HF 2866

as introduced - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to financial institutions; enacting a model 
  1.3             act against predatory lending in the home mortgage 
  1.4             market; making conforming changes; amending Minnesota 
  1.5             Statutes 1998, sections 47.20, subdivision 5; and 
  1.6             58.13, subdivision 1; proposing coding for new law as 
  1.7             Minnesota Statutes, chapter 58A. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9                              ARTICLE 1 
  1.10                         MODEL ACT AGAINST 
  1.11           PREDATORY LENDING IN THE HOME MORTGAGE MARKET 
  1.12     Section 1.  [58A.01] [DEFINITIONS.] 
  1.13     Subdivision 1.  [APPLICATION.] For purposes of sections 
  1.14  58A.01 to 58A.07, the terms defined in this section have the 
  1.15  meanings given. 
  1.16     Subd. 2.  [AFFILIATE.] "Affiliate" means any company that 
  1.17  controls, is controlled by, or is under common control with 
  1.18  another company, as set forth in the Bank Holding Company Act of 
  1.19  1956, United States Code, title 12, sections 1841 et seq., as 
  1.20  amended from time to time. 
  1.21     Subd. 3.  [ANNUAL PERCENTAGE RATE.] "Annual percentage rate"
  1.22  means the annual percentage rate for the loan calculated 
  1.23  according to the provisions of the federal Truth-in-Lending Act, 
  1.24  United States Code, title 15, sections 1601 et seq., and the 
  1.25  regulations adopted under that act by the federal reserve board, 
  1.26  as that act and those regulations are amended from time to time. 
  2.1      Subd. 4.  [BONA FIDE LOAN DISCOUNT POINTS.] "Bona fide loan 
  2.2   discount points" means loan discount points knowingly paid by 
  2.3   the borrower for the purpose of reducing, and which in fact 
  2.4   result in a bona fide reduction of, the interest rate or 
  2.5   time-price differential applicable to the loan, provided that 
  2.6   the amount of the interest rate reduction purchased by the 
  2.7   discount points is reasonably consistent with established 
  2.8   industry norms and practices for secondary mortgage market 
  2.9   transactions. 
  2.10     Subd. 5.  [HIGH-COST HOME LOAN.] "High-cost home loan" 
  2.11  means a home loan in which the terms of the loan meet one or 
  2.12  more of the following thresholds: 
  2.13     (1) the annual percentage rate of the home loan at 
  2.14  consummation exceeds by five or more percentage points the 
  2.15  weekly average yield on United States treasury securities 
  2.16  adjusted to a constant maturity of one year, as made available 
  2.17  by the Federal Reserve Board, as of the week immediately 
  2.18  preceding the week in which the interest rate for the loan is 
  2.19  established; 
  2.20     (2) the home loan is a variable rate loan in which the 
  2.21  annual percentage rate can reasonably be expected to increase 
  2.22  beyond the threshold established in clause (1); 
  2.23     (3) potential or scheduled increases in the annual 
  2.24  percentage rate of the home loan are not directly tied to future 
  2.25  increases in a widely used federal or private market measurement 
  2.26  that reflects the cost of borrowing money, such as the interest 
  2.27  rate yield on United States treasury securities, the federal 
  2.28  funds rate, or the prime interest rate; or 
  2.29     (4) the total points and fees on the loan exceed: 
  2.30     (i) three percent of the total loan amount if the total 
  2.31  loan amount is $20,000 or more; 
  2.32     (ii) four percent of the total loan amount if the total 
  2.33  loan amount is $20,000 or more and the loan is a purchase money 
  2.34  loan guaranteed by the Federal Housing Administration or the 
  2.35  Veterans Administration; or 
  2.36     (iii) the lesser of five percent of the total loan amount 
  3.1   or $800, if the total loan amount is less than $20,000.  The 
  3.2   following discount points are excluded from the calculation of 
  3.3   the total points and fees: 
