1.1 A bill for an act
1.2 relating to mortgage foreclosure; providing for
1.3 rescission of foreclosure consultant contracts;
1.4 regulating foreclosure consultant contracts; providing
1.5 remedies for foreclosure violations; requiring
1.6 foreclosure purchasers to enter foreclosure
1.7 reconveyances in the form of written contracts;
1.8 regulating foreclosure contracts; prohibiting certain
1.9 foreclosure purchaser practices; providing enforcement
1.10 remedies; requiring certain foreclosure notices;
1.11 imposing criminal penalties; amending Minnesota
1.12 Statutes 2002, sections 462A.05, by adding a
1.13 subdivision; 469.018, by adding a subdivision; 580.03;
1.14 Minnesota Statutes 2003 Supplement, section 462A.03,
1.15 subdivision 13; Laws 2003, chapter 128, article 10,
1.16 section 4, subdivision 3; proposing coding for new law
1.17 in Minnesota Statutes, chapter 580; proposing coding
1.18 for new law as Minnesota Statutes, chapter 325N.
1.19 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.20 Section 1. [325N.01] [DEFINITIONS.]
1.21 The definitions in paragraphs (a) to (h) apply to sections
1.22 325N.01 to 325N.09.
1.23 (a) "Foreclosure consultant" means any person who, directly
1.24 or indirectly, makes any solicitation, representation, or offer
1.25 to any owner to perform for compensation or who, for
1.26 compensation, performs any service which the person in any
1.27 manner represents will in any manner do any of the following:
1.28 (1) stop or postpone the foreclosure sale;
1.29 (2) obtain any forbearance from any beneficiary or
1.30 mortgagee;
1.31 (3) assist the owner to exercise the right of reinstatement
1.32 provided in section 580.30;
2.1 (4) obtain any extension of the period within which the
2.2 owner may reinstate the owner's obligation;
2.3 (5) obtain any waiver of an acceleration clause contained
2.4 in any promissory note or contract secured by a mortgage on a
2.5 residence in foreclosure or contained in the mortgage;
2.6 (6) assist the owner in foreclosure or loan default to
2.7 obtain a loan or advance of funds;
2.8 (7) avoid or ameliorate the impairment of the owner's
2.9 credit resulting from the recording of a notice of default or
2.10 the conduct of a foreclosure sale; or
2.11 (8) save the owner's residence from foreclosure.
2.12 (b) A foreclosure consultant does not include any of the
2.13 following:
2.14 (1) a person licensed to practice law in this state when
2.15 the person renders service in the course of his or her practice
2.16 as an attorney-at-law;
2.17 (2) a person licensed as a debt prorater under sections
2.18 332.12 to 332.29, when the person is acting as a debt prorater
2.19 as defined in these sections;
2.20 (3) a person licensed as a real estate broker or
2.21 salesperson under chapter 82 when the person engages in acts
2.22 whose performance requires licensure under that chapter unless
2.23 the person is engaged in offering services designed to, or
2.24 purportedly designed to, enable the owner to retain possession
2.25 of the residence in foreclosure;
2.26 (4) a person licensed as an accountant under chapter 326A
2.27 when the person is acting in any capacity for which the person
2.28 is licensed under those provisions;
2.29 (5) a person or the person's authorized agent acting under
2.30 the express authority or written approval of the Department of
2.31 Housing and Urban Development or other department or agency of
2.32 the United States or this state to provide services;
2.33 (6) a person who holds or is owed an obligation secured by
2.34 a lien on any residence in foreclosure when the person performs
2.35 services in connection with this obligation or lien if the
2.36 obligation or lien did not arise as the result of or as part of
3.1 a proposed foreclosure reconveyance;
3.2 (7) any person or entity doing business under any law of
3.3 this state, or of the United States relating to banks, trust
3.4 companies, savings and loan associations, industrial loan and
3.5 thrift companies, regulated lenders, credit unions, insurance
3.6 companies, or a mortgagee which is a United States Department of
3.7 Housing and Urban Development approved mortgagee and any
3.8 subsidiary or affiliate of these persons or entities, and any
3.9 agent or employee of these persons or entities while engaged in
3.10 the business of these persons or entities;
3.11 (8) a person licensed as a residential mortgage originator
3.12 or servicer pursuant to chapter 58, when acting under the
3.13 authority of that license or a foreclosure purchaser as defined
3.14 in section 325N.10;
3.15 (9) a nonprofit agency or organization that offers
3.16 counseling or advice to an owner of a home in foreclosure or
3.17 loan default if they do not contract for services with
3.18 for-profit lenders or foreclosure purchasers; and
3.19 (10) a judgment creditor of the owner, to the extent that
3.20 the judgment creditor's claim accrued prior to the personal
3.21 service of the foreclosure notice required by section 580.03,
3.22 but excluding a person who purchased the claim after such
3.23 personal service.
3.24 (c) "Foreclosure reconveyance" means a transaction
3.25 involving:
3.26 (1) the transfer of title to real property by a foreclosed
3.27 homeowner during a foreclosure proceeding, either by transfer of
3.28 interest from the foreclosed homeowner or by creation of a
3.29 mortgage or other lien or encumbrance during the foreclosure
3.30 process that allows the acquirer to obtain title to the property
3.31 by redeeming the property as a junior lienholder; and
3.32 (2) the subsequent conveyance, or promise of a subsequent
3.33 conveyance, of an interest back to the foreclosed homeowner by
3.34 the acquirer or a person acting in participation with the
3.35 acquirer that allows the foreclosed homeowner to possess the
3.36 real property following the completion of the foreclosure
4.1 proceeding, which interest includes, but is not limited to, an
4.2 interest in a contract for deed, purchase agreement, option to
4.3 purchase, or lease.
