HF 1748

1st Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to residential mortgage lending; modifying licensing and education
requirements; providing examination powers to the commissioner; amending
Minnesota Statutes 2006, sections 58.04, subdivisions 1, 2; 58.05; 58.06,
subdivision 2, by adding a subdivision; 58.08, subdivision 3; 58.10, subdivision
1; proposing coding for new law in Minnesota Statutes, chapter 58; repealing
Minnesota Statutes 2006, section 58.08, subdivision 1.

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

Section 1.

Minnesota Statutes 2006, section 58.04, subdivision 1, is amended to read:

Subdivision 1.

Residential mortgage originator licensing requirements.

(a)
deleted text begin Beginning August 1, 1999, deleted text end No person shall act as a residential mortgage originator, or
make residential mortgage loans without first obtaining a license from the commissioner
according to the licensing procedures provided in this chapter.

(b) new text begin A licensee must be either a partnership, limited liability partnership, association,
limited liability company, corporation, or other form of business organization, and must
have and maintain at all times one of the following: (1) approval as a mortgagee by
either the federal Department of Housing and Urban Development or the Federal National
Mortgage Association; (2) a minimum net worth, net of intangibles, of at least $250,000;
or (3) a surety bond or irrevocable letter of credit in the amount of $100,000. Net worth,
net of intangibles, must be calculated in accordance with generally accepted accounting
principles.
new text end

new text begin (c) new text end The following persons are exempt from the residential mortgage originator
licensing requirements:

deleted text begin (1) an employee of one mortgage originator licensee or one person holding a
certificate of exemption;
deleted text end

deleted text begin (2) a person licensed as a real estate broker under chapter 82 who is not licensed to
another real estate broker;
deleted text end

deleted text begin (3) an individual real estate licensee who is licensed to a real estate broker as
described in clause (2) if:
deleted text end

deleted text begin (i) the individual licensee acts only under the name, authority, and supervision of the
broker to whom the licensee is licensed;
deleted text end

deleted text begin (ii) the broker to whom the licensee is licensed obtains a certificate of exemption
according to section deleted text begin 58.05, subdivision 2 deleted text end ;
deleted text end

deleted text begin (iii) the broker does not collect an advance fee for its residential mortgage-related
activities; and
deleted text end

deleted text begin (iv) the residential mortgage origination activities are incidental to the real estate
licensee's primary activities as a real estate broker or salesperson;
deleted text end

deleted text begin (4) an individual licensed as a property/casualty or life/health insurance agent under
chapter 60K if:
deleted text end

deleted text begin (i) the insurance agent acts on behalf of only one residential mortgage originator,
which is in compliance with chapter 58;
deleted text end

deleted text begin (ii) the insurance agent has entered into a written contract with the mortgage
originator under the terms of which the mortgage originator agrees to accept responsibility
for the insurance agent's residential mortgage-related activities;
deleted text end

deleted text begin (iii) the insurance agent obtains a certificate of exemption under section deleted text begin 58.05,
subdivision 2 deleted text end ; and
deleted text end

deleted text begin (iv) the insurance agent does not collect an advance fee for the insurance agent's
residential mortgage-related activities;
deleted text end

deleted text begin (5) deleted text end new text begin (1) new text end a person who is not in the business of making residential mortgage loans and
who makes no more than three such loans, with its own funds, during any 12-month period;

deleted text begin (6) deleted text end new text begin (2) new text end a financial institution as defined in section 58.02, subdivision 10;

deleted text begin (7) deleted text end new text begin (3) new text end an agency of the federal government, or of a state or municipal government;

deleted text begin (8) deleted text end new text begin (4) new text end an employee or employer pension plan making loans only to its participants;

deleted text begin (9) deleted text end new text begin (5) new text end a person acting in a fiduciary capacity, such as a trustee or receiver, as a result
of a specific order issued by a court of competent jurisdiction; or

deleted text begin (10) deleted text end new text begin (6) new text end a person exempted by order of the commissioner.

Sec. 2.

Minnesota Statutes 2006, section 58.04, subdivision 2, is amended to read:

Subd. 2.

Residential mortgage servicer licensing requirements.

(a) deleted text begin Beginning
August 1, 1999, deleted text end No person shall engage in activities or practices that fall within the
definition of "servicing a residential mortgage loan" under section 58.02, subdivision
22, without first obtaining a license from the commissioner according to the licensing
procedures provided in this chapter.

