Minnesota Legislature
HF 1753
as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am
Current Version - as introduced
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A bill for an act
relating to financial institutions; requiring counseling and disclosures with
respect to high-cost home loans; proposing coding for new law in Minnesota
Statutes, chapter 58.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
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[58.31] DEFINITIONS.
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new text begin Subdivision 1. new text end
new text begin Scope. new text end
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For the purposes of sections 58.31 to 58.34, the terms defined
in this section have the meanings given them.
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new text begin Subd. 2. new text end
new text begin Authorized independent home loan counselor. new text end
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"Authorized independent
home loan counselor" means a nonprofit, third-party individual or organization authorized
to provide housing, loan, or credit counseling by either the Housing Finance Agency or
the United States Department of Housing and Urban Development.
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new text begin Subd. 3. new text end
new text begin Bona fide loan discount points. new text end
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"Bona fide loan discount points" means
loan discount points knowingly paid by the borrower that actually reduce the interest rate;
provided that the undiscounted interest rate does not exceed by more than one percentage
point the required net yield for a 90-day standard mandatory commitment for a loan with a
reasonably comparable term from Fannie Mae or Freddie Mac, whichever is greater.
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new text begin Subd. 4. new text end
new text begin Borrower. new text end
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"Borrower" means any natural person obligated to repay the
loan, including a coborrower, cosigner, or guarantor.
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new text begin Subd. 5. new text end
new text begin Commissioner. new text end
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"Commissioner" means the commissioner of commerce.
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new text begin Subd. 6. new text end
new text begin High-cost home loan. new text end
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"High-cost home loan" means a home loan that
meets or exceeds one or more of the thresholds as defined in subdivision 14.
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new text begin Subd. 7. new text end
new text begin Home loan. new text end
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"Home loan" means a loan, including a home equity line of
credit or an open-end credit plan but not including a reverse mortgage, where the loan is:
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(1) a residential mortgage loan as defined in section 58.02, subdivision 18;
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(2) secured by a mortgage or deed on real property that is used as a borrower's
primary residence; and
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(3) equal to or less than the maximum amount for loans eligible for sale to Fannie
Mae or Freddie Mac.
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For the purposes of this chapter, a home loan includes a loan that is secured by a
security interest in a manufactured home, as defined in section 327B.01, subdivision 13,
which is used as a borrower's primary residence.
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new text begin Subd. 8. new text end
new text begin Interest rate. new text end
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"Interest rate" means:
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(1) for a fixed rate loan, the interest rate as of the date of closing;
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(2) for an indexed variable rate loan, the sum of the index rate as of the date of
closing plus the maximum margin permitted at any time under the loan agreement; or
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(3) for all other variable rate loans, the maximum rate that may be charged during
the term of the loan.
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new text begin Subd. 9. new text end
new text begin Lender. new text end
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"Lender" means any person who is or should be licensed,
regulated, or authorized to do business under chapter 47, 48, 50, 51A, 52, 53, 56, or 58, or
who is regulated by the federal Comptroller of the Currency, the federal Office of Thrift
Supervision, or the National Credit Union Administration. Lender includes a mortgage
broker, as defined in section 58.02, subdivision 13.
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new text begin Subd. 10. new text end
new text begin Lender fees. new text end
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"Lender fees" means:
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(1) points, other than up to two bona fide discount points, fees, compensation,
premiums, or any amounts paid or payable, directly or indirectly, other than taxes and
interest, to the lender or a third party in connection with the loan transaction;
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(2) the maximum prepayment fees and penalties that may be charged or collected
under the terms of the loan; and
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(3) all prepayment fees or penalties that are charged to the borrower if the loan
refinances a previous loan made by the same lender or an affiliate of the lender.
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For open-ended loans, the lender fees are calculated by adding the total fees charged
at closing and the maximum additional fees that may be charged pursuant to the loan
documents during the term of the loan.
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new text begin Subd. 11. new text end
new text begin Person. new text end
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"Person" means an individual, corporation, business trust,
partnership or association, or any other legal entity.
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new text begin Subd. 12. new text end
new text begin Rate. new text end
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"Rate" means the interest rate charged on the home loan, based on
an annual simple interest yield.
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new text begin Subd. 13. new text end
new text begin Seller. new text end
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"Seller" means the seller of residential real property.
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new text begin Subd. 14. new text end
new text begin Thresholds. new text end
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"Thresholds" means any one of the following:
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(1) for a first lien mortgage, an interest rate that equals or exceeds 2.5 percentage
points over the yield on United States Treasury securities of a comparable period of
maturity as of the 15th day of the month in which the interest rate on the home loan
is set; or
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(2) for a second lien mortgage, an interest rate that equals or exceeds five percentage
points over the yield on United States Treasury securities of a comparable period of
maturity as of the 15th day of the month in which the interest rate on the home loan
is set; or
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(3) lender fees that exceed:
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(i) for loans in which the total loan amount is $30,000 or more, the lender fees
exceed three percent of the total loan amount; or
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(ii) for loans in which the total loan amount is less than $30,000, the lender fees
exceed the lesser of five percent of the total loan amount or $900.
