HF 13

as introduced - 82nd Legislature, 2002 1st Special Session (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to commerce; regulating home loans; providing 
  1.3             protections; proposing coding for new law as Minnesota 
  1.4             Statutes, chapter 58A. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  [TITLE, PURPOSES.] 
  1.7      (a) This act shall be known as the Minnesota Home Loan 
  1.8   Protection Act. 
  1.9      (b) The legislature finds that abusive mortgage lending has 
  1.10  become an increasing problem in this state, exacerbating the 
  1.11  loss of equity in homes and causing the number of foreclosures 
  1.12  to increase in recent years.  One of the most common forms of 
  1.13  abusive lending is the making of loans that are equity based, 
  1.14  rather than income based.  The financing of points and fees in 
  1.15  these loans provides immediate income to the originator and 
  1.16  encourages lenders to repeatedly refinance home loans.  The 
  1.17  lender's ability to sell loans reduces the incentive to ensure 
  1.18  that the homeowner can afford the payments of the loan.  As long 
  1.19  as there is sufficient equity in the home, an abusive lender 
  1.20  benefits even if the borrower is unable to make the payments and 
  1.21  is forced to refinance.  The financing of high points and fees 
  1.22  causes the loss of precious equity in each refinancing and often 
  1.23  leads to foreclosure. 
  1.24     Abusive lending has threatened the viability of many 
  1.25  communities and caused decreases in homeownership.  While the 
  2.1   marketplace appears to operate effectively for conventional 
  2.2   mortgages, too many homeowners find themselves victims of 
  2.3   overreaching lenders who provide loans with unnecessarily high 
  2.4   costs and terms that are unnecessary to secure repayment of the 
  2.5   loan.  The legislature finds that as competition and 
  2.6   self-regulation have not eliminated the abusive terms from 
  2.7   home-secured loans, the consumer protection provisions of this 
  2.8   act are necessary to encourage lending at reasonable rates with 
  2.9   reasonable terms. 
  2.10     (c) This act shall be liberally construed to effectuate its 
  2.11  purpose of protecting the homes and the equity of individual 
  2.12  borrowers.  This act is to be construed as a consumer protection 
  2.13  statute for all purposes. 
  2.14     Sec. 2.  [58A.01] [DEFINITIONS.] 
  2.15     Subdivision 1.  [APPLICATION.] The terms defined in 
  2.16  subdivisions 2 to 11 apply for the purposes of this chapter. 
  2.17     Subd. 2.  [BENCHMARK RATE.] "Benchmark rate" means the 
  2.18  interest rate which the borrower can reduce by paying bona fide 
  2.19  discount points.  This rate must not exceed the weekly average 
  2.20  yield of United States Treasury securities having a maturity of 
  2.21  five years, on the 15th day of the month immediately preceding 
  2.22  the month in which the loan is made, plus four percentage points.
  2.23     Subd. 3.  [BONA FIDE DISCOUNT POINTS.] "Bona fide discount 
  2.24  points" means loan discount points which are: 
  2.25     (1) knowingly paid by the borrower; 
  2.26     (2) paid for the express purpose of lowering the benchmark 
  2.27  rate; 
  2.28     (3) in fact reducing the interest rate or time-price 
  2.29  differential applicable to the loan from an interest rate which 
  2.30  does not exceed the benchmark rate; and 
  2.31     (4) recouped within the first four years of the scheduled 
  2.32  loan payments. 
  2.33  For purposes of assessing compliance with clause (4), loan 
  2.34  discount points will be considered to be recouped within the 
  2.35  first four years of the scheduled loan payments if the reduction 
  2.36  in the interest rate that is achieved by the payment of the loan 
  3.1   discount points reduces the interest charged on the scheduled 
  3.2   payments such that the borrower's dollar amount of savings in 
  3.3   interest over the first four years is equal to or exceeds the 
  3.4   dollar amount of loan discount points paid by the borrower. 
  3.5      Subd. 4.  [BORROWER.] "Borrower" means any natural person 
  3.6   obligated to repay the loan, including a coborrower, cosigner, 
  3.7   or guarantor. 