  3.4      (A) up to and including two bona fide loan discount points 
  3.5   payable by the borrower in connection with the loan transaction, 
  3.6   but only if the interest rate from which the loan's interest 
  3.7   rate will be discounted does not exceed by more than one 
  3.8   percentage point the required net yield for a 90-day standard 
  3.9   mandatory delivery commitment for a reasonably comparable loan 
  3.10  from either the Federal National Mortgage Association or the 
  3.11  Federal Home Loan Mortgage Corporation, whichever is greater; 
  3.12     (B) up to and including one bona fide loan discount point 
  3.13  payable by the borrower in connection with the loan transaction, 
  3.14  but only if the interest rate from which the loan's interest 
  3.15  rate will be discounted does not exceed by more than two 
  3.16  percentage points the required net yield for a 90-day standard 
  3.17  mandatory delivery commitment for a reasonably comparable loan 
  3.18  from either the Federal National Mortgage Association or the 
  3.19  Federal Home Loan Mortgage Corporation, whichever is greater. 
  3.20     Subd. 6.  [HOME LOAN.] "Home loan" means a loan, other than 
  3.21  an open-end credit plan or a reverse mortgage transaction, where:
  3.22     (1) the principal amount of the loan does not exceed the 
  3.23  conforming loan size limit for a single-family dwelling as 
  3.24  established from time to time by the Federal National Mortgage 
  3.25  Association; 
  3.26     (2) the borrower is a natural person; 
  3.27     (3) the debt is incurred by the borrower primarily for 
  3.28  personal, family, or household purposes; and 
  3.29     (4) the loan is secured by a mortgage or deed of trust on 
  3.30  real estate upon which there is located or there is to be 
  3.31  located a structure or structures designed principally for 
  3.32  occupancy of from one to four families, which is or will be 
  3.33  occupied by the borrower as the borrower's principal dwelling. 
  3.34     Subd. 7.  [LENDER.] "Lender" means any entity that 
  3.35  originated more than five home loans within the past 12-month 
  3.36  period or acted as an intermediary between originators and 
  4.1   borrowers on more than five home loans within the past 12-month 
  4.2   period. 
  4.3      Subd. 8.  [NONBENEFICIAL REFINANCING.] "Nonbeneficial 
  4.4   refinancing" means the making of a home loan to a borrower that 
  4.5   refinances an existing home loan when the new loan does not have 
  4.6   a reasonable, tangible net benefit to the borrower considering 
  4.7   all of the circumstances, including the terms of both the new 
  4.8   and refinanced loans, the cost of the new loan, and the 
  4.9   borrower's circumstances. 
  4.10     Subd. 9.  [OBLIGOR.] "Obligor" means each borrower, 
  4.11  coborrower, cosigner, or guarantor obligated to repay a loan. 
  4.12     Subd. 10.  [POINTS AND FEES.] "Points and fees" means: 
  4.13     (1) all items required to be disclosed under Code of 
  4.14  Federal Regulations, title 12, sections 226.4(a) and 226.4(b), 
  4.15  as amended from time to time, except interest or the time-price 
  4.16  differential; 
  4.17     (2) all charges for items listed under Code of Federal 
  4.18  Regulations, title 12, section 226.4(c)(7), as amended from time 
  4.19  to time, but only if the lender receives direct or indirect 
  4.20  compensation in connection with the charge or the charge is paid 
  4.21  to an affiliate of the lender; otherwise, the charges are not 
  4.22  included within the meaning of the phrase "points and fees"; 
  4.23     (3) all compensation paid directly or indirectly to a 
  4.24  mortgage broker, including a broker that originates a loan in 
  4.25  its own name in a table-funded transaction, not otherwise 
  4.26  included in clause (1) or (2); 
  4.27     (4) "points and fees" does not include:  (i) taxes, filing 
  4.28  fees, recording and other charges and fees paid or to be paid to 
  4.29  public officials for determining the existence of or for 
  4.30  perfecting, releasing, or satisfying a security interest; and 
  4.31  (ii) fees paid to a person other than a lender or an affiliate 
  4.32  of the lender or to the mortgage broker or an affiliate of the 
  4.33  mortgage broker for the following:  fees for flood 
  4.34  certification; fees for pest infestation and flood 
  4.35  determinations; appraisal fees; fees for inspections performed 
  4.36  prior to closing; credit reports; surveys; attorneys' fees, if 
  5.1   the borrower has the right to select the attorney from an 
  5.2   approved list or otherwise; notary fees; escrow charges, so long 
  5.3   as not otherwise included under clause (1); title insurance 
  5.4   premiums; and fire insurance and flood insurance premiums, 
  5.5   provided that the conditions in Code of Federal Regulations, 
  5.6   title 12, section 226.4(d)(2), are met. 