4.4 (d) "Person" means any individual, partnership,
4.5 corporation, limited liability company, association, or other
4.6 group, however organized.
4.7 (e) "Service" means and includes, but is not limited to,
4.8 any of the following:
4.9 (1) debt, budget, or financial counseling of any type;
4.10 (2) receiving money for the purpose of distributing it to
4.11 creditors in payment or partial payment of any obligation
4.12 secured by a lien on a residence in foreclosure;
4.13 (3) contacting creditors on behalf of an owner of a
4.14 residence in foreclosure;
4.15 (4) arranging or attempting to arrange for an extension of
4.16 the period within which the owner of a residence in foreclosure
4.17 may cure the owner's default and reinstate his or her obligation
4.18 pursuant to section 580.30;
4.19 (5) arranging or attempting to arrange for any delay or
4.20 postponement of the time of sale of the residence in
4.21 foreclosure;
4.22 (6) advising the filing of any document or assisting in any
4.23 manner in the preparation of any document for filing with any
4.24 bankruptcy court; or
4.25 (7) giving any advice, explanation, or instruction to an
4.26 owner of a residence in foreclosure, which in any manner relates
4.27 to the cure of a default in or the reinstatement of an
4.28 obligation secured by a lien on the residence in foreclosure,
4.29 the full satisfaction of that obligation, or the postponement or
4.30 avoidance of a sale of a residence in foreclosure, pursuant to a
4.31 power of sale contained in any mortgage.
4.32 (f) "Residence in foreclosure" means residential real
4.33 property consisting of one to four family dwelling units, one of
4.34 which the owner occupies as his or her principal place of
4.35 residence, and against which there is an outstanding notice of
4.36 pendency of foreclosure, recorded pursuant to section 580.032,
5.1 or against which a summons and complaint has been served under
5.2 chapter 581.
5.3 (g) "Owner" means the record owner of the residential real
5.4 property in foreclosure at the time the notice of pendency was
5.5 recorded, or the summons and complaint served.
5.6 (h) "Contract" means any agreement, or any term in any
5.7 agreement, between a foreclosure consultant and an owner for the
5.8 rendition of any service as defined in paragraph (e).
5.9 Sec. 2. [325N.02] [RESCISSION OF FORECLOSURE CONSULTANT
5.10 CONTRACT.]
5.11 (a) In addition to any other right under law to rescind a
5.12 contract, an owner has the right to cancel such a contract until
5.13 midnight of the third business day after the day on which the
5.14 owner signs a contract which complies with section 325N.03.
5.15 (b) Cancellation occurs when the owner gives written notice
5.16 of cancellation to the foreclosure consultant at the address
5.17 specified in the contract.
5.18 (c) Notice of cancellation, if given by mail, is effective
5.19 when deposited in the mail properly addressed with postage
5.20 prepaid.
5.21 (d) Notice of cancellation given by the owner need not take
5.22 the particular form as provided with the contract and, however
5.23 expressed, is effective if it indicates the intention of the
5.24 owner not to be bound by the contract.
5.25 Sec. 3. [325N.03] [CONTRACT.]
5.26 (a) Every contract must be in writing and must fully
5.27 disclose the exact nature of the foreclosure consultant's
5.28 services and the total amount and terms of compensation.
5.29 (b) The following notice, printed in at least 14-point
5.30 boldface type and completed with the name of the foreclosure
5.31 consultant, must be printed immediately above the statement
5.32 required by paragraph (c):
5.33 "NOTICE REQUIRED BY MINNESOTA LAW
5.34 .............. (Name) or anyone working
5.35 for him or her CANNOT:
5.36 (1) Take any money from you or ask you
6.1 for money until ................ (Name)
6.2 has completely finished doing everything
6.3 he or she said he or she would do; and
6.4 (2) Ask you to sign or have you sign any
6.5 lien, mortgage, or deed."
6.6 (c) The contract must be written in the same language as
6.7 principally used by the foreclosure consultant to describe his
6.8 or her services or to negotiate the contract, must be dated and
6.9 signed by the owner, and must contain in immediate proximity to
6.10 the space reserved for the owner's signature a conspicuous
6.11 statement in a size equal to at least 10-point boldface type, as
6.12 follows:
6.13 "You, the owner, may cancel this transaction at any time
6.14 prior to midnight of the third business day after the date
6.15 of this transaction. See the attached notice of
6.16 cancellation form for an explanation of this right."
6.17 (d) The contract must contain on the first page, in a type
6.18 size no smaller than that generally used in the body of the
6.19 document, each of the following:
6.20 (1) the name and address of the foreclosure consultant to
6.21 which the notice of cancellation is to be mailed; and
6.22 (2) the date the owner signed the contract.
6.23 (e) The contract must be accompanied by a completed form in
6.24 duplicate, captioned "notice of cancellation," which must be
6.25 attached to the contract, must be easily detachable, and must
6.26 contain in at least ten-point type the following statement
6.27 written in the same language as used in the contract:
6.28 "NOTICE OF CANCELLATION
6.29 ....................................
6.30 (Enter date of transaction) (Date)
6.31 You may cancel this transaction, without
6.32 any penalty or obligation, within three
6.33 business days from the above date.
6.34 To cancel this transaction, mail or deliver
6.35 a signed and dated copy of this cancellation
6.36 notice, or any other written notice
7.1 to ......................................
7.2 (Name of foreclosure consultant)
7.3 at ..................................................
7.4 (Address of foreclosure consultant's place of business)
7.5 NOT LATER THAN MIDNIGHT OF ..........................
7.6 (Date)
7.7 I hereby cancel this transaction ..................
7.8 (Date)
7.9 .............................
