Bill Text: MN HF36 | 2013-2014 | 88th Legislature | Introduced
Bill Title: Residential mortgage lending obsolete limitations repealed on state regulation, and federal Dodd-Frank Act conformed.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2013-01-14 - Author added Kahn [HF36 Detail]
Download: Minnesota-2013-HF36-Introduced.html
1.2relating to financial institutions; repealing certain obsolete limitations on state
1.3regulation of residential mortgage lending; conforming to the federal Dodd-Frank
1.4Act;amending Minnesota Statutes 2012, section 58.13, subdivision 1; repealing
1.5Minnesota Statutes 2012, section 58.18, subdivision 4.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. Minnesota Statutes 2012, section 58.13, subdivision 1, is amended to read:
1.8 Subdivision 1. Generally.(a) No person acting as a residential mortgage originator
1.9or servicer, including a person required to be licensed under this chapter, and no person
1.10exempt from the licensing requirements of this chapter under section58.04 , except as
1.11otherwise provided in paragraph (b), shall:
1.12 (1) fail to maintain a trust account to hold trust funds received in connection with a
1.13residential mortgage loan;
1.14 (2) fail to deposit all trust funds into a trust account within three business days of
1.15receipt; commingle trust funds with funds belonging to the licensee or exempt person; or
1.16use trust account funds for any purpose other than that for which they are received;
1.17 (3) unreasonably delay the processing of a residential mortgage loan application,
1.18or the closing of a residential mortgage loan. For purposes of this clause, evidence of
1.19unreasonable delay includes but is not limited to those factors identified in section47.206,
1.20subdivision 7 , clause (d);
1.21 (4) fail to disburse funds according to its contractual or statutory obligations;
1.22 (5) fail to perform in conformance with its written agreements with borrowers,
1.23investors, other licensees, or exempt persons;
2.1 (6) charge a fee for a product or service where the product or service is not actually
2.2provided, or misrepresent the amount charged by or paid to a third party for a product
2.3or service;
2.4 (7) fail to comply with sections345.31 to
345.60 , the Minnesota unclaimed property
2.5law;
2.6 (8) violate any provision of any other applicable state or federal law regulating
2.7residential mortgage loans including, without limitation, sections47.20 to
47.208 and
2.847.58
;
2.9 (9) make or cause to be made, directly or indirectly, any false, deceptive, or
2.10misleading statement or representation in connection with a residential loan transaction
2.11including, without limitation, a false, deceptive, or misleading statement or representation
2.12regarding the borrower's ability to qualify for any mortgage product;
2.13 (10) conduct residential mortgage loan business under any name other than that
2.14under which the license or certificate of exemption was issued;
2.15 (11) compensate, whether directly or indirectly, coerce or intimidate an appraiser for
2.16the purpose of influencing the independent judgment of the appraiser with respect to the
2.17value of real estate that is to be covered by a residential mortgage or is being offered as
2.18security according to an application for a residential mortgage loan;
2.19 (12) issue any document indicating conditional qualification or conditional approval
2.20for a residential mortgage loan, unless the document also clearly indicates that final
2.21qualification or approval is not guaranteed, and may be subject to additional review;
2.22 (13) make or assist in making any residential mortgage loan with the intent that the
2.23loan will not be repaid and that the residential mortgage originator will obtain title to
2.24the property through foreclosure;
2.25 (14) provide or offer to provide for a borrower, any brokering or lending services
2.26under an arrangement with a person other than a licensee or exempt person, provided that
2.27a person may rely upon a written representation by the residential mortgage originator that
2.28it is in compliance with the licensing requirements of this chapter;
2.29 (15) claim to represent a licensee or exempt person, unless the person is an employee
2.30of the licensee or exempt person or unless the person has entered into a written agency
2.31agreement with the licensee or exempt person;
2.32 (16) fail to comply with the record keeping and notification requirements identified
2.33in section58.14 or fail to abide by the affirmations made on the application for licensure;
2.34 (17) represent that the licensee or exempt person is acting as the borrower's agent
2.35after providing the nonagency disclosure required by section58.15 , unless the disclosure
3.1is retracted and the licensee or exempt person complies with all of the requirements of
3.2section58.16 ;
3.3 (18) make, provide, or arrange for a residential mortgage loan that is of a lower
3.4investment grade if the borrower's credit score or, if the originator does not utilize credit
3.5scoring or if a credit score is unavailable, then comparable underwriting data, indicates
3.6that the borrower may qualify for a residential mortgage loan, available from or through
3.7the originator, that is of a higher investment grade, unless the borrower is informed that the
3.8borrower may qualify for a higher investment grade loan with a lower interest rate and/or
3.9lower discount points, and consents in writing to receipt of the lower investment grade loan;
3.10 For purposes of this section, "investment grade" refers to a system of categorizing
3.11residential mortgage loans in which the loans are: (i) commonly referred to as "prime" or
3.12"subprime"; (ii) commonly designated by an alphabetical character with "A" being the
3.13highest investment grade; and (iii) are distinguished by interest rate or discount points
3.14or both charged to the borrower, which vary according to the degree of perceived risk
3.15of default based on factors such as the borrower's credit, including credit score and
3.16credit patterns, income and employment history, debt ratio, loan-to-value ratio, and prior
3.17bankruptcy or foreclosure;
3.18 (19) make, publish, disseminate, circulate, place before the public, or cause to be
3.19made, directly or indirectly, any advertisement or marketing materials of any type, or any
3.20statement or representation relating to the business of residential mortgage loans that is
3.21false, deceptive, or misleading;
3.22 (20) advertise loan types or terms that are not available from or through the licensee
3.23or exempt person on the date advertised, or on the date specified in the advertisement.