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new text begin Subd. 15. new text end
new text begin Total loan amount. new text end
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"Total loan amount" means the principal of the loan
minus lender fees that are included in the principal amount of the loan. For open-end
loans, the total loan amount must be calculated using the total line of credit allowed
under the home loan.
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Sec. 2.
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[58.32] REQUIRED COUNSELING FOR HIGH-COST HOME LOANS.
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A lender may not make a high-cost home loan unless it first receives certification
from an authorized independent home loan counselor that the borrower has received
counseling on the advisability of the loan transaction. Counseling shall be allowed in
whole or in part by telephonic means. The commissioner shall maintain a list of authorized
independent home loan counselors. A high-cost home loan originated by a lender in
violation of this section shall not be enforceable.
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Sec. 3.
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[58.33] DISCLOSURES.
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new text begin Subdivision 1. new text end
new text begin Written notice required; timing of notice. new text end
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A lender shall provide a
written disclosure notice to all applicants for a home loan:
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(1) upon determination by the lender that the home loan is a high-cost home loan; and
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(2) again no less than seven days prior to closing.
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The disclosure notice must be provided separately from the provision of any other
written document or oral statement.
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new text begin Subd. 2. new text end
new text begin Form and content of notice. new text end
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(a) The notice, which must be contained on a
single sheet of paper, must contain a legend, centered at the top of the loan document, in
bold, capital letters and in 28-point type stating, "THIS IS A HIGH-COST HOME LOAN."
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(b) The notice must also contain the following verbatim statements in capital and
small type, in a minimum of 14-point type, with at least a double space between each
statement:
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(1) "You could lose your home and all the money you have put into it if you do
not meet the obligations under the loan."
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(2) "Interest rates and fees vary. You should shop around for the best terms."
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(3) "You may have to pay property taxes and homeowner's insurance in addition
to your monthly loan payments."
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(4) "You do not have to complete any loan agreement just because you have gotten
this notice or because you signed a loan application."
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(5) "You may wish to have a lawyer or other competent individual review with you
the loan documents, which you will be required to sign at closing."
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(c) If the home loan contains a prepayment penalty, the notice must state, "This loan
requires you to pay a penalty for early repayment of the loan. This is called a 'Prepayment
Penalty.' This charge may discourage or prevent future refinancing."
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Sec. 4.
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[58.34] ENFORCEMENT.
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new text begin Subdivision 1. new text end
new text begin Jurisdiction; civil penalties. new text end
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(a) The commissioner may bring an
enforcement action under chapter 45 against a lender who has violated sections 58.31
to 58.34.
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(b) The public and private remedies in section 8.31 apply to violations of sections
58.31 to 58.34.
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new text begin Subd. 2. new text end
new text begin Consumer remedies. new text end
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A court in which any action is brought by a borrower
for relief against a lender, upon a finding of a violation of this chapter, shall award to
the prevailing borrower:
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(1) actual damages, including incidental and consequential damages; a borrower
must not be required to demonstrate reliance in order to receive actual damages;
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(2) reasonable attorney fees; and
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(3) court costs.
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new text begin Subd. 3. new text end
new text begin Resolution of disputes. new text end
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Any provision of a high-cost home loan that
requires the borrower to assert any claim or defense in a forum that is less convenient, more
costly, or more dilatory for the resolution of the dispute than a judicial forum established
in a state where the borrower may otherwise properly bring a claim or defense, or limits in
any way any claim or defense the borrower may have, is unconscionable and void.
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new text begin Subd. 4. new text end
new text begin Equitable relief. new text end
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A court in which any action is brought by a borrower
for relief against a lender or seller, upon a finding of a violation of this chapter, may
enjoin foreclosure and grant declaratory and any other such equitable relief as the court
deems appropriate.
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new text begin Subd. 5. new text end
new text begin Right of rescission. new text end
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The right of rescission granted under United States
Code, section 1601, et seq., for violations of that law and all other remedies provided in
this section are available to a borrower by way of recoupment against a party foreclosing
on the home loan or collecting on the loan, at any time during the term of the loan.
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new text begin Subd. 6. new text end
new text begin Remedies cumulative. new text end
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The remedies provided in this section are
cumulative and in addition to any other remedies provided by law.
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Sec. 5. new text begin EFFECTIVE DATE.
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This act is effective January 1, 2008.
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