  5.7      Subd. 11.  [TOTAL LOAN AMOUNT.] "Total loan amount" has the 
  5.8   same meaning as that term as used in Code of Federal 
  5.9   Regulations, title 12, section 226.32, and calculated in 
  5.10  accordance with the Federal Reserve Board's official staff 
  5.11  commentary to that section. 
  5.12     Sec. 2.  [58A.02] [PROHIBITED ACTS AND PRACTICES AND LENDER 
  5.13  REQUIREMENTS REGARDING HOME LOANS.] 
  5.14     (a) No prepayment fees or penalties may be contracted by 
  5.15  the borrower and lender with respect to any home loan.  This 
  5.16  paragraph supersedes section 47.20, subdivision 5, with respect 
  5.17  to home loans. 
  5.18     (b) No home loan may contain a payment schedule with 
  5.19  regular periodic payments that result in an increase in the 
  5.20  principal balance, a practice known as negative amortization. 
  5.21     (c) No lender may knowingly or intentionally engage in the 
  5.22  practice of nonbeneficial refinancing of a home loan. 
  5.23     (d) No lender may recommend or encourage default on an 
  5.24  existing loan or other debt prior to and in connection with the 
  5.25  closing or planned closing of a home loan that refinances all or 
  5.26  any portion of such existing loan or debt. 
  5.27     (e) No lender may make a home loan unless the lender 
  5.28  reasonably believes at the time the loan is consummated that one 
  5.29  or more of the obligors, when considered individually or 
  5.30  collectively, will be able to make the scheduled payments to 
  5.31  repay the obligation based upon a consideration of their current 
  5.32  and expected income, current obligations, employment status, and 
  5.33  other financial resources, other than the borrower's equity in 
  5.34  the dwelling which secures repayment of the loan. 
  5.35     (f) No lender may finance, directly or indirectly, any 
  5.36  credit life, credit disability, or credit involuntary 
  6.1   unemployment insurance, or any other life or health insurance 
  6.2   premiums through a home loan.  Insurance premiums calculated and 
  6.3   paid on a monthly basis shall not be considered financed by the 
  6.4   lender. 
  6.5      (g) No home loan document in which blanks are left to be 
  6.6   filled in after the contract is signed by any obligor are 
  6.7   enforceable against any obligor. 
  6.8      (h) If the discussions between the lender and the borrower 
  6.9   regarding a home loan are conducted primarily in a language 
  6.10  other than English, the lender shall, before the closing, 
  6.11  provide to the borrower an additional copy of any notice 
  6.12  required under the federal Truth-in-Lending Act, United States 
  6.13  Code, title 15, sections 1601 et seq., translated into the 
  6.14  language in which the discussions were primarily conducted.  The 
  6.15  lender shall not charge a fee for this translated document. 
  6.16     Sec. 3.  [58A.03] [LIMITATIONS AND PROHIBITED ACTS AND 
  6.17  PRACTICES FOR HIGH-COST HOME LOANS.] 
  6.18     Subdivision 1.  [NO BALLOON PAYMENT.] No high-cost home 
  6.19  loan may contain a scheduled payment that is more than twice as 
  6.20  large as the average of earlier scheduled payments.  This 
  6.21  provision does not apply if the payment schedule is adjusted to 
  6.22  the seasonal or irregular income of the borrower. 
