1.1                          A bill for an act 
  1.2             relating to mortgage foreclosure; providing for a new 
  1.3             law to regulate foreclosure reconveyance; establishing 
  1.4             licensure for foreclosure purchasers; adding a notice 
  1.5             to homeowners in foreclosure; amending Minnesota 
  1.6             Statutes 2002, section 580.03; proposing coding for 
  1.7             new law in Minnesota Statutes, chapters 325E; 580. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  [325E.59] [DEFINITIONS.] 
  1.10     Subdivision 1.  [SCOPE.] For the purposes of sections 
  1.11  325E.59 to 325E.61, the terms defined in this section have the 
  1.12  meanings given them. 
  1.13     Subd. 2.  [FORECLOSED HOMEOWNER.] "Foreclosed homeowner" 
  1.14  means an owner of residential real property, including a 
  1.15  condominium, that is the primary residence of the owner and 
  1.16  whose mortgage on the real property is or was in foreclosure. 
  1.17     Subd. 3.  [FORECLOSURE RECONVEYANCE.] "Foreclosure 
  1.18  reconveyance" means a transaction involving: 
  1.19     (1) the transfer of title to real property by a foreclosed 
  1.20  homeowner during a foreclosure proceeding, either by transfer of 
  1.21  interest from the foreclosed homeowner or by creation of a 
  1.22  mortgage or other lien or encumbrance during the foreclosure 
  1.23  process that allows the acquirer to obtain title to the property 
  1.24  by redeeming the property as a junior lienholder; and 
  1.25     (2) the subsequent conveyance, or promise of a subsequent 
  1.26  conveyance, of an interest back to the foreclosed homeowner by 
  2.1   the acquirer or a person acting in participation with the 
  2.2   acquirer that allows the foreclosed homeowner to possess the 
  2.3   real property following the completion of the foreclosure 
  2.4   proceeding, which interest includes but is not limited to an 
  2.5   interest in a contract for deed, purchase agreement, option to 
  2.6   purchase, or lease. 
  2.7      Subd. 4.  [FORECLOSURE PURCHASER.] "Foreclosure purchaser" 
  2.8   means a person that has acted as the acquirer in more than one 
  2.9   foreclosure reconveyance during any 24-month period.  
  2.10  Foreclosure purchaser also includes a person that has acted in 
  2.11  joint venture or joint enterprise with one or more acquirers in 
  2.12  more than one foreclosure reconveyance during any 24-month 
  2.13  period.  A federal or state chartered bank, savings bank, 
  2.14  thrift, or credit union is not a foreclosure purchaser. 
  2.15     Sec. 2.  [325E.60] [LICENSURE OF FORECLOSURE PURCHASERS.] 
  2.16     Subdivision 1.  [LICENSURE REQUIRED.] A person shall not 
  2.17  act as a foreclosure purchaser without obtaining a license from 
  2.18  the attorney general.  Each natural person and each business 
  2.19  entity must obtain a license to act as a foreclosure purchaser. 
  2.20     Subd. 2.  [GROUNDS FOR LICENSE DENIAL, NONRENEWAL, OR 
  2.21  REVOCATION.] The attorney general may, by order, restrict, 
  2.22  censure, suspend, revoke, or refuse to issue or renew a 
  2.23  foreclosure purchaser license or may levy a civil penalty or 
  2.24  order restitution to consumers under section 8.31 or any 
  2.25  combination of actions, for any one or more of the following 
  2.26  causes: 
  2.27     (1) engaging in a prohibited practice under section 
  2.28  325E.61; 
  2.29     (2) providing incorrect, misleading, incomplete, or untrue 
  2.30  information in the licensing application; 
  2.31     (3) violating any state or federal law concerning the offer 
  2.32  or sale of real estate or mortgages; 
  2.33     (4) obtaining or attempting to obtain a license through 
  2.34  misrepresentation or fraud, or engaging in conduct without 
  2.35  proper licensure; 
  2.36     (5) improperly withholding, misappropriating, or converting 
  3.1   any money or properties received in the course of doing 
  3.2   business; 
  3.3      (6) having pled guilty, with or without explicitly 
  3.4   admitting guilt, pled nolo contendere, or been convicted of a 
  3.5   felony, gross misdemeanor, or misdemeanor involving fraud, 
  3.6   dishonesty, or moral turpitude; 
  3.7      (7) having admitted or been found to have committed any 
  3.8   conduct in violation of consumer protection laws; 
  3.9      (8) using fraudulent, coercive, unconscionable, or 
  3.10  dishonest practices, or demonstrating incompetence, 
  3.11  untrustworthiness, or financial irresponsibility, whether or not 
  3.12  involving foreclosure purchases; 
  3.13     (9) having a professional license denied, suspended, or 
  3.14  revoked, or having been the subject of a fine or any other 
  3.15  discipline in this state or any other state, province, district, 
  3.16  or territory; 
  3.17     (10) failing to pay state income tax or comply with any 
  3.18  administrative or court order directing payment of state income 
  3.19  tax or child support; or 
  3.20     (11) failure to timely pay the fee for a foreclosure 
  3.21  purchaser license or application for licensure. 
