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HB 6186

Financial institutions: mortgage brokers and lenders; consolidation of certain licensing statutes related to residential mortgages; make conforming changes in 1966 PA 326. Amends sec. 1c of 1966 PA 326 (MCL 438.31c). TIE BAR WITH: HB 6177'26

2025-2026 Regular Session Introduced by Bill Schuette and 1 co-sponsor

HB 6186 would unify Michigan's mortgage licensing rules, cap rates at 11% for certain loans, limit prepayment penalties, and regulate deposit-account security for residential finan

bill electronically reproduced 07/03/2026
#financialinstitutions:mortgagebrokersandlenders
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Bill Summary · HB 6186

Summary of HB 6186 (2025-2026) – Michigan

What the bill is intended to do

  • HB 6186 proposes to amend 1966 PA 326 (the Michigan Money Lending Act as historically amended) by consolidating and aligning various licensing statutes related to residential mortgages, and by making conforming changes in coordination with a companion measure, HB 6177. The enactment is contingent on HB 6177 becoming law (a tie-bar).

Main purpose and intent

  • Create a unified framework governing mortgage broker/dealer activities and related lending practices, specifically for residential mortgage transactions.
  • Align and clarify rules around interest rates, fees, prepayment terms, and security arrangements in certain mortgage-related arrangements.
  • Ensure consistent application of the law to lenders and sellers who are involved in mortgage loans, land contracts, and related financing secured by real property (predominantly single-family dwellings).

Key provisions and changes (highlights)

  • Scope and applicability:
    • Applies to mortgage lenders and brokers approved as mortgagees under federal housing programs or regulated by state/federal authorities.
    • Subsection (5) clarifies that only lenders qualified under federal/state programs may rely on certain statutory limitations; subsection (6) preserves the ability of some non-qualified lenders/vendors to make specified mortgage loans or land contracts at a rate not exceeding 11% APR, subject to references to Truth in Lending Act (TILA) calculations (finance charge inclusions).
  • Interest rate and loan terms:
    • For notes, bonds, or similar debt secured by real property (including land contracts) created after Aug 11, 1969, parties may agree to various interest terms, but several conditions apply:
    • No rate increase for any reason beyond the initially agreed rate (under specified real property-secured arrangements).
    • For single-family home loans not insured/guaranteed by the federal government, lenders cannot require incidental deposits beyond escrow/authorized accounts, nor impose seller/borrower discounts or points beyond those permitted or required to qualify the loan for sale under applicable programs.
    • Prepayment terms: prepayment fees/penalties are limited to 1% of the prepayment amount within the first 3 years; after 3 years, prepayment penalties are prohibited (and prepayment at any time cannot be prohibited).
  • Mortgage-related fees and charges:
    • Limits on certain practices commonly used to increase the loan cost at origination (e.g., mandatory deposits or excessive discount/points), with exceptions for fees required to qualify for sale or commitment under federal programs.
  • Purchase money and second/third mortgages:
    • Purchase money mortgages and second mortgages may have an interest rate not to exceed 11% annually, with specific definitions for “purchase money mortgage,” “second mortgage,” and “third person” (which includes certain real estate brokers or builders engaged in residential sales).
    • The act sets boundaries for secondary financing and outlines how such loans should comply with related statutory acts (e.g., Secondary Mortgage Loan Act) except as otherwise limited by the tie-bar to HB 6177.
  • Mobile home financing:
    • For extensions of credit secured by a mobile home, a similar 11% cap applies (subject to the same exclusions and definitions as above), with note that this provision does not prohibit other laws authorizing higher rates.
  • Deposit accounts used as security:
    • The act allows a pledged, interest-bearing deposit account as additional security, with specified mechanics: withdrawals are applied against loan payments, and interest earned on the deposit accrues to the borrower’s deposit account. This is restricted to owner-occupied dwellings or related land contracts.
    • Limits: a lender/seller offering 5+ mortgages/land contracts in a calendar year cannot require such a deposit for more than 20% of the loans in that year.
    • Biweekly payments: for biweekly payment setups, regulated depository institutions may require an interest-bearing account to facilitate automatic withdrawals, with protections to avoid over-accumulation of funds beyond what’s needed for biweekly payments.
  • Definitions and terminology:
    • The bill provides definitions for key terms (affiliate, regulated depository financial institution) to determine when these provisions apply.
  • Enacting clause and effectiveness:
    • The change in HB 6186 takes effect only if HB 6177 (the companion mortgage licensing and supervision act) is enacted into law.

Who would be affected

  • Residential mortgage lenders and brokers, including:
    • Lenders approved under the National Housing Act or regulated by state/federal authorities.
    • Sellers financing (land contracts) and second/third mortgage lenders working with residential real estate.
    • Mobile home financing providers, where credit is secured by a mobile home.
  • Borrowers in residential mortgage transactions, particularly:
    • Homebuyers (single-family residential) and owners in owner-occupied properties.
    • Consumers who may be subject to biweekly payment arrangements and deposit-account security mechanisms.
  • Mortgage-related service providers and affiliated entities that deal with 5+ mortgage/contract volume in a year (due to deposit account restrictions).

Procedural and timeline aspects

  • Procedural: HB 6186 was introduced July 3, 2026, referred to the House Finance Committee.
  • Tie-bar: The act’s effectiveness is contingent on the enactment of HB 6177, making HB 6186 part of a broader, consolidated regulatory package for residential mortgage licensing and supervision.
  • The bill’s language references several preexisting acts and regulatory frameworks (Truth in Lending Act, secondary mortgage lending act, mobile home act, etc.), ensuring alignment with both state and federal laws.

Practical impact and considerations

  • If HB 6177 becomes law, HB 6186 would consolidate and adjust licensing statutes and conforming provisions, potentially simplifying compliance for mortgage brokers and lenders and clarifying permitted practices regarding fees, deposits, prepayments, and financing structures.
  • Non-qualified lenders may still offer certain mortgage or land contract products at up to 11% APR under specified conditions, subject to federal disclosures and finance charge definitions.
  • Borrowers could benefit from clearer protections against onerous prepayment penalties and from deposit-account security arrangements that are carefully defined and limited.
  • The tie-bar nature means stakeholders should monitor HB 6177's status to determine when HB 6186 takes effect.

Compiled from official sources — confirm details with the bill’s official record.

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