AGO 5972.

• Case Date: September 02, 1981
• Court: Michigan

Michigan Attorney General Opinions 1981. AGO 5972. September 2, 1981 STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 5972 USURY: Commitment fees Discount points STATUTES: Override of federal preemption Re-enactment of statute A qualified lender may charge discount points and may charge a commitment fee on loans secured by home mortgages since amendatory 1980 PA 238 did not override the federal preemption of the applicable state usury law. Honorable William R. Keith State Representative The Capitol Lansing, Michigan

You have requested my opinion on the following questions:

1. Does PA 238 of 1980 effectively override the federal preemption (Public Law 96-221) of state usury laws with respect to prohibiting lenders from collecting discount points? 2. Does PA 238 of 1980 effectively override the federal preemption (Public Law 96-221) of state usury laws with respect to prohibiting lenders from collecting commitment fees? The payment of discount points by a borrower, directly or indirectly, is forbidden by 1969 PA 305, as amended; MCLA 438.31c(2); MSA 19.15(1c)(2). This section is part of the state's general usury law, which, as explicated in OAG, 1981-1982, No 5894, p 157 (May 1, 1981), was preempted in part by the Depository Institutions Deregulation and Monetary Control Act of 1980 ('DIDMCA'), 94 Stat 132 et seq (March 31, 1980); 12 USC 226 note. Your inquiry concerns the continuing effect of this federal preemption in light of the fact that the Legislature has recently re-enacted 1969 PA 305, as amended, supra, by 1980 PA 238, subsequent to the passage of 'DIDMCA,' supra. As indicated in OAG, 1981-1982, No 5894, supra, the State Legislature was given the power in 'DIDMCA' to override the federal preemption and reinstate state usury laws. 94 Stat 162 (March 31, 1980); 12 USC 1735f-7 note. The analysis of the legal questions presented begins with an examination of the state's usury limit of five percent, which can be increased to seven percent if the parties so stipulate in writing. 1966 PA 326, as amended by 1970 PA 227; MCLA 438.31; MSA 19.15(1). This general interest rate ceiling, however, is subject to numerous exceptions, many of which were identified in OAG, 1979-1980, No 5765, p 942 (August 28, 1980), and OAG, 1979-1980, No 5740, p 877 (July 17, 1980). The exception most appropriate to real estate loans was enacted by 1969 PA 305, supra, upon recognition that escalating interest rates had caused existing limitations to become obsolete and were threatening the ability of prospective homeowners in Michigan to secure needed financing. As a result, the Legislature lifted the ceiling to permit parties to a 'conventional home loan mortgage or land contract' to agree in writing to pay any rate of interest. 1969 PA 305, as amended, supra, contained an annual sunset provision, and provided that lenders could not require borrowers to maintain a deposit account, other than an escrow account, could not 'directly or indirectly, impose or collect as a...