7.10 (Owner's signature)"
7.11 (f) The foreclosure consultant shall provide the owner with
7.12 a copy of the contract and the attached notice of cancellation
7.13 immediately upon execution of the contract.
7.14 (g) The three business days during which the owner may
7.15 cancel the contract shall not begin to run until the foreclosure
7.16 consultant has complied with this section.
7.17 Sec. 4. [325N.04] [VIOLATIONS.]
7.18 It is a violation for a foreclosure consultant to:
7.19 (1) claim, demand, charge, collect, or receive any
7.20 compensation until after the foreclosure consultant has fully
7.21 performed each and every service the foreclosure consultant
7.22 contracted to perform or represented he or she would perform;
7.23 (2) claim, demand, charge, collect, or receive any fee,
7.24 interest, or any other compensation for any reason which exceeds
7.25 eight percent per annum of the amount of any loan which the
7.26 foreclosure consultant may make to the owner;
7.27 (3) take any wage assignment, any lien of any type on real
7.28 or personal property, or other security to secure the payment of
7.29 compensation. Any such security is void and unenforceable;
7.30 (4) receive any consideration from any third party in
7.31 connection with services rendered to an owner unless the
7.32 consideration is first fully disclosed to the owner;
7.33 (5) acquire any interest, directly or indirectly, or by
7.34 means of a subsidiary or affiliate in a residence in foreclosure
7.35 from an owner with whom the foreclosure consultant has
7.36 contracted;
8.1 (6) take any power of attorney from an owner for any
8.2 purpose, except to inspect documents as provided by law; or
8.3 (7) induce or attempt to induce any owner to enter a
8.4 contract which does not comply in all respects with sections
8.5 325N.02 and 325N.03.
8.6 Sec. 5. [325N.05] [WAIVER NOT ALLOWED.]
8.7 Any waiver by an owner of the provisions of sections
8.8 325N.01 to 325N.09 is void and unenforceable as contrary to
8.9 public policy. Any attempt by a foreclosure consultant to
8.10 induce an owner to waive the owner's rights is a violation of
8.11 sections 325N.01 to 325N.09.
8.12 Sec. 6. [325N.06] [REMEDIES.]
8.13 (a) A violation of sections 325N.01 to 325N.09 is
8.14 considered to be a violation of section 325F.69, and all
8.15 remedies of section 8.31 are available for such an action. A
8.16 private cause of action under section 8.31 by a foreclosed
8.17 homeowner is in the public interest. An owner may bring an
8.18 action against a foreclosure consultant for any violation of
8.19 sections 325N.01 to 325N.09. Judgment must be entered for
8.20 actual damages, reasonable attorney fees and costs, and
8.21 appropriate equitable relief.
8.22 (b) The rights and remedies provided in paragraph (a) are
8.23 cumulative to, and not a limitation of, any other rights and
8.24 remedies provided by law. Any action brought pursuant to this
8.25 section must be commenced within four years from the date of the
8.26 alleged violation.
8.27 (c) The court may award exemplary damages up to one and
8.28 one-half times the compensation charged by the foreclosure
8.29 consultant if the court finds that the foreclosure consultant
8.30 violated the provisions of section 325N.04, clause (1), (2), or
8.31 (4), and the foreclosure consultant's conduct was in bad faith.
8.32 (d) Notwithstanding any other provision of this section, no
8.33 action may be brought on the basis of a violation of sections
8.34 325N.01 to 325N.09, except by an owner against whom the
8.35 violation was committed or by the attorney general. This
8.36 limitation does not apply to administrative action by the
9.1 commissioner of commerce.
9.2 Sec. 7. [325N.07] [PENALTY.]
9.3 Any person who commits any violation described in section
9.4 325N.04 may, upon conviction, be fined not more than $10,000 or
9.5 imprisoned not more than one year or both. Prosecution or
9.6 conviction for any violation described in section 325N.04 will
9.7 not bar prosecution or conviction for any other offenses. These
9.8 penalties are cumulative to any other remedies or penalties
9.9 provided by law.
9.10 Sec. 8. [325N.08] [PROVISIONS SEVERABLE.]
9.11 If any provision of sections 325N.01 to 325N.09 or the
9.12 application of any of these provisions to any person or
9.13 circumstance is held to be unconstitutional and void, the
9.14 remainder of sections 325N.01 to 325N.09 remains valid.
9.15 Sec. 9. [325N.09] [LIABILITY.]
9.16 (a) Any provision in a contract which attempts or purports
9.17 to require arbitration of any dispute arising under sections
9.18 325N.01 to 325N.09 is void at the option of the owner.
9.19 (b) This section applies to any contract entered into on or
9.20 after August 1, 2004.
9.21 FORECLOSURE PURCHASERS
9.22 Sec. 10. [325N.10] [DEFINITIONS.]
9.23 Subdivision 1. [SCOPE.] For the purposes of sections
9.24 325N.10 to 325N.18, the terms defined in this section have the
9.25 meanings given them.
9.26 Subd. 2. [FORECLOSED HOMEOWNER.] "Foreclosed homeowner"
9.27 means an owner of residential real property, including a
9.28 condominium, that is the primary residence of the owner and
9.29 whose mortgage on the real property is or was in foreclosure.