  3.8      Subd. 5.  [CREDITOR.] "Creditor" means a person who extends 
  3.9   consumer credit that is subject to a finance charge or is 
  3.10  payable by written agreement in more that four installments and 
  3.11  to whom the obligation is payable at any time. 
  3.12     Subd. 6.  [HIGH-COST HOME LOAN.] "High-cost home loan" 
  3.13  means a home loan in which the terms of the loan meet or exceed 
  3.14  one or more of the thresholds as defined in subdivision 10. 
  3.15     Subd. 7.  [HOME LOAN.] "Home loan" means a loan, including 
  3.16  an open-end credit plan, other than a reverse mortgage 
  3.17  transaction, where the loan is secured by: 
  3.18     (1) a mortgage or deed of trust on real estate in this 
  3.19  state upon which there is located or there is to be located a 
  3.20  structure or structures designed principally for occupancy of 
  3.21  from one to four families which is or will be occupied by a 
  3.22  borrower as the borrower's principal dwelling; or 
  3.23     (2) a security interest on a manufactured home which is or 
  3.24  will be occupied by a borrower as the borrower's principal 
  3.25  dwelling. 
  3.26  And where the loan refinances an existing home loan, is a 
  3.27  subordinate lien following one or more existing loans, or where 
  3.28  the property securing the mortgage was, prior to the new 
  3.29  mortgage, owned free and clear by the borrower. 
  3.30     Subd. 8.  [POINTS AND FEES.] "Points and fees" means: 
  3.31     (1) all items listed in United States Code, title 15, 
  3.32  section 1605(a)(1) through (4), except interest or the 
  3.33  time-price differential; 
  3.34     (2) all charges listed in United States Code, title 15, 
  3.35  section 1605(e); 
  3.36     (3) all compensation paid directly or indirectly to a 
  4.1   mortgage broker, including a broker that originates a loan in 
  4.2   its own name in a table-funded transaction; 
  4.3      (4) the cost of all premiums financed by the creditor, 
  4.4   directly or indirectly, for any credit life, credit disability, 
  4.5   credit unemployment or credit property insurance, or any other 
  4.6   life or health insurance, or any payments financed by the 
  4.7   creditor directly or indirectly for any debt cancellation or 
  4.8   suspension agreement or contract, except insurance premiums 
  4.9   calculated and paid on a monthly basis shall not be considered 
  4.10  financed by the creditor; 
  4.11     (5) the maximum prepayment fees and penalties that may be 
  4.12  charged or collected under the terms of the loan documents; and 
  4.13     (6) all prepayment fees or penalties that are charged the 
  4.14  borrower if the loan refinances a previous loan made by the same 
  4.15  creditor or an affiliate of the creditor. 
  4.16     For open-end loans, the points and fees are calculated by 
  4.17  adding the total fees charged at closing plus the maximum 
  4.18  additional fees which can be charged pursuant to the loan 
  4.19  documents during the term of the loan. 
  4.20     Subd. 9.  [RATE.] "Rate" means the interest rate charged on 
  4.21  the home loan, based on an annual simple interest yield. 
  4.22     Subd. 10.  [THRESHOLD.] "Threshold" means any one of the 
  4.23  following, as defined: 
  4.24     (a) "Rate threshold" means: 
  4.25     (1) for a first lien mortgage loan, the trigger rate equals 
  4.26  or exceeds six percentage points over the weekly average yield 
  4.27  on five-year United States Treasury securities; 
  4.28     (2) for a subordinate mortgage lien or a mortgage secured 
  4.29  solely by a security interest in a manufactured home, the 
  4.30  trigger rate equals or exceeds eight percentage points over the 
  4.31  weekly average yield on five-year United States Treasury 
  4.32  securities; and 
  4.33     (3) the trigger rate is calculated as follows: 
  4.34     (i) for fixed-rate loans in which the interest rate will 
  4.35  not vary during the term of the loan, the trigger rate is the 
  4.36  rate as of the date of closing; 
  5.1      (ii) for loans in which the interest varies according to an 
  5.2   index, the trigger rate is the sum of the index rate as of the 
  5.3   date of loan closing plus the maximum margin permitted at any 
  5.4   time under the loan agreement; and 
  5.5      (iii) for all other loans in which the rate may vary at any 
  5.6   time during the term of the loan, the trigger rate is the 
  5.7   maximum rate that may be charged during the term of the loan. 