  3.22     Subd. 3.  [HEARING RIGHTS.] (a) If the attorney general 
  3.23  determines that the licensee is in violation of this section, 
  3.24  the attorney general may issue an order requiring a licensee to 
  3.25  show cause why any or all of the following should not occur: 
  3.26     (1) the revocation, nonrenewal, or suspension of the 
  3.27  license; 
  3.28     (2) the censuring of the licensee; 
  3.29     (3) the imposition of a civil penalty of up to $25,000 per 
  3.30  violation; or 
  3.31     (4) the payment of restitution to foreclosed homeowners or 
  3.32  others. 
  3.33     The order must give reasonable notice of the time and place 
  3.34  for hearing on the matter and must state the reasons for the 
  3.35  entry of the order.  The attorney general may, by order, 
  3.36  summarily suspend a license pending final determination of any 
  4.1   order to show cause.  If a license is suspended pending final 
  4.2   determination of an order to show cause, a hearing on the merits 
  4.3   must be held within 30 days of the issuance of the order of 
  4.4   suspension, unless the suspended licensee agrees to a hearing 
  4.5   date beyond 30 days.  All hearings must be conducted in 
  4.6   accordance with the provisions of chapter 14.  After the 
  4.7   hearing, the attorney general shall enter an order disposing of 
  4.8   the matter as the facts require.  If the licensee fails to 
  4.9   appear at a hearing after having been duly notified of it, the 
  4.10  licensee is considered in default, and the proceeding may be 
  4.11  determined against the licensee upon consideration of the order 
  4.12  to show cause, the allegations of which may be considered to be 
  4.13  true. 
  4.14     (b) If the attorney general determines to nonrenew or deny 
  4.15  an application for a license, the attorney general shall notify 
  4.16  the applicant or licensee and advise, in writing, the applicant 
  4.17  or licensee of the reason for the denial or nonrenewal.  The 
  4.18  applicant or licensee may make written demand upon the attorney 
  4.19  general within 30 days for a hearing to determine the 
  4.20  reasonableness of the attorney general's action.  The hearing 
  4.21  must be held within 30 days, unless the suspended licensee 
  4.22  agrees to a hearing date beyond 30 days, and must be held 
  4.23  pursuant to the contested case provisions of chapter 14.  If no 
  4.24  hearing is requested within 30 days of service of the notice of 
  4.25  nonrenewal or denial, the nonrenewal or denial becomes final. 
  4.26     Subd. 4.  [CONDITIONS FOR RELICENSURE.] A revocation of a 
  4.27  license prohibits the licensee from making a new application for 
  4.28  a license for at least two years from the effective date of the 
  4.29  revocation.  The attorney general shall, as a condition of 
  4.30  reapplication, require the applicant to obtain a performance 
  4.31  bond issued by an insurer authorized to transact business in 
  4.32  this state in the amount of $50,000 or a greater amount the 
  4.33  attorney general considers appropriate for the protection of 
  4.34  citizens of this state in the event the attorney general grants 
  4.35  the application.  The bond must be filed with the attorney 
  4.36  general, with the state of Minnesota as obligee, conditioned for 
  5.1   the prompt payment to any aggrieved person entitled to 
  5.2   restitution under this section or to protect any aggrieved 
  5.3   person from loss resulting from fraudulent, deceptive, 
  5.4   dishonest, or other prohibited practices arising out of any 
  5.5   transaction when the licensee was licensed or performed acts for 
  5.6   which a licensee is required under this chapter.  The bond 
  5.7   remains operative as long as that licensee is licensed.  The 
  5.8   bond required by this subdivision must provide coverage for all 
  5.9   matters arising during the period of licensure. 
