HF 4234

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to mortgage lending; requiring retention of records of mortgage loans;
requiring periodic reports to the commissioner of commerce; providing for a
delay of mortgage foreclosure sales under certain circumstances; proposing
coding for new law in Minnesota Statutes, chapters 58; 580.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [58.145] MORTGAGE LOAN RECORD RETENTION REQUIRED.
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new text begin Subdivision 1. new text end

new text begin Preservation of records. new text end

new text begin A licensee shall preserve the records of a
mortgage loan transaction in one of the following ways:
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new text begin (1) original books, accounts, and files;
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new text begin (2) an electronic equivalent approved by the commissioner; or
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new text begin (3) a microphotographic copy technology approved by the commissioner.
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new text begin Subd. 2. new text end

new text begin Time period for preservation. new text end

new text begin (a) A lender shall retain records for 25
months after a loan is denied, repayment of the loan is made in full, or the loan is sold,
whichever occurs first.
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new text begin (b) A servicer shall retain records for 25 months after final payment is made or the
loan is sold, whichever occurs first.
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new text begin (c) If a licensee acts as a broker in a loan transaction, the licensee shall retain records
of the transaction for 25 months after the loan is made or denied.
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new text begin Subd. 3. new text end

new text begin Retention separate from other records. new text end

new text begin (a) Records required to be
retained under this section must be maintained separately from the records of any other
business of the licensee or its employees.
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new text begin (b) Notwithstanding paragraph (a), a licensee may commingle records of mortgage
loans with records of other types of loans made, brokered, or held by the licensee, if the
mortgage loans can be readily retrieved for an examination.
new text end

new text begin Subd. 4. new text end

new text begin Content of records. new text end

new text begin (a) For each mortgage loan made or serviced by a
licensee, a file shall be maintained which contains, at a minimum, the following:
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new text begin (1) the date of the loan closing;
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new text begin (2) the annual percentage rate of interest payable on the loan;
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new text begin (3) documentation of all charges and fees disbursed from the proceeds of the loan
or collected directly from the borrower;
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new text begin (4) documentation of disbursements of loan proceeds to creditors of the borrower;
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new text begin (5) documentation of any broker's agreement signed by the borrower if a broker fee
is paid from the loan proceeds at closing;
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new text begin (6) the amount of any origination or discount fee;
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new text begin (7) a notation of any applicable governmental loan program for each loan;
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new text begin (8) an accurate payment history;
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new text begin (9) the objective index used to determine the interest rate from time to time if the
loan has an adjustable rate;
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new text begin (10) if the loan was assigned by the licensee, the name of the assignee and the
date of the assignment;
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new text begin (11) any document which indicates whether the security interest is in first or second
lien position at the time the loan is made;
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new text begin (12) all required truth-in-lending disclosure documents;
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new text begin (13) records of all monies received from a borrower for fees to be paid to third
parties for services in connection with the loan;
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new text begin (14) records indicating that the services were provided and the fees paid by the
licensee to the third party;
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new text begin (15) a record of dates on which a credit report, appraisal, and other services or
items were ordered by the licensee;
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new text begin (16) any other document on which the licensee relied in underwriting the loan; and
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new text begin (17) (i) insurance information regarding optional insurance coverage purchased by
the borrower in connection with the loan, including the premium charged, the types of
coverages, and written authorization from the borrower for each type of coverage;
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new text begin (ii) clause (i) does not apply to hazard insurance on the property securing the loan.
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new text begin (b) Notwithstanding paragraph (a), a licensee acting as a broker in connection with
a particular transaction:
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new text begin (1) shall retain copies of all records listed in paragraph (a) which the licensee obtains
in the course of processing or underwriting a loan;
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new text begin (2) shall retain a copy of the broker agreement between the licensee and the borrower;
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new text begin (3) shall retain a record of the lender to whom the loan was brokered; and
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new text begin (4) is not responsible for retaining any record unless the licensee at some time is in
physical possession of a copy of that record.
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new text begin Subd. 5. new text end

new text begin Report to commissioner. new text end

new text begin (a) A licensee acting as a servicer shall compile
and submit to the commissioner, on or before the 20th business day of each month, a
report on the form required by the commissioner that contains the following information
for the preceding month, or as otherwise indicated:
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new text begin (1) the number of mortgage loans the licensee is servicing;
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new text begin (2) the number of mortgage loans that the licensee is servicing that are in payment
default and a breakdown of these mortgage loans by length of payment delinquency,
including 30-day, 60-day, and 90-day and longer delinquencies;
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new text begin (3) information on loss mitigation activities undertaken including, but not limited to,
the following:
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new text begin (i) the number of workout arrangements entered into by the licensee in connection
with mortgage loans;
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new text begin (ii) description of the types of workout arrangements, including mortgage loan
modifications, and the percentage of each type of workout arrangement entered into; and
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new text begin (iii) the proactive steps taken by the licensee to identify borrowers at a heightened
risk of default, such as those with impending interest rate resets, including, but not limited
to, contacts with borrowers to assess their ability to repay their mortgage loan obligations;
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new text begin (4) the number of foreclosure actions commenced in this state in connection with
mortgage loans the licensee is servicing;
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new text begin (5) information regarding adjustable rate mortgage loans; and
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new text begin (6) any other information that the commissioner may consider necessary, including
geographic information regarding applicable mortgage loans.
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new text begin (b) The commissioner may publish for public review the report required under
paragraph (a) of this regulation, or any information contained in the report, except
personally identifying information regarding borrowers.
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new text begin Subd. 6. new text end

new text begin Right to obtain older records. new text end

new text begin Records required under this section that
are retained for longer than the minimum time period shall be made available to the
commissioner upon the commissioner's reasonable request.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2008.
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Sec. 2.