  5.8      (b) "Total points and fees thresholds" means the following, 
  5.9   excluding up to two bona fide discount points: 
  5.10     (1) for loans in which the total loan amount is $30,000 or 
  5.11  more, the total points and fees on the loan, paid by the 
  5.12  borrower at or before closing, exceed three percent of the total 
  5.13  loan amount; and 
  5.14     (2) for loans in which the total loan amount is less than 
  5.15  $30,000, the total points and fees on the loan, paid by the 
  5.16  borrower at or before closing, exceed the lesser of $900 or six 
  5.17  percent of the total loan amount. 
  5.18     (c) "Prepayment penalty threshold" means the home loan 
  5.19  agreement permits the lender to charge or collect payment 
  5.20  penalties or penalties more than 30 months after the loan 
  5.21  closing or which exceed, in the aggregate, more than two percent 
  5.22  of the amount prepaid. 
  5.23     Subd. 11.  [TOTAL LOAN AMOUNT.] "Total loan amount" means 
  5.24  the principal of the loan minus those points and fees as defined 
  5.25  in subdivision 8 that are included in the principal amount of 
  5.26  the loan.  For open-end loans, the total loan amount is 
  5.27  calculated using the total line of credit allowed under the home 
  5.28  loan. 
  5.29     Sec. 3.  [58A.02] [PROHIBITED ACTS AND PRACTICES REGARDING 
  5.30  HOME LOANS.] 
  5.31     Subdivision 1.  [INSURANCE AND DEBT CANCELLATION 
  5.32  AGREEMENTS.] No creditor making a home loan shall finance, 
  5.33  directly or indirectly, any credit life, credit disability, 
  5.34  credit unemployment or credit property insurance, or any other 
  5.35  life or health insurance, or any payments directly or indirectly 
  5.36  for any debt cancellation or suspension agreement or contract, 
  6.1   except that insurance premiums or debt cancellation or 
  6.2   suspension fees calculated and paid on a monthly basis are not 
  6.3   considered to be financed by the creditor. 
  6.4      Subd. 2.  [FLIPPING.] No creditor may engage in the unfair 
  6.5   act or practice of flipping a home loan.  Flipping a home loan 
  6.6   is the making of a home loan to a borrower that refinances an 
  6.7   existing home loan when the new loan does not have reasonable, 
  6.8   tangible net benefit to the borrower considering all of the 
  6.9   circumstances, including the terms of both the new and 
  6.10  refinanced loans, the cost of the new loan, and the borrower's 
  6.11  circumstances.  In addition, the following home loan 
  6.12  refinancings are presumed to be flipping if: 
  6.13     (1) the primary tangible benefit to the borrower is an 
  6.14  interest rate lower than the interest rate on debts satisfied or 
  6.15  refinanced in connection with the home loan, and it will take 
  6.16  more than four years for the borrower to recoup the costs of the 
  6.17  points and fees and other closing costs through savings 
  6.18  resulting from the lower interest rate; or 
  6.19     (2) the new loan refinances an existing home loan that is a 
  6.20  special mortgage originated, subsidized, or guaranteed by or 
  6.21  through a state, tribal, or local government, or nonprofit 
  6.22  organization, which either bears a below-market interest rate at 
  6.23  the time the loan was originated, or has nonstandard payment 
  6.24  terms beneficial to the borrower, such as payments that vary 
  6.25  with income, are limited to a percentage of income, or where no 
  6.26  payments are required under specified conditions, and where, as 
  6.27  a result of the refinancing, the borrower will lose one or more 
  6.28  of the benefits of the special mortgage. 
