1.1 	A bill for an act
1.2 	relating to mortgage lending; requiring retention of records of mortgage loans; 
1.3 	requiring periodic reports to the commissioner of commerce; providing for a 
1.4 	delay of mortgage foreclosure sales under certain circumstances; proposing 
1.5 	coding for new law in Minnesota Statutes, chapters 58; 580.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. [58.145] MORTGAGE LOAN RECORD RETENTION REQUIRED.
1.8 		Subdivision 1.Preservation of records. A licensee shall preserve the records of a 
1.9 	mortgage loan transaction in one of the following ways:
1.10 	(1) original books, accounts, and files;
1.11 	(2) an electronic equivalent approved by the commissioner; or 
1.12 	(3) a microphotographic copy technology approved by the commissioner.
1.13 		Subd. 2.Time period for preservation. (a) A lender shall retain records for 25 
1.14 	months after a loan is denied, repayment of the loan is made in full, or the loan is sold, 
1.15 	whichever occurs first.
1.16 	(b) A servicer shall retain records for 25 months after final payment is made or the 
1.17 	loan is sold, whichever occurs first.
1.18 	(c) If a licensee acts as a broker in a loan transaction, the licensee shall retain records 
1.19 	of the transaction for 25 months after the loan is made or denied.
1.20 		Subd. 3.Retention separate from other records. (a) Records required to be 
1.21 	retained under this section must be maintained separately from the records of any other 
1.22 	business of the licensee or its employees.
1.23 	(b) Notwithstanding paragraph (a), a licensee may commingle records of mortgage 
1.24 	loans with records of other types of loans made, brokered, or held by the licensee, if the 
1.25 	mortgage loans can be readily retrieved for an examination.
2.1 		Subd. 4.Content of records. (a) For each mortgage loan made or serviced by a 
2.2 	licensee, a file shall be maintained which contains, at a minimum, the following:
2.3 	(1) the date of the loan closing;
2.4 	(2) the annual percentage rate of interest payable on the loan;
2.5 	(3) documentation of all charges and fees disbursed from the proceeds of the loan 
2.6 	or collected directly from the borrower;
2.7 	(4) documentation of disbursements of loan proceeds to creditors of the borrower;
2.8 	(5) documentation of any broker's agreement signed by the borrower if a broker fee 
2.9 	is paid from the loan proceeds at closing;
2.10 	(6) the amount of any origination or discount fee;
2.11 	(7) a notation of any applicable governmental loan program for each loan;
2.12 	(8) an accurate payment history;
2.13 	(9) the objective index used to determine the interest rate from time to time if the 
2.14 	loan has an adjustable rate;
2.15 	(10) if the loan was assigned by the licensee, the name of the assignee and the 
2.16 	date of the assignment;
2.17 	(11) any document which indicates whether the security interest is in first or second 
2.18 	lien position at the time the loan is made;
2.19 	(12) all required truth-in-lending disclosure documents;
2.20 	(13) records of all monies received from a borrower for fees to be paid to third 
2.21 	parties for services in connection with the loan;
2.22 	(14) records indicating that the services were provided and the fees paid by the 
2.23 	licensee to the third party;
2.24 	(15) a record of dates on which a credit report, appraisal, and other services or 
2.25 	items were ordered by the licensee;
2.26 	(16) any other document on which the licensee relied in underwriting the loan; and
2.27 	(17) (i) insurance information regarding optional insurance coverage purchased by 
2.28 	the borrower in connection with the loan, including the premium charged, the types of 
2.29 	coverages, and written authorization from the borrower for each type of coverage;
2.30 	(ii) clause (i) does not apply to hazard insurance on the property securing the loan.
2.31 	(b) Notwithstanding paragraph (a), a licensee acting as a broker in connection with 
2.32 	a particular transaction:
2.33 	(1) shall retain copies of all records listed in paragraph (a) which the licensee obtains 
2.34 	in the course of processing or underwriting a loan; 
2.35 	(2) shall retain a copy of the broker agreement between the licensee and the borrower;
2.36 	(3) shall retain a record of the lender to whom the loan was brokered; and 
3.1 	(4) is not responsible for retaining any record unless the licensee at some time is in 
3.2 	physical possession of a copy of that record.
3.3 		Subd. 5.Report to commissioner. (a) A licensee acting as a servicer shall compile 
3.4 	and submit to the commissioner, on or before the 20th business day of each month, a 
3.5 	report on the form required by the commissioner that contains the following information 
3.6 	for the preceding month, or as otherwise indicated:
3.7 	(1) the number of mortgage loans the licensee is servicing; 
3.8 	(2) the number of mortgage loans that the licensee is servicing that are in payment 
3.9 	default and a breakdown of these mortgage loans by length of payment delinquency, 
3.10 	including 30-day, 60-day, and 90-day and longer delinquencies;
3.11 	(3) information on loss mitigation activities undertaken including, but not limited to, 
3.12 	the following:
3.13 	(i) the number of workout arrangements entered into by the licensee in connection 
3.14 	with mortgage loans;
3.15 	(ii) description of the types of workout arrangements, including mortgage loan 
3.16 	modifications, and the percentage of each type of workout arrangement entered into; and
3.17 	(iii) the proactive steps taken by the licensee to identify borrowers at a heightened 
3.18 	risk of default, such as those with impending interest rate resets, including, but not limited 
3.19 	to, contacts with borrowers to assess their ability to repay their mortgage loan obligations;
3.20 	(4) the number of foreclosure actions commenced in this state in connection with 
3.21 	mortgage loans the licensee is servicing;
3.22 	(5) information regarding adjustable rate mortgage loans; and 
3.23 	(6) any other information that the commissioner may consider necessary, including 
3.24 	geographic information regarding applicable mortgage loans. 
3.25 	(b) The commissioner may publish for public review the report required under 
3.26 	paragraph (a) of this regulation, or any information contained in the report, except 
3.27 	personally identifying information regarding borrowers.
3.28 		Subd. 6.Right to obtain older records. Records required under this section that 
3.29 	are retained for longer than the minimum time period shall be made available to the 
3.30 	commissioner upon the commissioner's reasonable request.