  6.23     Subd. 2.  [NO ADVANCE PAYMENTS.] No high-cost home loan may 
  6.24  include terms under which more than two periodic payments 
  6.25  required under the loan are consolidated and paid in advance 
  6.26  from the loan proceeds provided to the borrower. 
  6.27     Subd. 3.  [NO INCREASED INTEREST RATE.] No high-cost home 
  6.28  loan may contain a provision that increases the interest rate 
  6.29  after default.  This provision does not apply to interest rate 
  6.30  changes in a variable rate loan otherwise consistent with the 
  6.31  provisions of the loan documents, provided that the change in 
  6.32  the interest rate is not triggered by the event of default or 
  6.33  the acceleration of the indebtedness. 
  6.34     Subd. 4.  [NO CALL PROVISION.] No high-cost home loan may 
  6.35  contain a provision which permits the lender, in its sole 
  6.36  discretion, to accelerate the indebtedness.  This provision does 
  7.1   not apply when repayment of the loan has been accelerated by 
  7.2   default, pursuant to a due-on-sale provision, or pursuant to 
  7.3   some other provision of the loan documents unrelated to the 
  7.4   payment schedule. 
  7.5      Subd. 5.  [NO MODIFICATION OF DEFERRAL FEES.] A lender may 
  7.6   not charge a borrower any fees or other charges to modify, 
  7.7   renew, extend, or amend a high-cost home loan or to defer any 
  7.8   payment due under the terms of a high-cost home loan. 
  7.9      Subd. 6.  [NO LENDING WITHOUT HOME OWNERSHIP COUNSELING.] A 
  7.10  lender may not make a high-cost home loan without first 
  7.11  receiving certification from a counselor approved by the 
  7.12  Minnesota housing finance agency that the borrower has received 
  7.13  counseling on the advisability of the loan transaction and on 
  7.14  the appropriateness of the loan for the borrower. 
  7.15     Subd. 7.  [NO MANDATORY ARBITRATION CLAUSE.] No high-cost 
  7.16  home loan may be subject to a mandatory arbitration clause that 
  7.17  limits in any way the right of the borrower to seek relief 
  7.18  through the judicial process. 
  7.19     Subd. 8.  [RESTRICTION ON HOME IMPROVEMENT CONTRACTS.] A 
  7.20  lender may not pay a contractor under a home improvement 
  7.21  contract from the proceeds of a high-cost home loan other than 
  7.22  (i) by an instrument payable to the borrower or jointly to the 
  7.23  borrower and the contractor, or (ii) at the election of the 
  7.24  borrower, through a third-party escrow agent in accordance with 
  7.25  terms established in a written agreement signed by the borrower, 
  7.26  the lender, and the contractor prior to the disbursement. 
  7.27     Sec. 4.  [58A.04] [ATTEMPTED EVASION OF COVERAGE AND 
  7.28  UNINTENTIONAL VIOLATIONS.] 
  7.29     Subdivision 1.  [ATTEMPTED EVASIONS.] Section 58A.03 
  7.30  applies to any person who in bad faith attempts to avoid its 
  7.31  application by: 
  7.32     (1) structuring a loan transaction as an open-end credit 
  7.33  plan for the purpose and with the intent of evading the 
  7.34  provisions of that section when the loan would have been a 
  7.35  high-cost home loan if the loan had been structured as a 
  7.36  closed-end loan; 
  8.1      (2) dividing any loan transaction into separate parts for 
  8.2   the purpose and with the intent of evading the provisions of 
  8.3   that section; or 
  8.4      (3) any other similar subterfuge. 