3.24For purposes of this clause, advertisement includes, but is not limited to, a list of sample
3.25mortgage terms, including interest rates, discount points, and closing costs provided by
3.26licensees or exempt persons to a print or electronic medium that presents the information
3.27to the public;
3.28 (21) use or employ phrases, pictures, return addresses, geographic designations, or
3.29other means that create the impression, directly or indirectly, that a licensee or other
3.30person is a governmental agency, or is associated with, sponsored by, or in any manner
3.31connected to, related to, or endorsed by a governmental agency, if that is not the case;
3.32 (22) violate section82.77 , relating to table funding;
3.33(23) make, provide, or arrange for a residential mortgage loan all or a portion
3.34of the proceeds of which are used to fully or partially pay off a "special mortgage"
3.35unless the borrower has obtained a written certification from an authorized independent
3.36loan counselor that the borrower has received counseling on the advisability of the
4.1loan transaction. For purposes of this section, "special mortgage" means a residential
4.2mortgage loan originated, subsidized, or guaranteed by or through a state, tribal, or
4.3local government, or nonprofit organization, that bears one or more of the following
4.4nonstandard payment terms which substantially benefit the borrower: (i) payments vary
4.5with income; (ii) payments of principal or interest are not required or can be deferred under
4.6specified conditions; (iii) principal or interest is forgivable under specified conditions;
4.7or (iv) where no interest or an annual interest rate of two percent or less is charged in
4.8connection with the loan. For purposes of this section, "authorized independent loan
4.9counselor" means a nonprofit, third-party individual or organization providing homebuyer
4.10education programs, foreclosure prevention services, mortgage loan counseling, or credit
4.11counseling certified by the United States Department of Housing and Urban Development,
4.12the Minnesota Home Ownership Center, the Minnesota Mortgage Foreclosure Prevention
4.13Association, AARP, or NeighborWorks America;
4.14 (24) make, provide, or arrange for a residential mortgage loan without verifying
4.15the borrower's reasonable ability to pay the scheduled payments of the following, as
4.16applicable: principal; interest; real estate taxes; homeowner's insurance, assessments,
4.17and mortgage insurance premiums. For loans in which the interest rate may vary, the
4.18reasonable ability to pay shall be determined based on a fully indexed rate and a repayment
4.19schedule which achieves full amortization over the life of the loan. For all residential
4.20mortgage loans, the borrower's income and financial resources must be verified by tax
4.21returns, payroll receipts, bank records, or other similarly reliable documents.
4.22 Nothing in this section shall be construed to limit a mortgage originator's or exempt
4.23person's ability to rely on criteria other than the borrower's income and financial resources
4.24to establish the borrower's reasonable ability to repay the residential mortgage loan,
4.25including criteria established by the United States Department of Veterans Affairs or the
4.26United States Department of Housing and Urban Development for interest rate reduction
4.27refinancing loans or streamline loans, or criteria authorized or promulgated by the
4.28Federal National Mortgage Association or Federal Home Loan Mortgage Corporation;
4.29however, such other criteria must be verified through reasonably reliable methods and
4.30documentation. The mortgage originator's analysis of the borrower's reasonable ability
4.31to repay may include, but is not limited to, consideration of the following items, if
4.32verified: (1) the borrower's current and expected income; (2) current and expected cash
4.33flow; (3) net worth and other financial resources other than the consumer's equity in the
4.34dwelling that secures the loan; (4) current financial obligations; (5) property taxes and
4.35insurance; (6) assessments on the property; (7) employment status; (8) credit history; (9)
4.36debt-to-income ratio; (10) credit scores; (11) tax returns; (12) pension statements; and
5.1(13) employment payment records, provided that no mortgage originator shall disregard
5.2facts and circumstances that indicate that the financial or other information submitted by
5.3the consumer is inaccurate or incomplete. A statement by the borrower to the residential
5.4mortgage originator or exempt person of the borrower's income and resources or sole
5.5reliance on any single item listed above is not sufficient to establish the existence of the
5.6income or resources when verifying the reasonable ability to pay.