(b) The following persons are exempt from the residential mortgage servicer
licensing requirements:

(1) a person licensed as a residential mortgage originator;

deleted text begin (2) an employee of one licensee or one person holding a certificate of exemption
based on an exemption under this subdivision;
deleted text end

deleted text begin (3) deleted text end new text begin (2) new text end a person servicing loans made with its own funds, if no more than three such
loans are made in any 12-month period;

deleted text begin (4) deleted text end new text begin (3) new text end a financial institution as defined in section 58.02, subdivision 10;

deleted text begin (5) deleted text end new text begin (4) new text end an agency of the federal government, or of a state or municipal government;

deleted text begin (6) deleted text end new text begin (5) new text end an employee or employer pension plan making loans only to its participants;

deleted text begin (7) deleted text end new text begin (6) new text end a person acting in a fiduciary capacity, such as a trustee or receiver, as a result
of a specific order issued by a court of competent jurisdiction; or

deleted text begin (8) deleted text end new text begin (7) new text end a person exempted by order of the commissioner.

Sec. 3.

Minnesota Statutes 2006, section 58.05, is amended to read:

58.05 EXEMPTIONS FROM LICENSE.

Subdivision 1.

Exempt person.

An exempt person as defined by section 58.04,
subdivision 1, paragraph deleted text begin (b) deleted text end new text begin (c) new text end , and subdivision 2, paragraph (b), is exempt from the
licensing requirements of this chapter, but is subject to all other provisions of this chapter.

Subd. 3.

Certificate of exemption.

A person must obtain a certificate of exemption
from the commissioner to qualify as an exempt person under section 58.04, subdivision
1, paragraph deleted text begin (b) deleted text end new text begin (c) new text end , deleted text begin as a real estate broker under clause (2), an insurance agent under
clause (4), deleted text end a financial institution under clause deleted text begin (6) deleted text end new text begin (2) new text end , or by order of the commissioner
under clause deleted text begin (10) deleted text end new text begin (6) new text end ; or under section 58.04, subdivision 2, paragraph (b), as a financial
institution under clause deleted text begin (4) deleted text end new text begin (3) new text end , or by order of the commissioner under clause deleted text begin (8) deleted text end new text begin (7) new text end .

Sec. 4.

Minnesota Statutes 2006, section 58.06, subdivision 2, is amended to read:

Subd. 2.

Application contents.

new text begin (a) new text end The application must contain the name and
complete business address or addresses of the license applicant. deleted text begin If deleted text end The license applicant deleted text begin is deleted text end
new text begin must be new text end a partnership, limited liability partnership, association, limited liability company,
corporation, or other form of business organization, new text begin and new text end the application must contain the
names and complete business addresses of each partner, member, director, and principal
officer. The application must also include a description of the activities of the license
applicant, in the detail and for the periods the commissioner may require.

new text begin (b) An applicant must submit one of the following:
new text end

new text begin (1) evidence which shows, to the commissioner's satisfaction, that either the federal
Department of Housing and Urban Development or the Federal National Mortgage
Association has approved the applicant as a mortgagee;
new text end

new text begin (2) a surety bond or irrevocable letter of credit in the amount of not less than
$100,000 in a form approved by the commissioner, issued by an insurance company
or bank authorized to do so in this state. The bond or irrevocable letter of credit must
be available for the recovery of expenses, fines, and fees levied by the commissioner
under this chapter and for losses incurred by borrowers. The bond or letter of credit must
be submitted with the license application, and evidence of continued coverage must be
submitted with each renewal. Any change in the bond or letter of credit must be submitted
for approval by the commissioner within ten days of its execution; or
new text end

new text begin (3) a copy of the applicant's most recent audited financial statement, including
balance sheet, statement of income or loss, statements of changes in shareholder equity,
and statement of changes in financial position. Financial statements must be as of a date
within 12 months of the date of application.
new text end

new text begin (c) new text end The application must also include all of the following:

deleted text begin (a) deleted text end new text begin (1) new text end an affirmation under oath that the applicant:

deleted text begin (1) will maintain competent staff and adequate staffing levels, through direct
employees or otherwise, to meet the requirements of this chapter deleted text end new text begin (i) is in compliance
with the requirements of section 58.125 new text end ;

new text begin (ii) will maintain a perpetual roster of individuals employed as residential mortgage
originators, including employees and independent contractors, which includes the date that
mandatory initial education was completed. In addition, the roster must be made available
to the commissioner on demand, within three business days of the commissioner's request;
new text end