  8.5      Subd. 2.  [CORRECTIONS AND UNINTENTIONAL VIOLATIONS.] A 
  8.6   lender in a high-cost home loan who, when acting in good faith, 
  8.7   fails to comply with section 58A.03 will not be deemed to have 
  8.8   violated that section if the lender establishes that either: 
  8.9      (1) Within 30 days of the loan closing and prior to the 
  8.10  institution of any action under section 58A.03, the borrower is 
  8.11  notified of the compliance failure, appropriate restitution is 
  8.12  made, and whatever adjustments are necessary are made to the 
  8.13  loan to either, at the choice of the borrower: 
  8.14     (i) make the high-cost home loan satisfy the requirements 
  8.15  of section 58A.03; or 
  8.16     (ii) change the terms of the loan in a manner beneficial to 
  8.17  the borrower so that the loan will no longer be considered a 
  8.18  high-cost home loan subject to the provisions of that section; 
  8.19  or 
  8.20     (2) The compliance failure was not intentional and resulted 
  8.21  from a bona fide error notwithstanding the maintenance of 
  8.22  procedures reasonably adapted to avoid such errors, and within 
  8.23  60 days after the discovery of the compliance failure and prior 
  8.24  to the institution of any action under section 58A.03 or the 
  8.25  receipt of written notice of the compliance failure, the 
  8.26  borrower is notified of the compliance failure, appropriate 
  8.27  restitution is made, and whatever adjustments are necessary are 
  8.28  made to the loan to either, at the choice of the borrower: 
  8.29     (i) make the high-cost home loan satisfy the requirements 
  8.30  of section 58A.03; or 
  8.31     (ii) change the terms of the loan in a manner beneficial to 
  8.32  the borrower so that the loan will no longer be considered a 
  8.33  high-cost home loan subject to the provisions of section 58A.03. 
  8.34  Examples of a bona fide error include clerical, calculation, 
  8.35  computer malfunction and programming, and printing errors.  An 
  8.36  error of legal judgment with respect to a person's obligations 
  9.1   under section 58A.03 is not a bona fide error. 
  9.2      Sec. 5.  [58A.05] [REPORTING REQUIREMENTS FOR LENDERS THAT 
  9.3   DO NOT REPORT INFORMATION UNDER THE FEDERAL HOME MORTGAGE 
  9.4   DISCLOSURE ACT (HMDA).] 
  9.5      (a) Lenders that are exempt from the reporting requirements 
  9.6   of United States Code, title 12, section 2803 solely because the 
  9.7   home purchase loans, including refinancings, that the lender 
  9.8   originated in the preceding calendar year totaled less than ten 
  9.9   percent of its total loan origination volume measured in 
  9.10  dollars, thereby qualifying for an exemption under Paragraph 
  9.11  I.D. of Appendix A (Form and Instructions for Completion of HMDA 
  9.12  Loan/Application Register) to Code of Federal Regulations, title 
  9.13  12, section 203, shall report to the commissioner of commerce 
  9.14  the same information that other lenders are required to report 
  9.15  under United States Code, title 12, section 2803(b) to the 
  9.16  appropriate federal agency. 
  9.17     (b) Lenders shall submit the information required under 
  9.18  paragraph (a) in the format established by the United States 
  9.19  Department of Housing and Urban Development under United States 
  9.20  Code, title 12, section 2803(h)(5). 
  9.21     Sec. 6.  [58A.06] [REPORTING OF INTEREST RATES.] 
  9.22     (a) Lenders shall report to the commissioner of commerce 
  9.23  the average and median interest rates of mortgage loans and home 
  9.24  improvement loans that they originate, grouped according to the 
  9.25  categories established under United States Code, title 12, 
  9.26  section 2803(b)(4):  census tract, income level, racial 
  9.27  characteristics, and gender. 
  9.28     (b) In calculating the interest rate for variable rate 
  9.29  loans to fulfill the requirements of paragraph (a), lenders 
  9.30  shall use the average interest rate on the variable rate loan 
  9.31  for the 12 months of the reporting period established under 
  9.32  United States Code, title 12, section 2803(d), which is the 
  9.33  calendar year. 