5.7 (25) engage in "churning." As used in this section, "churning" means knowingly or
5.8intentionally making, providing, or arranging for a residential mortgage loan when the
5.9new residential mortgage loan does not provide a reasonable, tangible net benefit to the
5.10borrower considering all of the circumstances including the terms of both the new and
5.11refinanced loans, the cost of the new loan, and the borrower's circumstances;
5.12 (26) the first time a residential mortgage originator orally informs a borrower of the
5.13anticipated or actual periodic payment amount for a first-lien residential mortgage loan
5.14which does not include an amount for payment of property taxes and hazard insurance,
5.15the residential mortgage originator must inform the borrower that an additional amount
5.16will be due for taxes and insurance and, if known, disclose to the borrower the amount of
5.17the anticipated or actual periodic payments for property taxes and hazard insurance. This
5.18same oral disclosure must be made each time the residential mortgage originator orally
5.19informs the borrower of a different anticipated or actual periodic payment amount change
5.20from the amount previously disclosed. A residential mortgage originator need not make
5.21this disclosure concerning a refinancing loan if the residential mortgage originator knows
5.22that the borrower's existing loan that is anticipated to be refinanced does not have an
5.23escrow account; or
5.24 (27) make, provide, or arrange for a residential mortgage loan, other than a reverse
5.25mortgage pursuant to United States Code, title 15, chapter 41, if the borrower's compliance
5.26with any repayment option offered pursuant to the terms of the loan will result in negative
5.27amortization during any six-month period.
5.28(b) Paragraph (a), clauses (24) through (27), do not apply to a state or federally
5.29chartered bank, savings bank, or credit union, an institution chartered by Congress under
5.30the Farm Credit Act, or to a person making, providing, or arranging a residential mortgage
5.31loan originated or purchased by a state agency or a tribal or local unit of government. This
5.32paragraph supersedes any inconsistent provision of this chapter.
5.33EFFECTIVE DATE.This section is effective August 1, 2013, and applies to
5.34residential mortgage loans made on or after that date.
5.35 Sec. 2. REPEALER.
6.1Minnesota Statutes 2012, section 58.18, subdivision 4, is repealed.
6.2EFFECTIVE DATE.This section is effective August 1, 2013, and applies to
6.3residential mortgage loans made on or after that date.
1.3regulation of residential mortgage lending; conforming to the federal Dodd-Frank
1.4Act;amending Minnesota Statutes 2012, section 58.13, subdivision 1; repealing
1.5Minnesota Statutes 2012, section 58.18, subdivision 4.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. Minnesota Statutes 2012, section 58.13, subdivision 1, is amended to read:
