State Representative Bill G. Schuette today secured House passage of his plan to modernize outdated lending rules that have put Michigan at a competitive disadvantage and forced lenders to operate under standards written nearly 50 years ago.

Michigan’s current law requires lenders to offer extremely small mortgage loans that often no longer make financial sense in today’s economy, creating unnecessary regulatory barriers and discouraging some companies from operating in the state. Schuette’s plan would gradually raise mortgage minimums for lenders from $10,000 to $45,000 by 2028, with minimums rising to $15,000 upon signing of the bill and $30,000 after Jan. 1, 2027. The update would allow lenders to set higher minimum loan amounts, ensuring they are not required to originate very small loans that result in a loss while still allowing other lenders to issue loans below the new threshold; all while, reducing unnecessary regulatory barriers for all lending companies.

“Michigan’s current lending minimums put our state at a competitive disadvantage when trying to attract new lending companies,” said Schuette, R-Midland. “There are fixed costs associated with originating a loan – underwriting, appraisal, and processing – that don’t change whether the loan is for $30,000 or $3 million. When the state requires companies to offer extremely small loans, many of which no longer make sense in today’s economic climate, lenders often lose money on those transactions.”

The limits have been in place since 1977, meaning Schuette’s proposal would be the first update to the law in nearly 50 years. Companies could still issue mortgages below $45,000, but the state would no longer force them to do so. The legislation would also gradually raise home improvement loan minimums from $1,000 to $4,500 by 2028.

“By updating these limits to reflect today’s economic realities, we’re ensuring lenders in Michigan are not burdened by unnecessary regulatory barriers” Schuette said. “Inflation has affected every sector of the economy over the last 50 years. Michigan shouldn’t require lenders to operate under standards that were written in the 1970s.”

Schuette’s plan, House Bill 5497, would also allow minimum loan thresholds to be adjusted every five years – beginning January 1, 2032 – based on changes in the Consumer Price Index, ensuring the minimum amounts are kept up to date according to economic realities. Additionally, the bill eliminates the requirement that limits these restrictions to credit granting institutions physically located in Michigan, so that Michigan-based lenders can compete on a more-level playing field.

The plan now moves to the Senate for further consideration.