  9.34     (c) Lenders shall submit the information required under 
  9.35  paragraph (a) in a similar format to how the lender reports 
  9.36  information to the appropriate federal agency under United 
 10.1   States Code, title 12, section 2803(h)(5) or to the commissioner 
 10.2   of commerce under section 58A.05. 
 10.3      Sec. 7.  [58A.07] [ENFORCEMENT; PENALTIES.] 
 10.4      (a) Lenders that violate sections 58A.01 to 58A.04 are 
 10.5   subject to forfeiture of all principal and interest on all loans 
 10.6   made in violation of those sections.  A borrower or other 
 10.7   obligor alleging a violation of those sections in connection 
 10.8   with a home loan entered into by the borrower or other obligor 
 10.9   may commence an action for a declaratory judgment to establish 
 10.10  that a violation occurred, that the forfeiture of principal and 
 10.11  interest has resulted, and that the mortgage is discharged to 
 10.12  the extent that it secures the forfeited principal and interest. 
 10.13     (b) Sections 58A.01 to 58A.04 may also be enforced by a 
 10.14  private cause of action under section 8.31, subdivision 3a.  The 
 10.15  private cause of action may seek any remedies available under 
 10.16  that subdivision. 
 10.17     (c) The commissioner of commerce shall enforce sections 
 10.18  58A.01 to 58A.07.  A violation of any provision of sections 
 10.19  58A.01 to 58A.07 is deemed for all purposes to be a violation of 
 10.20  section 58.13, subdivision 1. 
 10.21     (d) This section does not limit any other remedies 
 10.22  available to a borrower or other obligor. 
 10.23     Sec. 8.  [EFFECTIVE DATE.] 
 10.24     Sections 1 to 7 are effective January 1, 2001.  The 
 10.25  reporting requirements under sections 5 and 6 begin with the 
 10.26  first calendar year following enactment. 
 10.27                             ARTICLE 2 
 10.28                         CONFORMING CHANGES
 10.29     Section 1.  Minnesota Statutes 1998, section 47.20, 
 10.30  subdivision 5, is amended to read: 
 10.31     Subd. 5.  [PREPAYMENT PENALTY.] (a) Unless the mortgagor 
 10.32  waives its right to prepay the mortgage loan without penalty, in 
 10.33  a uniform written disclosure waiver approved by the commissioner 
 10.34  and signed by the mortgagor, no conventional loan or loan 
 10.35  authorized in subdivision 1 shall contain a provision requiring 
 10.36  or permitting the imposition of a penalty in the event the loan 
 11.1   or advance of credit is prepaid.  The prepayment penalty shall 
 11.2   not exceed the lesser of two percent of the unpaid principal 
 11.3   balance or 60 days interest on the unpaid principal balance.  A 
 11.4   lender that offers a mortgage loan with a prepayment penalty 
 11.5   shall also offer a mortgage loan without a prepayment penalty. 
 11.6      This section does not permit the imposition of a prepayment 
 11.7   penalty in the event that the property securing the mortgage 
 11.8   loan is sold or the mortgage loan is prepaid in part.  No 
 11.9   prepayment penalty may be enforced after 42 months from the date 
 11.10  of the mortgage loan. 
 11.11     This subdivision is superseded by section 58A.02, paragraph 
 11.12  (a), with respect to home loans as defined in section 58A.01. 