  5.10     Subd. 5.  [CEASE AND DESIST ORDERS.] (a) Whenever it 
  5.11  appears to the attorney general that a person has engaged or is 
  5.12  about to engage in an act or practice constituting unlicensed 
  5.13  activity as a foreclosure purchaser, the attorney general may 
  5.14  issue and cause to be served upon the person an order requiring 
  5.15  the person to cease and desist from violations. 
  5.16     (b) The cease and desist order must give reasonable notice 
  5.17  of the rights of the person to request a hearing and must state 
  5.18  the reasons for the entry of the order.  A hearing must be held 
  5.19  no later than ten days after the request for the hearing is 
  5.20  received by the attorney general.  All hearings must be 
  5.21  conducted in accordance with the provisions of chapter 14.  
  5.22  After the completion of the hearing, the administrative law 
  5.23  judge shall issue a report within ten days.  Within 15 days 
  5.24  after receiving the administrative law judge's report, the 
  5.25  attorney general shall issue a further order vacating or making 
  5.26  permanent the cease and desist order.  The time periods provided 
  5.27  in this provision may be waived by agreement of the attorney 
  5.28  general and the person against whom the cease and desist order 
  5.29  is issued.  If the person to whom a cease and desist order is 
  5.30  issued fails to appear at the hearing after being duly notified, 
  5.31  the person is in default, and the proceeding may be determined 
  5.32  against that person upon consideration of the cease and desist 
  5.33  order, the allegations of which may be considered to be true. 
  5.34     (c) If no hearing is requested within 30 days of service of 
  5.35  the order, the cease and desist order becomes permanent. 
  5.36     (d) A cease and desist order issued under this subdivision 
  6.1   remains in effect until it is modified or vacated by the 
  6.2   attorney general.  The administrative proceeding provided by 
  6.3   this subdivision, and subsequent appellate judicial review of 
  6.4   that administrative proceeding, constitutes the exclusive remedy 
  6.5   for determining whether the attorney general properly issued the 
  6.6   cease and desist order and whether the cease and desist order 
  6.7   should be vacated or made permanent. 
  6.8      (e) Whenever the attorney general seeks to enforce 
  6.9   compliance with a cease and desist order that has been made 
  6.10  permanent, the allegations in the cease and desist order are 
  6.11  considered conclusively established for purposes of a proceeding 
  6.12  in district court for permanent or temporary relief to enforce 
  6.13  the cease and desist order.  Whenever the attorney general seeks 
  6.14  to enforce compliance with a cease and desist order when a 
  6.15  hearing, hearing request, or final determination on the cease 
  6.16  and desist order is pending, or the time has not yet expired to 
  6.17  request a hearing on whether a cease and desist order should be 
  6.18  vacated or made permanent, the allegations in the cease and 
  6.19  desist order are considered conclusively established for 
  6.20  purposes of a proceeding in district court for permanent or 
  6.21  temporary relief to enforce the cease and desist order.  
  6.22     (f) Notwithstanding paragraphs (a) to (e), the person 
  6.23  against whom the cease and desist order is issued and who has 
  6.24  requested a hearing may, within 15 days after service of the 
  6.25  cease and desist order, bring an action in Ramsey County 
  6.26  District Court for issuance of an injunction to suspend 
  6.27  enforcement of the cease and desist order pending a final 
  6.28  decision of the attorney general to vacate or make permanent the 
  6.29  cease and desist order.  The court shall determine whether to 
  6.30  issue an injunction based on traditional principles of temporary 
  6.31  equitable relief. 
  6.32     Subd. 6.  [FEES.] The fee for a natural person for a 
  6.33  foreclosure purchaser license is $100.  The fee for a business 
  6.34  entity for a foreclosure purchaser license is $500.  Each 
  6.35  applicant for a foreclosure purchaser license shall include an 
  6.36  application fee of $50. 