new text begin [580.042] EXTENSION OF FORECLOSURE SALE DATES;
PRECARIOUS MORTGAGE LOANS.
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new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the terms defined in
this subdivision have the meanings given.
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new text begin (b) "Holder" means the owner of the debt constituting a residential mortgage loan
or a servicer or other person acting on the holder's behalf.
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new text begin (c) A "precarious mortgage loan" is a mortgage loan on a single-family or duplex
residential property in which the mortgagor resides and that:
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new text begin (1) is a subprime loan within the meaning of section 58.02;
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new text begin (2) allows the mortgagor to only pay interest;
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new text begin (3) allows the mortgagor to make a minimum payment that is lower than the
payment required to reduce the principal balance of the mortgage loan, resulting in
a negative amortization;
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new text begin (4) provides for an initial interest rate that after a period of time is replaced with a
variable rate;
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new text begin (5) was made without income verification; or
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new text begin (6) was made in any method that would violate present provisions of section 58.13,
regardless of whether those provisions were in that section at the time the mortgage loan
was originated.
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new text begin (d) "Good faith loss mitigation efforts" means reasonable efforts by the holder acting
in good faith to work with the mortgagor to cure a default using applicable loan mitigation
practices which may include, but are not limited to:
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new text begin (1) capitalizing arrearages;
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new text begin (2) reducing principal;
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new text begin (3) extending the term;
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new text begin (4) waiving late fees or other fees; or
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new text begin (5) modifying the payment amount or the interest rate to result in a restructured loan
with a monthly payment that is affordable to the mortgagor.
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new text begin Subd. 2. new text end

new text begin Precarious mortgage loans; extension of foreclosure sale date. new text end

new text begin (a) A
mortgagor may record an affidavit in the office of the county recorder or registrar of titles,
whichever is appropriate, of the county in which the property, or any part of it, is located
and mail a copy by certified mail to the holder indicating that the mortgagor's mortgage
loan is a precarious mortgage loan and that the lender has failed to engage in good faith
loss mitigation efforts. The affidavit may be recorded at any time after the first publication
of the notice of foreclosure sale under section 580.04, but before the scheduled date of
sale. After such an affidavit is filed, the foreclosure sale date is automatically extended six
months, unless the holder obtains a court order authorizing the sale at an earlier date.
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new text begin (b) A court in the county in which the property or any part of it is located may
order an earlier date if the holder proves by clear and convincing evidence: (1) that it has
undertaken good faith loss mitigation efforts, unless the servicing contract strictly and
unequivocally forbids all such efforts; and (2) that foreclosure is the only viable option to
protect the holder's interest in the property.
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new text begin (c) The holder may show it engaged in good faith loss mitigation efforts by
submitting a list of all applicable loss mitigation practices currently used by it or available
to its loan servicer, together with an affidavit signed by a representative of the holder or
servicer who is personally responsible for determining the debtor's eligibility for loss
mitigation, explaining how the representative engaged in a good faith consideration of
all such practices. If the holder has no list of loss mitigation practices it must show its
attempt at resolution through mitigation.
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new text begin (d) The debtor may present evidence to show that the representative did not engage
in good faith negotiations involving such loss mitigation practices.
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new text begin (e) It is presumed, unless explicitly stated to the contrary in a service agreement, that
the servicer must act in the best interest of the investor, and that acting in the best interest
of the investor must include good faith attempts at loss mitigation.
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new text begin (f) The court shall consider whether restructuring was considered, what possible loss
mitigation is expressly forbidden by the service contract, whether a reasonable attempt
was made by the servicer to get the investor to waive any impediment in the servicing
contract to specific types of loss mitigation, whether the servicer investigated the facts,
and whether there is likely to be a larger loss to the investor if the property is foreclosed
than if a loss mitigation effort is used.
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new text begin (g) The district court may appoint one or more voluntary referees to whom to refer
hearings under this section. The rules of procedure and evidence shall be those used in
conciliation court. No filing fee shall be charged to a mortgagor under this section.
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new text begin Subd. 3. new text end

new text begin Effect of lack of good faith mitigation. new text end

new text begin Any holder who does not engage
in good faith loss mitigation efforts shall also lose all right to do mortgage-related business
in Minnesota and may not use any government systems for the purpose of mortgage-related
business, including but not limited to courts and records, for a period of ten years.
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new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to foreclosures in which the scheduled date of sale is after that date.
new text end