  6.29     Subd. 3.  [RECOMMENDATION OF DEFAULT.] No creditor shall 
  6.30  recommend or encourage default on an existing loan or other debt 
  6.31  prior to and in connection with the closing or planned closing 
  6.32  of a home loan that refinances all or any portion of such 
  6.33  existing loan or debt. 
  6.34     Subd. 4.  [LATE FEES.] No creditor may charge a late 
  6.35  payment fee except according to the following rules: 
  6.36     (1) the late payment fee may not be in excess of four 
  7.1   percent of the amount of the payment past due; 
  7.2      (2) the fee may only be assessed for a payment past due for 
  7.3   15 days or more; 
  7.4      (3) the fee may not be charged more than once with respect 
  7.5   to a single late payment.  If a late payment charge is deducted 
  7.6   from a payment made on the loan, and the deduction causes a 
  7.7   subsequent default on a subsequent payment, no late payment 
  7.8   charge may be imposed for the default.  If a late payment charge 
  7.9   has been once imposed with respect to a particular late payment, 
  7.10  no charge may be imposed with respect to any future payment 
  7.11  which would have been timely and sufficient except for the 
  7.12  previous default; 
  7.13     (4) no fee may be charged unless the creditor notifies the 
  7.14  borrower within 45 days following the date the payment was due 
  7.15  that a late payment charge has been imposed for a particular 
  7.16  late payment.  No late payment charge may be collected from any 
  7.17  borrower if the borrower informs the creditor that nonpayment of 
  7.18  an installment is in dispute and presents proof of payment 
  7.19  within 45 days of receipt of the creditor's notice of the late 
  7.20  charge; and 
  7.21     (5) the creditor shall treat each and every payment as 
  7.22  posted on the same date as it was received by the creditor, 
  7.23  servicer, creditor's agent, or at the address provided to the 
  7.24  borrower by the creditor, servicer, or the creditor's agent for 
  7.25  making payments. 
  7.26     Subd. 5.  [CALL PROVISION PROHIBITION.] No home loan may 
  7.27  contain a provision that permits the creditor, in its sole 
  7.28  discretion, to accelerate the indebtedness.  This provision does 
  7.29  not prohibit acceleration of the loan in good faith due to the 
  7.30  borrower's failure to abide by the material terms of the loan. 
  7.31     Subd. 6.  [FEE FOR BALANCE.] No creditor may charge a fee 
  7.32  for informing or transmitting to any person the balance due to 
  7.33  pay off a home loan or to provide a release upon prepayment.  
  7.34  Payoff balances must be provided within a reasonable time, but 
  7.35  in any event no more than seven business days after the request. 
  7.36     Sec. 4.  [58A.03] [LIMITATIONS AND PROHIBITED PRACTICES FOR 
  8.1   HIGH-COST HOME LOANS.] 
  8.2      Subdivision 1.  [NO FINANCING OF FEES OR CHARGES.] No 
  8.3   creditor making a high-cost home loan shall directly or 
  8.4   indirectly finance any points or fees. 
  8.5      Subd. 2.  [PREPAYMENT PENALTIES LIMITED.] No prepayment 
  8.6   fees or penalties may be included in the loan documents for a 
  8.7   high-cost home loan or charged to the borrower which exceed in 
  8.8   the aggregate: 
  8.9      (1) in the first 12 months after the loan closing, more 
  8.10  than two percent of the loan amount prepaid; or 
  8.11     (2) in the second 12 months after the loan closing, more 
  8.12  than one percent of the amount prepaid. 
  8.13     No prepayment penalty shall be contracted for after the 
  8.14  second year following the loan closing. 
  8.15     Subd. 3.  [NO BALLOON PAYMENT.] No high-cost home loan may 
  8.16  contain a scheduled payment that is more than twice as large as 
  8.17  the average of earlier scheduled payments.  This provision does 
  8.18  not apply when the payment schedule is adjusted to the seasonal 
  8.19  or irregular income of the borrower. 