 11.13     (b) A precomputed conventional loan or precomputed loan 
 11.14  authorized in subdivision 1 shall provide for a refund of the 
 11.15  precomputed finance charge according to the actuarial method if 
 11.16  the loan is paid in full by cash, renewal or refinancing, or a 
 11.17  new loan, one month or more before the final installment due 
 11.18  date.  The actuarial method for the purpose of this section is 
 11.19  the amount of interest attributable to each fully unexpired 
 11.20  monthly installment period of the loan contract following the 
 11.21  date of prepayment in full, calculated as if the loan was made 
 11.22  on an interest-bearing basis at the rate of interest provided 
 11.23  for in the note based on the assumption that all payments were 
 11.24  made according to schedule.  A precomputed loan for the purpose 
 11.25  of this section means a loan for which the debt is expressed as 
 11.26  a sum comprised of the principal amount and the amount of 
 11.27  interest for the entire term of the loan computed actuarially in 
 11.28  advance on the assumption that all scheduled payments will be 
 11.29  made when due, and does not include a loan for which interest is 
 11.30  computed from time to time by application of a rate to the 
 11.31  unpaid principal balance, interest-bearing loans, or 
 11.32  simple-interest loans.  For the purpose of calculating a refund 
 11.33  for precomputed loans under this section, any portion of the 
 11.34  finance charge for extending the first payment period beyond one 
 11.35  month may be ignored.  Nothing in this section shall be 
 11.36  considered a limitation on discount points or other finance 
 12.1   charges charged or collected in advance, and nothing in this 
 12.2   section shall require a refund of the charges in the event of 
 12.3   prepayment.  Nothing in this section shall be considered to 
 12.4   supersede section 47.204. 
 12.5      Sec. 2.  Minnesota Statutes 1998, section 58.13, 
 12.6   subdivision 1, is amended to read: 
 12.7      Subdivision 1.  [GENERALLY.] No person acting as a 
 12.8   residential mortgage originator or servicer, including a person 
 12.9   required to be licensed under this chapter, and no person exempt 
 12.10  from the licensing requirements of this chapter under section 
 12.11  58.04, shall: 
 12.12     (1) fail to maintain a trust account to hold trust funds 
 12.13  received in connection with a residential mortgage loan; 
 12.14     (2) fail to deposit all trust funds into a trust account 
 12.15  within three business days of receipt; commingle trust funds 
 12.16  with funds belonging to the licensee or exempt person; or use 
 12.17  trust account funds for any purpose other than that for which 
 12.18  they are received; 
 12.19     (3) unreasonably delay the processing of a residential 
 12.20  mortgage loan application, or the closing of a residential 
 12.21  mortgage loan.  For purposes of this clause, evidence of 
 12.22  unreasonable delay includes but is not limited to those factors 
 12.23  identified in section 47.206, subdivision 7, clause (d); 
 12.24     (4) fail to disburse funds according to its contractual or 
 12.25  statutory obligations; 
 12.26     (5) fail to perform in conformance with its written 
 12.27  agreements with borrowers, investors, other licensees, or exempt 
 12.28  persons; 
 12.29     (6) charge a fee for a product or service where the product 
 12.30  or service is not actually provided, or misrepresent the amount 
 12.31  charged by or paid to a third party for a product or service; 
 12.32     (7) fail to comply with sections 345.31 to 345.60, the 
 12.33  Minnesota unclaimed property law; 
 12.34     (8) violate any provision of any other applicable state or 
 12.35  federal law regulating residential mortgage loans including, 
 12.36  without limitation, sections 47.20 to 47.208 and 58A.01 to 
 13.1   58A.07; 
 13.2      (9) make or cause to be made, directly or indirectly, any 
 13.3   false, deceptive, or misleading statement or representation in 
 13.4   connection with a residential loan transaction including, 
 13.5   without limitation, a false, deceptive, or misleading statement 
 13.6   or representation regarding the borrower's ability to qualify 
 13.7   for any mortgage product; 
 13.8      (10) conduct residential mortgage loan business under any 
 13.9   name other than that under which the license or certificate of 
 13.10  exemption was issued; 
 13.11     (11) compensate, whether directly or indirectly, coerce or 
 13.12  intimidate an appraiser for the purpose of influencing the 
 13.13  independent judgment of the appraiser with respect to the value 
 13.14  of real estate that is to be covered by a residential mortgage 