9.30 Subd. 3. [FORECLOSURE RECONVEYANCE.] "Foreclosure
9.31 reconveyance" means a transaction involving:
9.32 (1) the transfer of title to real property by a foreclosed
9.33 homeowner during a foreclosure proceeding, either by transfer of
9.34 interest from the foreclosed homeowner or by creation of a
9.35 mortgage or other lien or encumbrance during the foreclosure
9.36 process that allows the acquirer to obtain title to the property
10.1 by redeeming the property as a junior lienholder; and
10.2 (2) the subsequent conveyance, or promise of a subsequent
10.3 conveyance, of an interest back to the foreclosed homeowner by
10.4 the acquirer or a person acting in participation with the
10.5 acquirer that allows the foreclosed homeowner to possess the
10.6 real property following the completion of the foreclosure
10.7 proceeding, which interest includes, but is not limited to, an
10.8 interest in a contract for deed, purchase agreement, option to
10.9 purchase, or lease.
10.10 Subd. 4. [FORECLOSURE PURCHASER.] "Foreclosure purchaser"
10.11 means a person that has acted as the acquirer in more than one
10.12 foreclosure reconveyance during any 24-month period.
10.13 Foreclosure purchaser also includes a person that has acted in
10.14 joint venture or joint enterprise with one or more acquirers in
10.15 more than one foreclosure reconveyance during any 24-month
10.16 period. A federal or state chartered bank, savings bank,
10.17 thrift, or credit union is not a foreclosure purchaser.
10.18 Subd. 5. [RESALE.] "Resale" means a bona fide market sale
10.19 of the property subject to the foreclosure reconveyance by the
10.20 foreclosure purchaser to an unaffiliated third party.
10.21 Subd. 6. [RESALE PRICE.] "Resale price" means the gross
10.22 sale price of the property on resale.
10.23 Sec. 11. [325N.11] [CONTRACT REQUIREMENT; FORM AND
10.24 LANGUAGE.]
10.25 A foreclosure purchaser shall enter into every foreclosure
10.26 reconveyance in the form of a written contract. Every contract
10.27 must be written in letters of a size equal to at least 12-point
10.28 boldface type, in the same language principally used by the
10.29 foreclosure purchaser and foreclosed homeowner to negotiate the
10.30 sale of the residence in foreclosure and must be fully completed
10.31 and signed and dated by the foreclosed homeowner and foreclosure
10.32 purchaser before the execution of any instrument of conveyance
10.33 of the residence in foreclosure.
10.34 Sec. 12. [325N.12] [CONTRACT TERMS.]
10.35 Every contract required by section 325N.11 must contain the
10.36 entire agreement of the parties and must include the following
11.1 terms:
11.2 (1) the name, business address, and the telephone number of
11.3 the foreclosure purchaser;
11.4 (2) the address of the residence in foreclosure;
11.5 (3) the total consideration to be given by the foreclosure
11.6 purchaser in connection with or incident to the sale;
11.7 (4) a complete description of the terms of payment or other
11.8 consideration including, but not limited to, any services of any
11.9 nature that the foreclosure purchaser represents he or she will
11.10 perform for the foreclosed homeowner before or after the sale;
11.11 (5) the time at which possession is to be transferred to
11.12 the foreclosure purchaser;
11.13 (6) a complete description of the terms of any related
11.14 agreement designed to allow the foreclosed homeowner to remain
11.15 in the home, such as a rental agreement, repurchase agreement,
11.16 contract for deed, or lease with option to buy;
11.17 (7) a notice of cancellation as provided in section
11.18 325N.14, paragraph (b); and
11.19 (8) the following notice in at least 14-point boldface
11.20 type, if the contract is printed or in capital letters if the
11.21 contract is typed, and completed with the name of the
11.22 foreclosure purchaser, immediately above the statement required
11.23 by section 325N.14, paragraph (a):
11.24 "NOTICE REQUIRED BY MINNESOTA LAW
11.25 Until your right to cancel this contract has ended, .......
11.26 (Name) or anyone working for ....... (Name) CANNOT ask you
11.27 to sign or have you sign any deed or any other document."
11.28 The contract required by this section survives delivery of
11.29 any instrument of conveyance of the residence in foreclosure,
11.30 and has no effect on persons other than the parties to the
11.31 contract.
11.32 Sec. 13. [325N.13] [CONTRACT CANCELLATION.]
11.33 (a) In addition to any other right of rescission, the
11.34 foreclosed homeowner has the right to cancel any contract with a
11.35 foreclosure purchaser until midnight of the fifth business day
11.36 following the day on which the foreclosed homeowner signs a
12.1 contract that complies with sections 325N.10 to 325N.15 or until
12.2 8:00 a.m. on the last day of the period during which the
12.3 foreclosed homeowner has a right of redemption, whichever occurs
12.4 first.
12.5 (b) Cancellation occurs when the foreclosed homeowner
12.6 delivers, by any means, written notice of cancellation to the
12.7 address specified in the contract.
12.8 (c) A notice of cancellation given by the foreclosed
12.9 homeowner need not take the particular form as provided with the
12.10 contract.
12.11 (d) Within ten days following receipt of a notice of
12.12 cancellation given in accordance with this section, the
12.13 foreclosure purchaser shall return without condition any
12.14 original contract and any other documents signed by the
12.15 foreclosed homeowner.
12.16 Sec. 14. [325N.14] [NOTICE OF CANCELLATION.]
12.17 (a) The contract must contain in immediate proximity to the
12.18 space reserved for the foreclosed homeowner's signature a
12.19 conspicuous statement in a size equal to at least 14-point
12.20 boldface type, if the contract is printed, or in capital
12.21 letters, if the contract is typed, as follows:
12.22 "You may cancel this contract for the sale
12.23 of your house without any penalty or obligation
12.24 at any time before
12.25 ..............................................
12.26 (Date and time of day)
12.27 See the attached notice of cancellation form
12.28 for an explanation of this right."
12.29 The foreclosure purchaser shall accurately enter the date and
12.30 time of day on which the cancellation right ends.