  8.20     Subd. 4.  [NO NEGATIVE AMORTIZATION.] No high-cost home 
  8.21  loan may include payment terms under which the outstanding 
  8.22  principal balance will increase at any time over the course of 
  8.23  the loan because the regular periodic payments do not cover the 
  8.24  full amount of interest due. 
  8.25     Subd. 5.  [NO INCREASED INTEREST RATE.] No high-cost home 
  8.26  loan may contain a provision that increases the interest rate 
  8.27  after default.  This provision does not apply to interest rate 
  8.28  changes in a variable rate loan otherwise consistent with the 
  8.29  provisions of the loan documents, provided the change in the 
  8.30  interest rate is not triggered by the event of default or the 
  8.31  acceleration of the indebtedness. 
  8.32     Subd. 6.  [NO ADVANCE PAYMENTS.] No high-cost home loan may 
  8.33  include terms under which more than two periodic payments 
  8.34  required under the loan are consolidated and paid in advance 
  8.35  from the loan proceeds provided to the borrower. 
  8.36     Subd. 7.  [NO MANDATORY ARBITRATION CLAUSE.] No high-cost 
  9.1   home loan may be subject to a mandatory arbitration clause that 
  9.2   limits in any way the right of the borrower to seek relief 
  9.3   through the judicial process for any and all claims and defenses 
  9.4   the borrower may have against the creditor, broker, or other 
  9.5   party involved in the loan transaction. 
  9.6      Subd. 8.  [NO LENDING WITHOUT HOMEOWNERSHIP COUNSELING.] A 
  9.7   creditor may not make a high-cost home loan without first 
  9.8   receiving certification from a counselor approved by the United 
  9.9   States Department of Housing and Urban Development (HUD), a 
  9.10  state housing financing agency, or the regulatory agency which 
  9.11  has jurisdiction over the creditor, that the borrower has 
  9.12  received counseling on the advisability of the loan transaction. 
  9.13     Subd. 9.  [NO LENDING WITHOUT DUE REGARD TO REPAYMENT 
  9.14  ABILITY.] A creditor may not make a high-cost home loan without 
  9.15  due regard to repayment ability.  A creditor who follows the 
  9.16  debt-to-income ratio listed in Code of Federal Regulations, 
  9.17  title 38, section 36.4337(c)(1), and as defined in Code of 
  9.18  Federal Regulations, title 38, section 36.4337(d), and follows 
  9.19  the residual income guidelines established in Code of Federal 
  9.20  Regulations, title 38, section 36.4337(e) and VA Form 26-6393 
  9.21  shall benefit from a rebuttable presumption that the creditor 
  9.22  made the loan with due regard to repayment ability. 
  9.23     Subd. 10.  [HOME IMPROVEMENT CONTRACTS.] A creditor may not 
  9.24  pay a contractor under a home improvement contract from the 
  9.25  proceeds of a high-cost home loan, unless: 
  9.26     (1) the creditor is presented with a signed and dated 
  9.27  completion certificate showing that the home improvements have 
  9.28  been completed; and 
  9.29     (2) the instrument is payable to the borrower or jointly to 
  9.30  the borrower and the contractor, or, at the election of the 
  9.31  borrower, through a third-party escrow agent in accordance with 
  9.32  terms established in a written agreement signed by the borrower, 
  9.33  the creditor, and the contractor before the disbursement. 
  9.34     Subd. 11.  [NO MODIFICATION OR DEFERRAL FEES.] A creditor 
  9.35  may not charge a borrower any fees or other charges to modify, 
  9.36  renew, extend, or amend a high-cost home loan or to defer any 
 10.1   payment due under the terms of a high-cost home loan. 
 10.2      Subd. 12.  [JUDICIAL FORECLOSURE OR DETERMINATION.] Any 
 10.3   creditor making a high-cost home loan that has the legal right 
 10.4   to foreclose must use the judicial foreclosure procedures of the 
 10.5   state wherein the property securing the loan is located.  The 
 10.6   borrower has the right to assert in the proceeding the 
 10.7   nonexistence of a default and any other claim or defense to 
 10.8   acceleration and foreclosure, including any based on any 
 10.9   violations of this chapter, though no such claim or defense may 
 10.10  be deemed a compulsory counterclaim. 
