beyond allowed tolerances, the lender or service provider must absorb the difference.
Home Ownership and Equity Protection Act (HOEPA)
HOEPA specifically targets high-cost mortgages. Loans that meet threshold tests for rates or fees trigger additional disclosure requirements and substantive restrictions on loan terms, including prohibitions on balloon payments in some cases, restrictions on prepayment penalties, and requirements for borrower counseling. High-cost loan designation under HOEPA gives borrowers additional legal protections and remedies.
Consumer Financial Protection Bureau (CFPB)
The CFPB enforces federal consumer financial laws and has authority over many mortgage lenders and servicers. Borrowers can file complaints at consumerfinance.gov. The CFPB's complaint database is public and can be used to research a lender's history before doing business with them.
Michigan Mortgage Brokers, Lenders, and Servicers Licensing Act
Michigan requires licensing for mortgage brokers, lenders, and servicers under MCL 445.1651 et seq. The Department of Insurance and Financial Services (DIFS) oversees compliance. Unlicensed activity is a violation and can be reported to DIFS. Licensees must meet net worth, bonding, and continuing education requirements designed to ensure competence and accountability.
Michigan Consumer Protection Act
The Michigan Consumer Protection Act (MCPA) prohibits unfair, unconscionable, and deceptive trade practices. Predatory lending conduct that falls within MCPA coverage can give borrowers state court remedies including actual damages, treble damages in some circumstances, and attorney fees.
Coventry Enterprises LLC provides loan education and review. Related: borrower rights and Michigan lending regulations.