12.31 (b) The contract must be accompanied by a completed form in
12.32 duplicate, captioned "notice of cancellation" in a size equal to
12.33 a 12-point boldface type if the contract is printed, or in
12.34 capital letters, if the contract is typed, followed by a space
12.35 in which the foreclosure purchaser shall enter the date on which
12.36 the foreclosed homeowner executes any contract. This form must
13.1 be attached to the contract, must be easily detachable, and must
13.2 contain in type of at least 10 points, if the contract is
13.3 printed or in capital letters if the contract is typed, the
13.4 following statement written in the same language as used in the
13.5 contract:
13.6 "NOTICE OF CANCELLATION
13.7 ....................................
13.8 (Enter date contract signed)
13.9 You may cancel this contract for the sale
13.10 of your house, without any penalty or
13.11 obligation, at any time before
13.12 ...........................................
13.13 (Enter date and time of day)
13.14 To cancel this transaction, personally
13.15 deliver a signed and dated copy of this
13.16 cancellation notice to
13.17 .........................................
13.18 (Name of purchaser)
13.19 at ...............................................
13.20 (Street address of purchaser's place of business)
13.21 NOT LATER THAN ............................
13.22 (Enter date and time of day)
13.23 I hereby cancel this transaction ....................
13.24 (Date)
13.25 .............................
13.26 (Seller's signature)"
13.27 (c) The foreclosure purchaser shall provide the foreclosed
13.28 homeowner with a copy of the contract and the attached notice of
13.29 cancellation at the time the contract is executed by all parties.
13.30 (d) The five business days during which the foreclosed
13.31 homeowner may cancel the contract must not begin to run until
13.32 all parties to the contract have executed the contract and the
13.33 foreclosure purchaser has complied with this section.
13.34 Sec. 15. [325N.15] [WAIVER.]
13.35 Any waiver of the provisions of sections 325N.10 to 315N.18
13.36 is void and unenforceable as contrary to public policy except a
14.1 consumer may waive the five-day right to cancel provided in
14.2 section 325N.13 if the property is subject to a foreclosure sale
14.3 within the five business days, and the foreclosed homeowner
14.4 agrees to waive his or her right to cancel in a handwritten
14.5 statement signed by all parties holding title to the foreclosed
14.6 property.
14.7 Sec. 16. [325N.16] [LIABILITY.]
14.8 (a) Any provision in a contract which attempts or purports
14.9 to require arbitration of any dispute arising under sections
14.10 325N.10 to 325N.18 is void at the option of the owner.
14.11 (b) This section applies to any contract entered into on or
14.12 after August 1, 2004.
14.13 Sec. 17. [325N.17] [PROHIBITED PRACTICES.]
14.14 A foreclosure purchaser shall not:
14.15 (a) enter into, or attempt to enter into, a foreclosure
14.16 reconveyance with a foreclosed homeowner unless:
14.17 (1) the foreclosure purchaser verifies and can demonstrate
14.18 that the foreclosed homeowner has a reasonable ability to pay
14.19 for the subsequent conveyance of an interest back to the
14.20 foreclosed homeowner. In the case of a lease with an option to
14.21 purchase, payment ability also includes the reasonable ability
14.22 to make the lease payments and purchase the property within the
14.23 term of the option to purchase. There is a rebuttable
14.24 presumption that a homeowner is reasonably able to pay for the
14.25 subsequent conveyance if the owner's payments for primary
14.26 housing expenses and regular principal and interest payments on
14.27 other personal debt, on a monthly basis, do not exceed 60
14.28 percent of the owner's monthly gross income. For the purposes
14.29 of this section, "primary housing expenses" means the sum of
14.30 payments for regular principal, interest, rent, utilities,
14.31 hazard insurance, real estate taxes, and association dues.
14.32 There is a rebuttable presumption that the foreclosure purchaser
14.33 has not verified reasonable payment ability if the foreclosure
14.34 purchaser has not obtained documents other than a statement by
14.35 the foreclosed homeowner of assets, liabilities, and income;
14.36 (2) the foreclosure purchaser and the foreclosed homeowner
15.1 complete a closing for any foreclosure reconveyance in which the
15.2 foreclosure purchaser obtains a deed or mortgage from a
15.3 foreclosed homeowner. For purposes of this section, "closing"
15.4 means an in-person meeting to complete final documents incident
15.5 to the sale of the real property or creation of a mortgage on
15.6 the real property conducted by a closing agent, as defined in
15.7 section 82.17, who is not employed by or an affiliate of the
15.8 foreclosure purchaser;
15.9 (3) the foreclosure purchaser obtains the written consent
15.10 of the foreclosed homeowner to a grant by the foreclosure
15.11 purchaser of any interest in the property during such times as
15.12 the foreclosed homeowner maintains any interest in the property;
15.13 and
15.14 (4) the foreclosure purchaser complies with the
15.15 requirements of the federal Home Ownership Equity Protection
15.16 Act, United States Code, title 15, section 1639, or its
15.17 implementing regulation, Code of Federal Regulations, title 12,
15.18 sections 226.31 to 226.34, for any foreclosure reconveyance in
15.19 which the foreclosed homeowner obtains a vendee interest in a
15.20 contract for deed;
15.21 (b) fail to either:
15.22 (1) ensure that title to the subject dwelling has been
15.23 reconveyed to the foreclosed homeowner; or
15.24 (2) make a payment to the foreclosed homeowner such that
15.25 the foreclosed homeowner has received consideration in an amount
15.26 of at least 82 percent of the fair market value of the property
15.27 within 150 days of either the eviction or voluntary
15.28 relinquishment of possession of the dwelling by the foreclosed
15.29 homeowner. The foreclosure purchaser shall make a detailed
15.30 accounting of the basis for the payment amount, or a detailed
15.31 accounting of the reasons for failure to make a payment,