 10.11     Sec. 5.  [58A.04] [RIGHT TO CURE.] 
 10.12     Subdivision 1.  [RIGHT TO REINSTATE.] If a creditor asserts 
 10.13  that grounds for acceleration exist and requires the payment in 
 10.14  full of all sums secured by the security instrument, the 
 10.15  borrower, or anyone authorized to act on the borrower's behalf, 
 10.16  has the right at any time, up to the time title is transferred 
 10.17  by means of foreclosure, by judicial proceeding and sale or 
 10.18  otherwise, to cure the default, and reinstate the home loan by 
 10.19  tendering the amount or performance as specified.  Cure of 
 10.20  default reinstates the borrower to the same position as if the 
 10.21  default had not occurred and nullifies, as of the date of the 
 10.22  cure, any acceleration of any obligation under the security 
 10.23  instrument or note arising from the default. 
 10.24     Subd. 2.  [GROUNDS FOR REINSTATEMENT.] Before any action 
 10.25  filed to foreclose upon the home or other action is taken to 
 10.26  seize or transfer ownership of the home, a notice of the right 
 10.27  to cure the default must be delivered to the borrower informing 
 10.28  the borrower of the following: 
 10.29     (1) the nature of default claimed on the home loan, and of 
 10.30  the borrower's right to cure the default by paying the sum of 
 10.31  money required to cure the default, provided that a creditor or 
 10.32  servicer may not refuse to accept any partial payment made or 
 10.33  tendered in response to the notice.  If the amount necessary to 
 10.34  cure the default will change during the 30-day period after the 
 10.35  effective date of the notice, due to the application of a daily 
 10.36  interest rate or the addition of late fees, as allowed by this 
 11.1   chapter, the notice must give sufficient information to enable 
 11.2   the borrower to calculate the amount at any point during the 
 11.3   30-day period; 
 11.4      (2) the date by which the borrower shall cure the default 
 11.5   to avoid acceleration and initiation of foreclosure, or other 
 11.6   action to seize the home, which date shall not be less than 30 
 11.7   days after the date the notice is effective, and the name, 
 11.8   address, and telephone number of a person to whom the payment or 
 11.9   tender shall be made; 
 11.10     (3) that if the borrower does not cure the default by the 
 11.11  date specified, the creditor may take steps to terminate the 
 11.12  borrower's ownership in the property by requiring payment in 
 11.13  full of the home loan and commencing a foreclosure proceeding or 
 11.14  other action to seize the home; and 
 11.15     (4) the name and address of the creditor and the telephone 
 11.16  number of a representative of the creditor who the borrower may 
 11.17  contact if the borrower disagrees with the creditor's assertion 
 11.18  that a default has occurred or the correctness of the creditor's 
 11.19  calculation of the amount required to cure the default. 
 11.20     Subd. 3.  [FEES.] To cure a default under this section, a 
 11.21  borrower may not be required to pay any charge, fee, or penalty 
 11.22  attributable to the exercise of the right to cure a default as 
 11.23  provided for in this section, other than the fees specifically 
 11.24  allowed by this section.  The borrower may not be liable for any 
 11.25  attorney fees relating to the borrower's default that are 
 11.26  incurred by the lender before or during the 30-day period set 
 11.27  forth in subdivision 2, clause (2), nor for any such fees in 
 11.28  excess of $100 that are incurred by the lender after the 
 11.29  expiration of the 30-day period but before the time the lender 
 11.30  files a foreclosure action or takes other action to seize or 
 11.31  transfer ownership of the home.  After the lender files a 
 11.32  foreclosure action or takes other action to seize or transfer 
 11.33  ownership of the home, the borrower is only liable for attorney 
 11.34  fees that are reasonable and actually incurred by the lender, 
 11.35  based on a reasonable hourly rate and a reasonable number of 
 11.36  hours. 