  7.1      Sec. 3.  [325E.61] [PROHIBITED PRACTICES.] 
  7.2      A foreclosure purchaser shall not: 
  7.3      (1) enter into, or attempt to enter into, a foreclosure 
  7.4   reconveyance with a foreclosed homeowner unless: 
  7.5      (i) the foreclosure purchaser verifies and can demonstrate 
  7.6   that the foreclosed homeowner has a reasonable ability to pay 
  7.7   for the subsequent conveyance of an interest back to the 
  7.8   foreclosed homeowner.  In the case of a lease with an option to 
  7.9   purchase, payment ability also includes the reasonable ability 
  7.10  to make the lease payments and purchase the property within the 
  7.11  term of the option to purchase.  There is a rebuttable 
  7.12  presumption that the foreclosure purchaser has not verified 
  7.13  reasonable payment ability if the foreclosure purchaser has not 
  7.14  obtained documents other than a statement by the foreclosed 
  7.15  homeowner of assets, liabilities, and income; 
  7.16     (ii) the foreclosure purchaser and the foreclosed homeowner 
  7.17  complete a closing for any foreclosure reconveyance in which the 
  7.18  foreclosure purchaser obtains a deed or mortgage from a 
  7.19  foreclosed homeowner.  For purposes of this section, "closing" 
  7.20  means an in-person meeting to complete final documents incident 
  7.21  to the sale of the real property or creation of a mortgage on 
  7.22  the real property conducted by a closing agent, as defined in 
  7.23  section 82.17, who is not employed by or an affiliate of the 
  7.24  foreclosure purchaser; 
  7.25     (iii) the foreclosure purchaser provides consideration to 
  7.26  the foreclosed homeowner of at least 85 percent of the fair 
  7.27  market value of the property purchased for any foreclosure 
  7.28  reconveyance in which the foreclosure purchaser obtains a deed 
  7.29  from a foreclosed homeowner, or pays to the foreclosed homeowner 
  7.30  consideration in an amount of at least 85 percent of the fair 
  7.31  market value of the property for any foreclosure reconveyance in 
  7.32  which the foreclosure purchaser obtains title through a mortgage 
  7.33  or other encumbrance by the foreclosed homeowner during the 
  7.34  foreclosure process that allows the acquirer to obtain title by 
  7.35  redeeming the property as a junior lienholder.  For purposes of 
  7.36  this clause, the following applies:  (A) there is a rebuttable 
  8.1   presumption that an appraisal by a person licensed or certified 
  8.2   by an agency of the federal government or this state to appraise 
  8.3   real estate constitutes the fair market value of the property; 
  8.4   (B) both the fair market value amount and the consideration 
  8.5   amount paid to the homeowner can be determined at either the 
  8.6   time of the initial transaction or at the time of a later event 
  8.7   resulting in consideration paid to the foreclosed homeowner or 
  8.8   transfer of title to the foreclosed homeowner; and (C) 
  8.9   "consideration" shall mean any payment or thing of value 
  8.10  provided to the foreclosed homeowner, including payment of money 
  8.11  to satisfy a debt or legal obligation of the foreclosed 
  8.12  homeowner; 
  8.13     (iv) the foreclosure purchaser obtains the written consent 
  8.14  of the foreclosed homeowner to a grant by the foreclosure 
  8.15  purchaser of any interest in the property during such times as 
  8.16  the foreclosed homeowner maintains any interest in the property; 
  8.17  and 
  8.18     (v) the foreclosure purchaser complies with the 
  8.19  requirements of the federal Home Ownership Equity Protection 
  8.20  Act, United States Code, title 15, section 1639, or its 
  8.21  implementing regulation, Code of Federal Regulations, title 12, 
  8.22  sections 226.31 to 226.34, for any foreclosure reconveyance in 
  8.23  which the foreclosed homeowner obtains a vendee interest in a 
  8.24  contract for deed; 
  8.25     (2) enter into repurchase or lease terms as part of the 
  8.26  subsequent conveyance that are unfair or commercially 
  8.27  unreasonable, or engages in any other unfair or unconscionable 
  8.28  conduct; 
  8.29     (3) represent, directly or indirectly, that: 
  8.30     (i) the foreclosure purchaser is acting as an advisor or a 
  8.31  consultant, or in any other manner represents that the 
  8.32  foreclosure purchaser is acting on behalf of the homeowner; 
  8.33     (ii) the foreclosure purchaser has certification or 
  8.34  licensure that the foreclosure purchaser does not have, or that 
  8.35  the foreclosure purchaser is not a member of a licensed 
  8.36  profession if that is untrue; 
  9.1      (iii) the foreclosure purchaser is assisting the foreclosed 
  9.2   homeowner to save the house if the result of the transaction is 
  9.3   that the foreclosed homeowner will lose title to the house; or 
  9.4      (iv) the foreclosure purchaser is assisting the foreclosed 
  9.5   homeowner in preventing a completed foreclosure if the result of 
  9.6   the transaction is that the foreclosed homeowner will not 
  9.7   complete a redemption of the property; or 
  9.8      (4) make any other statements or engage in any other 
  9.9   conduct that is false, deceptive, or misleading, or that has the 
  9.10  likelihood to cause confusion or misunderstanding. 