3.31 	EFFECTIVE DATE. This section is effective August 1, 2008.

3.32 	Sec. 2. [580.042] EXTENSION OF FORECLOSURE SALE DATES; 
3.33 	PRECARIOUS MORTGAGE LOANS.
3.34 		Subdivision 1.Definitions. (a) For purposes of this section, the terms defined in 
3.35 	this subdivision have the meanings given.
4.1 	(b) "Holder" means the owner of the debt constituting a residential mortgage loan 
4.2 	or a servicer or other person acting on the holder's behalf.
4.3 	(c) A "precarious mortgage loan" is a mortgage loan on a single-family or duplex 
4.4 	residential property in which the mortgagor resides and that:
4.5 	(1) is a subprime loan within the meaning of section 58.02;
4.6 	(2) allows the mortgagor to only pay interest;
4.7 	(3) allows the mortgagor to make a minimum payment that is lower than the 
4.8 	payment required to reduce the principal balance of the mortgage loan, resulting in 
4.9 	a negative amortization;
4.10 	(4) provides for an initial interest rate that after a period of time is replaced with a 
4.11 	variable rate;
4.12 	(5) was made without income verification; or
4.13 	(6) was made in any method that would violate present provisions of section 58.13, 
4.14 	regardless of whether those provisions were in that section at the time the mortgage loan 
4.15 	was originated.
4.16 	(d) "Good faith loss mitigation efforts" means reasonable efforts by the holder acting 
4.17 	in good faith to work with the mortgagor to cure a default using applicable loan mitigation 
4.18 	practices which may include, but are not limited to:
4.19 	(1) capitalizing arrearages;
4.20 	(2) reducing principal;
4.21 	(3) extending the term;
4.22 	(4) waiving late fees or other fees; or
4.23 	(5) modifying the payment amount or the interest rate to result in a restructured loan 
4.24 	with a monthly payment that is affordable to the mortgagor.
4.25 		Subd. 2.Precarious mortgage loans; extension of foreclosure sale date. (a) A 
4.26 	mortgagor may record an affidavit in the office of the county recorder or registrar of titles, 
4.27 	whichever is appropriate, of the county in which the property, or any part of it, is located 
4.28 	and mail a copy by certified mail to the holder indicating that the mortgagor's mortgage 
4.29 	loan is a precarious mortgage loan and that the lender has failed to engage in good faith 
4.30 	loss mitigation efforts. The affidavit may be recorded at any time after the first publication 
4.31 	of the notice of foreclosure sale under section 580.04, but before the scheduled date of 
4.32 	sale. After such an affidavit is filed, the foreclosure sale date is automatically extended six 
4.33 	months, unless the holder obtains a court order authorizing the sale at an earlier date.
4.34 	(b) A court in the county in which the property or any part of it is located may 
4.35 	order an earlier date if the holder proves by clear and convincing evidence: (1) that it has 
4.36 	undertaken good faith loss mitigation efforts, unless the servicing contract strictly and 
5.1 	unequivocally forbids all such efforts; and (2) that foreclosure is the only viable option to 
5.2 	protect the holder's interest in the property.
5.3 	(c) The holder may show it engaged in good faith loss mitigation efforts by 
5.4 	submitting a list of all applicable loss mitigation practices currently used by it or available 
5.5 	to its loan servicer, together with an affidavit signed by a representative of the holder or 
5.6 	servicer who is personally responsible for determining the debtor's eligibility for loss 
5.7 	mitigation, explaining how the representative engaged in a good faith consideration of 
5.8 	all such practices. If the holder has no list of loss mitigation practices it must show its 
5.9 	attempt at resolution through mitigation. 
5.10 	(d) The debtor may present evidence to show that the representative did not engage 
5.11 	in good faith negotiations involving such loss mitigation practices.
5.12 	(e) It is presumed, unless explicitly stated to the contrary in a service agreement, that 
5.13 	the servicer must act in the best interest of the investor, and that acting in the best interest 
5.14 	of the investor must include good faith attempts at loss mitigation.
5.15 	(f) The court shall consider whether restructuring was considered, what possible loss 
5.16 	mitigation is expressly forbidden by the service contract, whether a reasonable attempt 
5.17 	was made by the servicer to get the investor to waive any impediment in the servicing 
5.18 	contract to specific types of loss mitigation, whether the servicer investigated the facts, 
5.19 	and whether there is likely to be a larger loss to the investor if the property is foreclosed 
5.20 	than if a loss mitigation effort is used.
5.21 	(g) The district court may appoint one or more voluntary referees to whom to refer 
5.22 	hearings under this section. The rules of procedure and evidence shall be those used in 
5.23 	conciliation court. No filing fee shall be charged to a mortgagor under this section.
5.24 		Subd. 3.Effect of lack of good faith mitigation. Any holder who does not engage 
5.25 	in good faith loss mitigation efforts shall also lose all right to do mortgage-related business 
5.26 	in Minnesota and may not use any government systems for the purpose of mortgage-related 
5.27 	business, including but not limited to courts and records, for a period of ten years.

5.28 	EFFECTIVE DATE. This section is effective the day following final enactment 
5.29 	and applies to foreclosures in which the scheduled date of sale is after that date.