 12.1      Subd. 4.  [ENFORCEMENT OF SECURITY INSTRUMENT.] If a 
 12.2   default is cured before the initiation of any action to 
 12.3   foreclose or to seize the residence, the creditor shall not 
 12.4   institute the foreclosure proceeding or other action for that 
 12.5   default.  If a default is cured after the initiation of any 
 12.6   action to foreclose, the creditor shall take steps necessary to 
 12.7   terminate the foreclosure proceeding or other action.  Any 
 12.8   creditor making a home loan who has the legal right to foreclose 
 12.9   must use the judicial foreclosure procedures of the state 
 12.10  wherein the property securing the loan is located.  The borrower 
 12.11  may assert in a judicial foreclosure proceeding or other action 
 12.12  the nonexistence of a default and any other claim or defense to 
 12.13  acceleration and foreclosure, including any based on violations 
 12.14  of this chapter, though no such claim or defense may be deemed a 
 12.15  compulsory counterclaim. 
 12.16     Sec. 6.  [58A.05] [PRESERVATION AND ENFORCEMENT OF CLAIMS 
 12.17  AND DEFENSES, NO SUBTERFUGE.] 
 12.18     Subdivision 1.  [CLAIMS AGAINST SELLERS.] Notwithstanding 
 12.19  any other provision of law, where a home loan was made, 
 12.20  arranged, or assigned by a person selling either a manufactured 
 12.21  home, or home improvements to the dwelling of a borrower, the 
 12.22  borrower may assert all affirmative claims and any defenses that 
 12.23  the borrower may have against the seller or home improvement 
 12.24  contractor against the lender, any assignee, holder, or 
 12.25  servicer, in any capacity. 
 12.26     Subd. 2.  [LIABILITY OF ASSIGNEES AND OTHER HOLDERS IN 
 12.27  HIGH-COST HOME LOANS.] Notwithstanding any provision of any 
 12.28  other law, the remedies provided in this section apply to the 
 12.29  creditor, any director, officer, employee, or controlling 
 12.30  stockholder of, or agent for, a creditor who personally 
 12.31  participated in the making or approving of a high-cost home 
 12.32  loan, and any other persons to whom this chapter applies and who 
 12.33  violated the requirements of this chapter.  Any person who 
 12.34  purchases or is otherwise assigned a high-cost home loan is 
 12.35  subject to all affirmative claims and any defenses with respect 
 12.36  to the loan that the borrower could assert against the original 
 13.1   creditor or broker of the loan. 
 13.2      Subd. 3.  [LIABILITY OF ASSIGNEES IN FORECLOSURE 
 13.3   ACTION.] Notwithstanding any provision of any other law, a 
 13.4   borrower in default more than 60 days or in foreclosure may 
 13.5   assert a violation of this chapter by way of offset: 
 13.6      (1) as an original action; 
 13.7      (2) as a defense or counterclaim to an action to collect 
 13.8   amounts owed; or 
 13.9      (3) to obtain possession of the home secured by the home 
 13.10  loan. 
 13.11     Subd. 4.  [NO SUBTERFUGE.] It is a violation of this 
 13.12  chapter, for any person, who in bad faith attempts to avoid the 
 13.13  application of this chapter by: 
 13.14     (1) dividing any loan transaction into separate parts for 
 13.15  this purpose; or 
 13.16     (2) any other such subterfuge, with the intent of evading 
 13.17  the provisions of this chapter. 
 13.18     Sec. 7.  [58A.06] [ENFORCEMENT.] 
 13.19     Subdivision 1.  [CIVIL.] (a) Any violation of this chapter 
 13.20  is a deceptive and unfair trade practice and constitutes a 
 13.21  violation of section 325F.69. 
 13.22     (b) Any person found by a preponderance of the evidence to 
 13.23  have violated this chapter is liable to the borrower for the 
 13.24  following: 
 13.25     (1) actual damages, including consequential and incidental 
 13.26  damages, and the borrower is not required to demonstrate 
 13.27  reliance in order to receive actual damages; 
 13.28     (2) statutory damages equal to the finance charges agreed 
 13.29  to in the home loan agreement, plus ten percent of the amount 
 13.30  financed; 
 13.31     (3) punitive damages when the violation was malicious or 
 13.32  reckless; and 
 13.33     (4) costs and reasonable attorney fees. 