deleted text begin (2) deleted text end new text begin (iii) new text end will advise the commissioner of any material changes to the information
submitted in the most recent application within ten days of the change;

deleted text begin (3) deleted text end new text begin (iv) new text end will advise the commissioner in writing immediately of any bankruptcy
petitions filed against or by the applicant or licensee;

deleted text begin (4) is financially solvent deleted text end new text begin (v) will maintain at all times either a net worth, net of
intangibles, of at least $250,000 or a surety bond or irrevocable letter of credit in the
amount of at least $100,000 new text end ;

deleted text begin (5) deleted text end new text begin (vi) new text end complies with federal and state tax laws; new text begin and
new text end

deleted text begin (6) deleted text end new text begin (vii) new text end complies with sections 345.31 to 345.60, the Minnesota unclaimed property
law; deleted text begin and deleted text end

deleted text begin (7) is, or that a person in control of the license applicant is, at least 18 years of age;
deleted text end

deleted text begin (b) deleted text end new text begin (2) new text end information as to the mortgage lending, servicing, or brokering experience
of the applicant and persons in control of the applicant;

deleted text begin (c) deleted text end new text begin (3) new text end information as to criminal convictions, excluding traffic violations, of persons
in control of the license applicant;

deleted text begin (d) deleted text end new text begin (4) new text end whether a court of competent jurisdiction has found that the applicant or
persons in control of the applicant have engaged in conduct evidencing gross negligence,
fraud, misrepresentation, or deceit in performing an act for which a license is required
under this chapter;

deleted text begin (e) deleted text end new text begin (5) new text end whether the applicant or persons in control of the applicant have been the
subject of: an order of suspension or revocation, cease and desist order, or injunctive
order, or order barring involvement in an industry or profession issued by this or another
state or federal regulatory agency or by the Secretary of Housing and Urban Development
within the ten-year period immediately preceding submission of the application; and

deleted text begin (f) deleted text end new text begin (6) new text end other information required by the commissioner.

Sec. 5.

Minnesota Statutes 2006, section 58.06, is amended by adding a subdivision to
read:

new text begin Subd. 3. new text end

new text begin Waiver. new text end

new text begin The commissioner may, for good cause shown, waive any
requirement of this section with respect to any license application or to permit a license
applicant to submit substituted information in its license application in lieu of the
information required by this section.
new text end

Sec. 6.

Minnesota Statutes 2006, section 58.08, subdivision 3, is amended to read:

Subd. 3.

Exemption.

deleted text begin Subdivisions 1 and deleted text end new text begin Subdivision new text end 2 deleted text begin do deleted text end new text begin does new text end not apply to
mortgage originators or mortgage servicers who are approved as seller/servicers by the
Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.

Sec. 7.

Minnesota Statutes 2006, section 58.10, subdivision 1, is amended to read:

Subdivision 1.

Amounts.

The following fees must be paid to the commissioner:

(1) for an initial residential mortgage originator license, deleted text begin $850 deleted text end new text begin $2,550 new text end , $50 of which
is credited to the consumer education account in the special revenue fund;

(2) for a renewal license, deleted text begin $450 deleted text end new text begin $1,350 new text end , $50 of which is credited to the consumer
education account in the special revenue fund;

(3) for an initial residential mortgage servicer's license, $1,000;

(4) for a renewal license, $500; and

(5) for a certificate of exemption, $100.

Sec. 8.

new text begin [58.115] EXAMINATIONS.
new text end

new text begin The commissioner has under this chapter the same powers with respect to
examinations that the commissioner has under section 46.04, including the authority to
charge for the direct costs of the examination, including travel and per diem expenses.
new text end

Sec. 9.

new text begin [58.126] EDUCATION REQUIREMENT.
new text end

new text begin No individual shall engage in residential mortgage origination or make residential
mortgage loans, whether as an employee or independent contractor, before the completion
of 15 hours of educational training which has been approved by the commissioner, and
covering state and federal laws concerning residential mortgage lending.
new text end

Sec. 10. new text begin LICENSE RENEWAL EXTENSION.
new text end

new text begin The July 31, 2007, renewal date for mortgage originators is extended to October 30,
2007, because of the changes to the licensing requirements made by this act.
new text end

Sec. 11. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2006, section 58.08, subdivision 1, new text end new text begin is repealed.
new text end