  9.11     Sec. 4.  [325E.62] [ENFORCEMENT.] 
  9.12     A violation of section 325E.61 is considered to be a 
  9.13  violation of section 325F.69, and such action by a foreclosed 
  9.14  homeowner is in the public interest.  Any foreclosed homeowner 
  9.15  may bring an action for damages as a result of any sale or 
  9.16  contract in violation of section 325E.61.  The remedies provided 
  9.17  in this section are cumulative and do not restrict any remedy 
  9.18  that is otherwise available. 
  9.19     Sec. 5.  Minnesota Statutes 2002, section 580.03, is 
  9.20  amended to read: 
  9.21     580.03 [NOTICE OF SALE; SERVICE ON OCCUPANT.] 
  9.22     Six weeks' published notice shall be given that such 
  9.23  mortgage will be foreclosed by sale of the mortgaged premises or 
  9.24  some part thereof, and at least four weeks before the appointed 
  9.25  time of sale a copy of such notice shall be served in like 
  9.26  manner as a summons in a civil action in the district court upon 
  9.27  the person in possession of the mortgaged premises, if the same 
  9.28  are actually occupied.  If there be a building on such premises 
  9.29  used by a church or religious corporation, for its usual 
  9.30  meetings, service upon any officer or trustee of such 
  9.31  corporation shall be a sufficient service upon it.  The notice 
  9.32  required by section 580.041 must be served simultaneously with 
  9.33  the notice of foreclosure required by this section. 
  9.34     Sec. 6.  [580.041] [FORECLOSURE ADVICE NOTICE.] 
  9.35     Subdivision 1.  [FORM AND DELIVERY OF NOTICE.] The notice 
  9.36  required by this section must be in bold, 14-point type and must 
 10.1   be printed on colored paper that is other than the color of the 
 10.2   notice of foreclosure and that does not obscure or overshadow 
 10.3   the content of this notice.  The title of the notice must be in 
 10.4   bold, 20-point type.  The notice must be on its own page.  The 
 10.5   notice required by this section must be delivered with the 
 10.6   notice of foreclosure required by sections 580.03 and 580.04.  
 10.7   The notice required by this section also must be delivered with 
 10.8   each subsequent written communication mailed to the mortgagor by 
 10.9   the foreclosing party up to the day of redemption.  The notice 
 10.10  required by this section must not be published. 
 10.11     Subd. 2.  [CONTENT OF NOTICE.] The notice required by this 
 10.12  section must appear substantially as follows: 
 10.13              "<b>Help For Homeowners in Foreclosure</b> 
 10.14     <b>Minnesota law requires that we send you this notice about</b> 
 10.15  <b>the foreclosure process.  Please read it carefully.</b> 
 10.16     <b>Mortgage foreclosure is a complex process.  Some people may</b> 
 10.17  <b>approach you about "saving" your home.  You should be careful</b> 
 10.18  <b>about any such promises.  The state encourages you to become</b> 
 10.19  <b>informed about your options in foreclosure.</b> 
 10.20     <b>Here are some government agencies and nonprofit</b> 
 10.21  <b>organizations who you may contact for information about the</b> 
 10.22  <b>foreclosure process:</b> 
 10.23     <b>[Insert Resources]</b> 
 10.24     <b>The state does not guarantee the advice of these agencies.</b>" 
 10.25     Subd. 3.  [REFERRAL RESOURCES IN NOTICE.] The attorney 
 10.26  general shall post on its Web site or otherwise make readily 
 10.27  available the name and contact information of government 
 10.28  agencies or nonprofit corporations for insertion into the notice 
 10.29  required by this section.  The party foreclosing the mortgage 
 10.30  shall make reasonable efforts to include in its notice current 
 10.31  resources made available by the attorney general.  A foreclosing 
 10.32  lender who updates the notice semiannually with current 
 10.33  resources made available by the attorney general will be 
 10.34  presumed to have made such reasonable efforts.  The posting of 
 10.35  this information by the attorney general is not subject to the 
 10.36  rulemaking procedures of chapter 14. 
 11.1      Sec. 7.  [EFFECTIVE DATE.] 
 11.2      Sections 1 and 3 are effective the day following final 
 11.3   enactment.  Section 2 is effective September 1, 2004.  Persons 
 11.4   applying for a foreclosure purchaser license on or before 
 11.5   September 1, 2004, are not in violation of the requirements of 
 11.6   section 2 until the attorney general issues or denies the 
 11.7   requested license.  Sections 4 to 6 are effective January 1, 
 11.8   2005.