 13.34     (c) A borrower may be granted injunctive, declaratory, and 
 13.35  other equitable relief as the court considers appropriate in an 
 13.36  action to enforce compliance with this chapter. 
 14.1      (d) The intentional violation of this chapter, or 
 14.2   regulation under it, renders the home loan agreement void, and 
 14.3   the creditor has no right to collect, receive, or retain any 
 14.4   principal, interest, or other charges with respect to the loan, 
 14.5   and the borrower may recover any payments made under the 
 14.6   agreement. 
 14.7      (e) The right of rescission granted under United States 
 14.8   Code, title 15, section 1601 et seq., for violations of that law 
 14.9   and all other remedies provided under it shall be available to a 
 14.10  borrower by way of recoupment against a party foreclosing on the 
 14.11  home loan or collecting on the loan, at any time during the term 
 14.12  of the loan. 
 14.13     (f) The remedies provided in this section are not intended 
 14.14  to be the exclusive remedies available to a borrower, nor must 
 14.15  the borrower exhaust any administrative remedies provided under 
 14.16  this chapter or any other applicable law before proceeding under 
 14.17  this section. 
 14.18     Subd. 2.  [CRIMINAL.] Any person, including members, 
 14.19  officers, and directors of the creditor, who knowingly violates 
 14.20  this chapter is guilty of a gross misdemeanor. 
 14.21     Subd. 3.  [CORRECTIONS AND UNINTENTIONAL VIOLATIONS.] A 
 14.22  creditor in a home loan who, when acting in good faith, fails to 
 14.23  comply with the provisions of this chapter, will not be deemed 
 14.24  to have violated this section if the creditor establishes that 
 14.25  either: 
 14.26     (1) within 30 days of the loan closing, and prior to 
 14.27  receiving any notice from the borrower of the compliance 
 14.28  failure, the creditor has made appropriate restitution to the 
 14.29  borrower and appropriate adjustments are made to the loan; or 
 14.30     (2) within 60 days of the loan closing, and before 
 14.31  receiving any notice from the borrower of the compliance 
 14.32  failure, and the compliance failure was not intentional and 
 14.33  resulted from a bona fide error notwithstanding the maintenance 
 14.34  of procedures reasonably adapted to avoid such errors, the 
 14.35  borrower is notified of the compliance failure, appropriate 
 14.36  restitution is made to the borrower, and appropriate adjustments 
 15.1   are made to the loan. 
 15.2   Examples of bona fide errors include clerical, calculation, 
 15.3   computer malfunction and programming, and printing errors.  An 
 15.4   error of legal judgment with respect to a person's obligations 
 15.5   under this section is not a bona fide error. 
 15.6      Subd. 4.  [CUMULATIVE.] The remedies provided in this 
 15.7   section are cumulative. 
 15.8      Sec. 8.  [58A.07] [RIGHTS IN ADDITION TO OTHER LAWS.] 
 15.9      The rights conferred by this section are independent of and 
 15.10  in addition to any other rights under other laws. 
 15.11     Sec. 9.  [58A.08] [SEVERABILITY.] 
 15.12     The provisions of this chapter are severable, and if any 
 15.13  phrase, clause, sentence, or provision is declared to be invalid 
 15.14  or is preempted by federal law or regulation, the validity of 
 15.15  the remainder of this chapter are not to be affected by it.  If 
 15.16  any provision of this chapter is declared to be inapplicable to 
 15.17  any specific category, type, or kind of loan or points and fees, 
 15.18  the provisions of this chapter nonetheless continue to apply 
 15.19  with respect to all other loans and points and fees. 
 15.20     Sec. 10.  [58A.09] [APPLICABILITY.] 
 15.21     The law of the state in which the property is located shall 
 15.22  be applied to all transactions governed by this chapter.  This 
 15.23  chapter applies to all loans made or entered into after the 
 15.24  effective date of this chapter.