15.32 including providing written documentation of expenses, within
15.33 this 150-day period. The accounting shall be on a form
15.34 prescribed by the attorney general, in consultation with the
15.35 commissioner of commerce, without being subject to the
15.36 rulemaking procedures of chapter 14. For purposes of this
16.1 provision, the following applies:
16.2 (i) there is a rebuttable presumption that an appraisal by
16.3 a person licensed or certified by an agency of the federal
16.4 government or this state to appraise real estate constitutes the
16.5 fair market value of the property;
16.6 (ii) the time for determining the fair market value amount
16.7 shall be determined in the foreclosure reconveyance contract as
16.8 either at the time of the execution of the foreclosure
16.9 reconveyance contract or at resale. If the contract states that
16.10 the fair market value shall be determined at the time of resale,
16.11 the fair market value shall be the resale price if it is sold
16.12 within 120 days of the eviction or voluntary relinquishment of
16.13 the property by the foreclosed homeowner. If the contract
16.14 states that the fair market value shall be determined at the
16.15 time of resale, and the resale is not completed within 120 days
16.16 of the eviction or voluntary relinquishment of the property by
16.17 the foreclosed homeowner, the fair market value shall be
16.18 determined by an appraisal conducted during this 120 day period
16.19 and payment, if required, shall be made to the homeowner, but
16.20 the fair market value shall be recalculated as the resale price
16.21 on resale and an additional payment amount, if appropriate based
16.22 on the resale price, shall be made to the foreclosed homeowner
16.23 within 15 days of resale, and a detailed accounting of the basis
16.24 for the payment amount, or a detailed accounting of the reasons
16.25 for failure to make additional payment, shall be made within 15
16.26 days of resale, including providing written documentation of
16.27 expenses. The accounting shall be on a form prescribed by the
16.28 attorney general, in consultation with the commissioner of
16.29 commerce, without being subject to the rulemaking procedures of
16.30 chapter 14;
16.31 (iii) "consideration" shall mean any payment or thing of
16.32 value provided to the foreclosed homeowner, including unpaid
16.33 rent or contract for deed payments owed by the foreclosed
16.34 homeowner prior to the date of eviction or voluntary
16.35 relinquishment of the property, reasonable costs paid to third
16.36 parties necessary to complete the foreclosure reconveyance
17.1 transaction, payment of money to satisfy a debt or legal
17.2 obligation of the foreclosed homeowner, or the reasonable cost
17.3 of repairs for damage to the dwelling caused by the foreclosed
17.4 homeowner; but
17.5 (iv) "consideration" shall not include amounts imputed as a
17.6 downpayment or fee to the foreclosure purchaser, or a person
17.7 acting in participation with the foreclosure purchaser, incident
17.8 to a contract for deed, lease, or option to purchase entered
17.9 into as part of the foreclosure reconveyance, except for
17.10 reasonable costs paid to third parties necessary to complete the
17.11 foreclosure reconveyance;
17.12 (c) enter into repurchase or lease terms as part of the
17.13 subsequent conveyance that are unfair or commercially
17.14 unreasonable, or engage in any other unfair conduct;
17.15 (d) represent, directly or indirectly, that:
17.16 (1) the foreclosure purchaser is acting as an advisor or a
17.17 consultant, or in any other manner represents that the
17.18 foreclosure purchaser is acting on behalf of the homeowner;
17.19 (2) the foreclosure purchaser has certification or
17.20 licensure that the foreclosure purchaser does not have, or that
17.21 the foreclosure purchaser is not a member of a licensed
17.22 profession if that is untrue;
17.23 (3) the foreclosure purchaser is assisting the foreclosed
17.24 homeowner to "save the house" or substantially similar phrase;
17.25 or
17.26 (4) the foreclosure purchaser is assisting the foreclosed
17.27 homeowner in preventing a completed foreclosure if the result of
17.28 the transaction is that the foreclosed homeowner will not
17.29 complete a redemption of the property;
17.30 (e) make any other statements, directly or by implication,
17.31 or engage in any other conduct that is false, deceptive, or
17.32 misleading, or that has the likelihood to cause confusion or
17.33 misunderstanding, including, but not limited to, statements
17.34 regarding the value of the residence in foreclosure, the amount
17.35 of proceeds the foreclosed homeowner will receive after a
17.36 foreclosure sale, any contract term, or the foreclosed
18.1 homeowner's rights or obligations incident to or arising out of
18.2 the foreclosure reconveyance; or
18.3 (f) do any of the following until the time during which the
18.4 foreclosed homeowner may cancel the transaction has fully
18.5 elapsed:
18.6 (1) accept from any foreclosed homeowner an execution of,
18.7 or induce any foreclosed homeowner to execute, any instrument of
18.8 conveyance of any interest in the residence in foreclosure;
18.9 (2) record with the county recorder or file with the
18.10 registrar of titles any document, including but not limited to,
18.11 any instrument of conveyance, signed by the foreclosed
18.12 homeowner;
18.13 (3) transfer or encumber or purport to transfer or encumber
18.14 any interest in the residence in foreclosure to any third party,
18.15 provided no grant of any interest or encumbrance is defeated or
18.16 affected as against a bona fide purchaser or encumbrance for
18.17 value and without notice of a violation of sections 325N.10 to
18.18 325N.18, and knowledge on the part of any such person or entity
18.19 that the property was "residential real property in foreclosure"
18.20 does not constitute notice of a violation of sections 325N.10 to
18.21 325N.18. This section does not abrogate any duty of inquiry
18.22 which exists as to rights or interests of persons in possession
18.23 of the residential real property in foreclosure; or
18.24 (4) pay the foreclosed homeowner any consideration.