 13.15  or is being offered as security according to an application for 
 13.16  a residential mortgage loan; 
 13.17     (12) issue any document indicating conditional 
 13.18  qualification or conditional approval for a residential mortgage 
 13.19  loan, unless the document also clearly indicates that final 
 13.20  qualification or approval is not guaranteed, and may be subject 
 13.21  to additional review; 
 13.22     (13) make or assist in making any residential mortgage loan 
 13.23  with the intent that the loan will not be repaid and that the 
 13.24  residential mortgage originator will obtain title to the 
 13.25  property through foreclosure; 
 13.26     (14) provide or offer to provide for a borrower, any 
 13.27  brokering or lending services under an arrangement with a person 
 13.28  other than a licensee or exempt person, provided that a person 
 13.29  may rely upon a written representation by the residential 
 13.30  mortgage originator that it is in compliance with the licensing 
 13.31  requirements of this chapter; 
 13.32     (15) claim to represent a licensee or exempt person, unless 
 13.33  the person is an employee of the licensee or exempt person or 
 13.34  unless the person has entered into a written agency agreement 
 13.35  with the licensee or exempt person; 
 13.36     (16) fail to comply with the recordkeeping and notification 
 14.1   requirements identified in section 58.14 or fail to abide by the 
 14.2   affirmations made on the application for licensure; 
 14.3      (17) represent that the licensee or exempt person is acting 
 14.4   as the borrower's agent after providing the nonagency disclosure 
 14.5   required by section 58.15, unless the disclosure is retracted 
 14.6   and the licensee or exempt person complies with all of the 
 14.7   requirements of section 58.16; 
 14.8      (18) make, provide, or arrange for a residential mortgage 
 14.9   loan that is of a lower investment grade if the borrower's 
 14.10  credit score or, if the originator does not utilize credit 
 14.11  scoring or if a credit score is unavailable, then comparable 
 14.12  underwriting data, indicates that the borrower may qualify for a 
 14.13  residential mortgage loan, available from or through the 
 14.14  originator, that is of a higher investment grade, unless the 
 14.15  borrower is informed that the borrower may qualify for a higher 
 14.16  investment grade loan with a lower interest rate and/or lower 
 14.17  discount points, and consents in writing to receipt of the lower 
 14.18  investment grade loan. 
 14.19     For purposes of this section, "investment grade" refers to 
 14.20  a system of categorizing residential mortgage loans in which the 
 14.21  loans are:  (i) commonly referred to as "prime" or "subprime"; 
 14.22  (ii) commonly designated by an alphabetical character with "A" 
 14.23  being the highest investment grade; and (iii) are distinguished 
 14.24  by interest rate or discount points or both charged to the 
 14.25  borrower, which vary according to the degree of perceived risk 
 14.26  of default based on factors such as the borrower's credit, 
 14.27  including credit score and credit patterns, income and 
 14.28  employment history, debt ratio, loan-to-value ratio, and prior 
 14.29  bankruptcy or foreclosure; 
 14.30     (19) make, publish, disseminate, circulate, place before 
 14.31  the public, or cause to be made, directly or indirectly, any 
 14.32  advertisement or marketing materials of any type, or any 
 14.33  statement or representation relating to the business of 
 14.34  residential mortgage loans that is false, deceptive, or 
 14.35  misleading; 
 14.36     (20) advertise loan types or terms that are not available 
 15.1   from or through the licensee or exempt person on the date 
 15.2   advertised, or on the date specified in the advertisement.  For 
 15.3   purposes of this clause, advertisement includes, but is not 
 15.4   limited to, a list of sample mortgage terms, including interest 
 15.5   rates, discount points, and closing costs provided by licensees 
 15.6   or exempt persons to a print or electronic medium that presents 
 15.7   the information to the public; and 
 15.8      (21) use or employ phrases, pictures, return addresses, 
 15.9   geographic designations, or other means that create the 
 15.10  impression, directly or indirectly, that a licensee or other 
 15.11  person is a governmental agency, or is associated with, 
 15.12  sponsored by, or in any manner connected to, related to, or 
 15.13  endorsed by a governmental agency, if that is not the case. 
 15.14     Sec. 3.  [EFFECTIVE DATE.] 
 15.15     Sections 1 and 2 are effective January 1, 2001.