1.8 Subdivision 1. Generally.
1.9or servicer, including a person required to be licensed under this chapter, and no person
1.10exempt from the licensing requirements of this chapter under section
1.11
1.12 (1) fail to maintain a trust account to hold trust funds received in connection with a
1.13residential mortgage loan;
1.14 (2) fail to deposit all trust funds into a trust account within three business days of
1.15receipt; commingle trust funds with funds belonging to the licensee or exempt person; or
1.16use trust account funds for any purpose other than that for which they are received;
1.17 (3) unreasonably delay the processing of a residential mortgage loan application,
1.18or the closing of a residential mortgage loan. For purposes of this clause, evidence of
1.19unreasonable delay includes but is not limited to those factors identified in section
1.20subdivision 7
1.21 (4) fail to disburse funds according to its contractual or statutory obligations;
1.22 (5) fail to perform in conformance with its written agreements with borrowers,
1.23investors, other licensees, or exempt persons;
2.1 (6) charge a fee for a product or service where the product or service is not actually
2.2provided, or misrepresent the amount charged by or paid to a third party for a product
2.3or service;
2.4 (7) fail to comply with sections
2.5law;
2.6 (8) violate any provision of any other applicable state or federal law regulating
2.7residential mortgage loans including, without limitation, sections
2.9 (9) make or cause to be made, directly or indirectly, any false, deceptive, or
2.10misleading statement or representation in connection with a residential loan transaction
2.11including, without limitation, a false, deceptive, or misleading statement or representation
2.12regarding the borrower's ability to qualify for any mortgage product;
2.13 (10) conduct residential mortgage loan business under any name other than that
2.14under which the license or certificate of exemption was issued;
2.15 (11) compensate, whether directly or indirectly, coerce or intimidate an appraiser for
2.16the purpose of influencing the independent judgment of the appraiser with respect to the
2.17value of real estate that is to be covered by a residential mortgage or is being offered as
2.18security according to an application for a residential mortgage loan;
2.19 (12) issue any document indicating conditional qualification or conditional approval
2.20for a residential mortgage loan, unless the document also clearly indicates that final
2.21qualification or approval is not guaranteed, and may be subject to additional review;
2.22 (13) make or assist in making any residential mortgage loan with the intent that the
2.23loan will not be repaid and that the residential mortgage originator will obtain title to
2.24the property through foreclosure;
2.25 (14) provide or offer to provide for a borrower, any brokering or lending services
2.26under an arrangement with a person other than a licensee or exempt person, provided that
2.27a person may rely upon a written representation by the residential mortgage originator that
2.28it is in compliance with the licensing requirements of this chapter;
2.29 (15) claim to represent a licensee or exempt person, unless the person is an employee
2.30of the licensee or exempt person or unless the person has entered into a written agency
2.31agreement with the licensee or exempt person;
2.32 (16) fail to comply with the record keeping and notification requirements identified
2.33in section
2.34 (17) represent that the licensee or exempt person is acting as the borrower's agent
2.35after providing the nonagency disclosure required by section
3.1is retracted and the licensee or exempt person complies with all of the requirements of
3.2section
3.3 (18) make, provide, or arrange for a residential mortgage loan that is of a lower
3.4investment grade if the borrower's credit score or, if the originator does not utilize credit
3.5scoring or if a credit score is unavailable, then comparable underwriting data, indicates
3.6that the borrower may qualify for a residential mortgage loan, available from or through
3.7the originator, that is of a higher investment grade, unless the borrower is informed that the
3.8borrower may qualify for a higher investment grade loan with a lower interest rate and/or
3.9lower discount points, and consents in writing to receipt of the lower investment grade loan;
3.10 For purposes of this section, "investment grade" refers to a system of categorizing
3.11residential mortgage loans in which the loans are: (i) commonly referred to as "prime" or
3.12"subprime"; (ii) commonly designated by an alphabetical character with "A" being the
3.13highest investment grade; and (iii) are distinguished by interest rate or discount points
3.14or both charged to the borrower, which vary according to the degree of perceived risk
3.15of default based on factors such as the borrower's credit, including credit score and
3.16credit patterns, income and employment history, debt ratio, loan-to-value ratio, and prior
3.17bankruptcy or foreclosure;
3.18 (19) make, publish, disseminate, circulate, place before the public, or cause to be
3.19made, directly or indirectly, any advertisement or marketing materials of any type, or any
3.20statement or representation relating to the business of residential mortgage loans that is
3.21false, deceptive, or misleading;
3.22 (20) advertise loan types or terms that are not available from or through the licensee
3.23or exempt person on the date advertised, or on the date specified in the advertisement.
3.24For purposes of this clause, advertisement includes, but is not limited to, a list of sample
3.25mortgage terms, including interest rates, discount points, and closing costs provided by
3.26licensees or exempt persons to a print or electronic medium that presents the information
3.27to the public;
3.28 (21) use or employ phrases, pictures, return addresses, geographic designations, or
3.29other means that create the impression, directly or indirectly, that a licensee or other
3.30person is a governmental agency, or is associated with, sponsored by, or in any manner
3.31connected to, related to, or endorsed by a governmental agency, if that is not the case;
3.32 (22) violate section
3.33(23) make, provide, or arrange for a residential mortgage loan all or a portion
3.34of the proceeds of which are used to fully or partially pay off a "special mortgage"
3.35unless the borrower has obtained a written certification from an authorized independent
3.36loan counselor that the borrower has received counseling on the advisability of the
4.1loan transaction. For purposes of this section, "special mortgage" means a residential
4.2mortgage loan originated, subsidized, or guaranteed by or through a state, tribal, or
4.3local government, or nonprofit organization, that bears one or more of the following
4.4nonstandard payment terms which substantially benefit the borrower: (i) payments vary
4.5with income; (ii) payments of principal or interest are not required or can be deferred under
4.6specified conditions; (iii) principal or interest is forgivable under specified conditions;
4.7or (iv) where no interest or an annual interest rate of two percent or less is charged in
4.8connection with the loan. For purposes of this section, "authorized independent loan
4.9counselor" means a nonprofit, third-party individual or organization providing homebuyer
4.10education programs, foreclosure prevention services, mortgage loan counseling, or credit
4.11counseling certified by the United States Department of Housing and Urban Development,
4.12the Minnesota Home Ownership Center, the Minnesota Mortgage Foreclosure Prevention
4.13Association, AARP, or NeighborWorks America;
4.14 (24) make, provide, or arrange for a residential mortgage loan without verifying
4.15the borrower's reasonable ability to pay the scheduled payments of the following, as
4.16applicable: principal; interest; real estate taxes; homeowner's insurance, assessments,
4.17and mortgage insurance premiums. For loans in which the interest rate may vary, the
4.18reasonable ability to pay shall be determined based on a fully indexed rate and a repayment
4.19schedule which achieves full amortization over the life of the loan. For all residential
4.20mortgage loans, the borrower's income and financial resources must be verified by tax
4.21returns, payroll receipts, bank records, or other similarly reliable documents.