18.25 Sec. 18. [325N.18] [ENFORCEMENT.]
18.26 Subdivision 1. [REMEDIES.] A violation of sections 325N.10
18.27 to 325N.17 is considered to be a violation of section 325F.69,
18.28 and all the remedies of section 8.31 are available for such an
18.29 action. A private right of action under section 8.31 by a
18.30 foreclosed homeowner is in the public interest.
18.31 Subd. 1a. [LIMITATION.] Notwithstanding any other
18.32 provision of this section, no action may be brought on the basis
18.33 of a violation of sections 325N.10 to 325N.18, except by an
18.34 owner against whom the violation was committed or by the
18.35 attorney general. This limitation does not apply to
18.36 administrative action by the commissioner of commerce.
19.1 Subd. 2. [EXEMPLARY DAMAGES.] In a private right of action
19.2 under section 8.31 for a violation of section 325N.17, the court
19.3 may award exemplary damages of any amount. In the event the
19.4 court determines that an award of exemplary damages is
19.5 appropriate, the amount of exemplary damages awarded shall not
19.6 be less than 1-1/2 times the foreclosed homeowner's actual
19.7 damages. Any claim for exemplary damages brought pursuant to
19.8 this section must be commenced within four years after the date
19.9 of the alleged violation.
19.10 Subd. 3. [REMEDIES CUMULATIVE.] The remedies provided in
19.11 this section are cumulative and do not restrict any remedy that
19.12 is otherwise available. The provisions of sections 325N.10 to
19.13 325N.18 are not exclusive and are in addition to any other
19.14 requirements, rights, remedies, and penalties provided by law.
19.15 No action under this section shall affect the rights in the
19.16 foreclosed property held by a good faith purchaser for value
19.17 under sections 507.34, 508.48, 508A.48, or other applicable law.
19.18 Subd. 4. [CRIMINAL PENALTY.] Any foreclosure purchaser who
19.19 engages in any practice which would operate as a fraud or deceit
19.20 upon a foreclosed homeowner may, upon conviction, be fined not
19.21 more than $50,000 or imprisoned not more than one year, or both.
19.22 Prosecution or conviction for any one of the violations does not
19.23 bar prosecution or conviction for any other offenses.
19.24 Subd. 5. [FAILURE OF TRANSACTION.] Failure of the parties
19.25 to complete the reconveyance transaction, in the absence of
19.26 additional misconduct, shall not subject a foreclosure purchaser
19.27 to the criminal penalties under section 325N.07 or 325N.18.
19.28 Sec. 19. Minnesota Statutes 2003 Supplement, section
19.29 462A.03, subdivision 13, is amended to read:
19.30 Subd. 13. [ELIGIBLE MORTGAGOR.] "Eligible mortgagor" means
19.31 a nonprofit or cooperative housing corporation; the Department
19.32 of Administration for the purpose of developing nursing home
19.33 beds under section 251.011 or community-based programs as
19.34 defined in sections 252.50 and 253.28; a limited profit entity
19.35 or a builder as defined by the agency in its rules, which
19.36 sponsors or constructs residential housing as defined in
20.1 subdivision 7; or a natural person of low or moderate income,
20.2 except that the return to a limited dividend entity shall not
20.3 exceed ten 15 percent of the capital contribution of the
20.4 investors or such lesser percentage as the agency shall
20.5 establish in its rules, provided that residual receipts funds of
20.6 a limited dividend entity may be used for agency-approved,
20.7 housing-related investments owned by the limited dividend entity
20.8 without regard to the limitation on returns. Owners of existing
20.9 residential housing occupied by renters shall be eligible for
20.10 rehabilitation loans, only if, as a condition to the issuance of
20.11 the loan, the owner agrees to conditions established by the
20.12 agency in its rules relating to rental or other matters that
20.13 will insure that the housing will be occupied by persons and
20.14 families of low or moderate income. The agency shall require by
20.15 rules that the owner give preference to those persons of low or
20.16 moderate income who occupied the residential housing at the time
20.17 of application for the loan.
20.18 Sec. 20. Minnesota Statutes 2002, section 462A.05, is
20.19 amended by adding a subdivision to read:
20.20 Subd. 3c. [REFINANCING; LONG-TERM MORTGAGES.] It may agree
20.21 to purchase, make, or otherwise participate in the making and
20.22 enter into commitments for the purchase, making, or
20.23 participation in the making of long-term mortgage loans to
20.24 persons and families of low and moderate income to refinance a
20.25 long-term mortgage or other financing secured by the residential
20.26 housing occupied by the owner of the property. The loans shall
20.27 be made only upon determination by the agency that long-term
20.28 mortgage loans are not otherwise available, wholly or in part,
20.29 from private lenders upon equivalent terms and conditions.
20.30 Sec. 21. Minnesota Statutes 2002, section 469.018, is
20.31 amended by adding a subdivision to read:
20.32 Subd. 3. [PROHIBITION ON LEASE
20.33 RESTRICTIONS.] Notwithstanding any other law to the contrary, no
20.34 declaration governing a common interest community, as defined in
20.35 chapter 515B, whether or not the common interest community is
20.36 subject to chapter 515B, and no bylaw, regulation, rule, or
21.1 policy adopted by or on behalf of the unit owners' association
21.2 for a common interest community, may prohibit or limit an
21.3 authority from leasing a residential unit owned by it to
21.4 eligible persons of low or moderate income and their families
21.5 under applicable state or federal legislation. Nothing in this
21.6 subdivision shall prohibit common interest community
21.7 declarations, bylaws, regulations, rules, or policies from
21.8 otherwise regulating the use of a unit owned by an authority or
21.9 the conduct of unit occupants, provided the regulations apply to
21.10 all units in the common interest community; nor from enforcing a
21.11 prohibition against leasing residential units that was effective
21.12 before the authority owned the unit. This subdivision applies
21.13 to all common interest community units owned by an authority for
21.14 which title was acquired by the authority after January 1, 1999.