4.22 Nothing in this section shall be construed to limit a mortgage originator's or exempt
4.23person's ability to rely on criteria other than the borrower's income and financial resources
4.24to establish the borrower's reasonable ability to repay the residential mortgage loan,
4.25including criteria established by the United States Department of Veterans Affairs or the
4.26United States Department of Housing and Urban Development for interest rate reduction
4.27refinancing loans or streamline loans, or criteria authorized or promulgated by the
4.28Federal National Mortgage Association or Federal Home Loan Mortgage Corporation;
4.29however, such other criteria must be verified through reasonably reliable methods and
4.30documentation. The mortgage originator's analysis of the borrower's reasonable ability
4.31to repay may include, but is not limited to, consideration of the following items, if
4.32verified: (1) the borrower's current and expected income; (2) current and expected cash
4.33flow; (3) net worth and other financial resources other than the consumer's equity in the
4.34dwelling that secures the loan; (4) current financial obligations; (5) property taxes and
4.35insurance; (6) assessments on the property; (7) employment status; (8) credit history; (9)
4.36debt-to-income ratio; (10) credit scores; (11) tax returns; (12) pension statements; and
5.1(13) employment payment records, provided that no mortgage originator shall disregard
5.2facts and circumstances that indicate that the financial or other information submitted by
5.3the consumer is inaccurate or incomplete. A statement by the borrower to the residential
5.4mortgage originator or exempt person of the borrower's income and resources or sole
5.5reliance on any single item listed above is not sufficient to establish the existence of the
5.6income or resources when verifying the reasonable ability to pay.
5.7 (25) engage in "churning." As used in this section, "churning" means knowingly or
5.8intentionally making, providing, or arranging for a residential mortgage loan when the
5.9new residential mortgage loan does not provide a reasonable, tangible net benefit to the
5.10borrower considering all of the circumstances including the terms of both the new and
5.11refinanced loans, the cost of the new loan, and the borrower's circumstances;
5.12 (26) the first time a residential mortgage originator orally informs a borrower of the
5.13anticipated or actual periodic payment amount for a first-lien residential mortgage loan
5.14which does not include an amount for payment of property taxes and hazard insurance,
5.15the residential mortgage originator must inform the borrower that an additional amount
5.16will be due for taxes and insurance and, if known, disclose to the borrower the amount of
5.17the anticipated or actual periodic payments for property taxes and hazard insurance. This
5.18same oral disclosure must be made each time the residential mortgage originator orally
5.19informs the borrower of a different anticipated or actual periodic payment amount change
5.20from the amount previously disclosed. A residential mortgage originator need not make
5.21this disclosure concerning a refinancing loan if the residential mortgage originator knows
5.22that the borrower's existing loan that is anticipated to be refinanced does not have an
5.23escrow account; or
5.24 (27) make, provide, or arrange for a residential mortgage loan, other than a reverse
5.25mortgage pursuant to United States Code, title 15, chapter 41, if the borrower's compliance
5.26with any repayment option offered pursuant to the terms of the loan will result in negative
5.27amortization during any six-month period.
5.28
5.29
5.30
5.31
5.32
5.33EFFECTIVE DATE.This section is effective August 1, 2013, and applies to
5.34residential mortgage loans made on or after that date.
5.35 Sec. 2. REPEALER.
6.1Minnesota Statutes 2012, section 58.18, subdivision 4, is repealed.
6.2EFFECTIVE DATE.This section is effective August 1, 2013, and applies to
6.3residential mortgage loans made on or after that date.