21.15 Sec. 22. Minnesota Statutes 2002, section 580.03, is
21.16 amended to read:
21.17 580.03 [NOTICE OF SALE; SERVICE ON OCCUPANT.]
21.18 Six weeks' published notice shall be given that such
21.19 mortgage will be foreclosed by sale of the mortgaged premises or
21.20 some part thereof, and at least four weeks before the appointed
21.21 time of sale a copy of such notice shall be served in like
21.22 manner as a summons in a civil action in the district court upon
21.23 the person in possession of the mortgaged premises, if the same
21.24 are actually occupied. If there be a building on such premises
21.25 used by a church or religious corporation, for its usual
21.26 meetings, service upon any officer or trustee of such
21.27 corporation shall be a sufficient service upon it. The notice
21.28 required by section 580.041 must be served simultaneously with
21.29 the notice of foreclosure required by this section.
21.30 Sec. 23. [580.041] [FORECLOSURE ADVICE NOTICE.]
21.31 Subdivision 1. [FORM AND DELIVERY OF NOTICE.] The notice
21.32 required by this section must be in 14-point boldface type and
21.33 must be printed on colored paper that is other than the color of
21.34 the notice of foreclosure and that does not obscure or
21.35 overshadow the content of the notice. The title of the notice
21.36 must be in 20-point boldface type. The notice must be on its
22.1 own page. The notice required by this section must be delivered
22.2 with the notice of foreclosure required by sections 580.03 and
22.3 580.04. The notice required by this section also must be
22.4 delivered with each subsequent written communication regarding
22.5 the foreclosure mailed to the mortgagor by the foreclosing party
22.6 up to the day of redemption. A foreclosing mortgagee will be
22.7 deemed to have complied with this section if it sends the notice
22.8 required by this section at least once every 60 days during the
22.9 period of the foreclosure process. The notice required by this
22.10 section must not be published.
22.11 Subd. 2. [CONTENT OF NOTICE.] The notice required by this
22.12 section must appear substantially as follows:
22.13 "Help For Homeowners in Foreclosure
22.14 Minnesota law requires that we send you this notice
22.15 about the foreclosure process. Please read it carefully.
22.16 Mortgage foreclosure is a complex process. Some
22.17 people may approach you about "saving" your home. You
22.18 should be careful about any such promises.
22.19 The state encourages you to become informed about your
22.20 options in foreclosure before entering into any agreements
22.21 with anyone in connection with the foreclosure of your
22.22 home. There are government agencies and nonprofit
22.23 organizations that you may contact for helpful information
22.24 about the foreclosure process. For the name and telephone
22.25 number of an organization near you please call the
22.26 Minnesota Home Finance Agency (MHFA) at (insert telephone
22.27 number). The state does not guarantee the advice of these
22.28 agencies.
22.29 Do not delay dealing with the foreclosure because your
22.30 options may become more limited as time passes."
22.31 Sec. 24. Laws 2003, chapter 128, article 10, section 4,
22.32 subdivision 3, is amended to read:
22.33 Subd. 3. Affordable Rental Investment Fund
22.34 $9,273,000 the first year and
22.35 $9,273,000 the second year are for the
22.36 affordable rental investment fund
22.37 program under Minnesota Statutes,
22.38 section 462A.21, subdivision 8b.
23.1 This appropriation is to finance the
23.2 acquisition, rehabilitation, and debt
23.3 restructuring of federally assisted
23.4 rental property and for making equity
23.5 take-out loans under Minnesota
23.6 Statutes, section 462A.05, subdivision
23.7 39. This appropriation also may be
23.8 used to finance the acquisition,
23.9 rehabilitation, and debt restructuring
23.10 of existing supportive housing
23.11 properties. For purposes of this
23.12 subdivision, supportive housing means
23.13 affordable rental housing with linkages
23.14 to services necessary for individuals,
23.15 youth, and families with children to
23.16 maintain housing stability. The owner
23.17 of the federally assisted rental
23.18 property must agree to participate in
23.19 the applicable federally assisted
23.20 housing program and to extend any
23.21 existing low-income affordability
23.22 restrictions on the housing for the
23.23 maximum term permitted. The owner must
23.24 also enter into an agreement that gives
23.25 local units of government, housing and
23.26 redevelopment authorities, and
23.27 nonprofit housing organizations the
23.28 right of first refusal if the rental
23.29 property is offered for sale. Priority
23.30 must be given among comparable
23.31 properties to properties with the
23.32 longest remaining term under an
23.33 agreement for federal rental
23.34 assistance. Priority must also be
23.35 given among comparable rental housing
23.36 developments to developments that are
23.37 or will be owned by local government
23.38 units, a housing and redevelopment
23.39 authority, or a nonprofit housing
23.40 organization.
23.41 Sec. 25. [PROVISIONS SEVERABLE.]
23.42 If any provision of this act, or if any application of this
23.43 act to any person or circumstances is held unconstitutional and
23.44 void, the remainder of this act remains valid.
23.45 Sec. 26. [EFFECTIVE DATE; EXPIRATION.]
23.46 Sections 1 to 18, 22, 23, and 25 are effective August 1,
23.47 2004, and expire December 31, 2009. Sections 19, 20, 21, and 24
23.48 are effective July 1, 2004.