HF 3728

as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to the state board of investment; prohibiting 
  1.3             investment of state and retirement funds in predatory 
  1.4             lenders; proposing coding for new law in Minnesota 
  1.5             Statutes, chapter 11A. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  [11A.242] [INVESTMENTS IN PREDATORY LENDERS 
  1.8   PROHIBITED.] 
  1.9      Subdivision 1.  [PROHIBITION.] (a) The state board must not 
  1.10  invest in securities of any entity that regularly engages in 
  1.11  predatory lending in this state or elsewhere. 
  1.12     (b) This section does not require divestment of investments 
  1.13  held by the state board as of the effective date of this section.
  1.14     (c) This section does not prohibit investment in mutual 
  1.15  funds that include securities of entities that engage in 
  1.16  predatory lending. 
  1.17     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
  1.18  the terms defined in this subdivision have the meanings given. 
  1.19     (b) "Affiliate" means any business entity that controls, is 
  1.20  controlled by, or is under common control with, another entity, 
  1.21  as set forth in the federal Bank Holding Company Act of 1956, 
  1.22  United States Code, title 12, section 1841, et seq., as that act 
  1.23  may be amended from time to time, and includes any successors in 
  1.24  interest or alter egos to the business entity. 
  1.25     (c) "Annual percentage rate" means the annual percentage 
  2.1   rate for a home loan calculated according to the federal Truth 
  2.2   in Lending Act, United States Code, title 15, section 1601, et 
  2.3   seq., and its implementing regulations, as that act or 
  2.4   regulations may be amended from time to time. 
  2.5      (d) "Entity" includes any affiliate. 
  2.6      (e) "High-cost home loan" means a home loan that meets 
  2.7   either of the following characteristics: 
  2.8      (1) the annual percentage rate of the loan equals or 
  2.9   exceeds: 
  2.10     (i) by more than three percentage points, if the home loan 
  2.11  is a first mortgage; or 
  2.12     (ii) by more than five percentage points, if the home loan 
  2.13  is a junior mortgage, the rate set by the required net yield for 
  2.14  a 90-day standard mandatory delivery commitment for a first 
  2.15  mortgage loan from either the Federal National Mortgage 
  2.16  Association or the Federal Home Loan Mortgage Association, 
  2.17  whichever is greater, as that yield is reported on the 15th day 
  2.18  of the month immediately preceding the month in which the 
  2.19  application for the home loan is received by the lender; or 
  2.20     (2) the total points and fees on the loan equal or exceed 
  2.21  either five percent of the total loan amount or $800, whichever 
  2.22  amount is greater. 
  2.23     If the terms of the home loan provide for an initial or 
  2.24  introductory period during which the annual percentage rate is 
  2.25  lower than that which will apply after the end of the initial or 
  2.26  introductory period, then the annual percentage rate to be 
  2.27  considered for purposes of this definition is the rate which 
  2.28  applies after the initial or introductory period. 
  2.29     If the terms of the home loan provide for an annual 
  2.30  percentage rate that varies in accordance with an index plus a 
  2.31  margin, then the annual percentage rate to be considered for 
  2.32  purposes of this definition is the rate that is in effect on the 
  2.33  date of loan consummation.  In the case of a home loan with a 
  2.34  regular interest rate that varies in accordance with an index 
  2.35  plus a margin, but with an initial or introductory interest rate 
  2.36  established in some other manner, the annual percentage rate to 
  3.1   be considered is the rate that would have been in effect on the 
  3.2   date of loan consummation were the regular rate determined by 
  3.3   the index plus the margin to apply, that is, the fully-indexed 
  3.4   rate on the date of loan consummation. 
  3.5      (f) "Home loan" means a loan of money, including without 
  3.6   limitation a line of credit or an open-end credit plan, if all 
  3.7   of the following apply: 
  3.8      (1) the principal amount of the loan does not exceed the 
  3.9   current conforming first mortgage loan size limit for a 
  3.10  single-family dwelling as established by the Federal National 
  3.11  Mortgage Association; 
  3.12     (2) the borrower incurred the loan primarily for the 
  3.13  borrower's personal, family, or household uses; 
  3.14     (3) the loan is secured in whole or in part by a deed of 
  3.15  trust, a mortgage, or a similar security device or instrument, 
  3.16  on real property; 
  3.17     (4) this real property contains or will contain either (i) 
  3.18  one to four residential units; or (ii) individual residential 
  3.19  units of condominiums or cooperatives; and 
  3.20     (5) one of these residential units is or will be occupied 
  3.21  by the borrower as the borrower's principal dwelling. 
  3.22  In the case of multiple borrowers, the criteria in clauses (2) 
  3.23  and (5) will be considered satisfied if at least one of the 
  3.24  borrowers has met the stated criteria.  A "home loan" does not 
  3.25  include a reverse mortgage. 
  3.26     (g) "Points and fees" means the following: 
  3.27     (1) all items required to be disclosed under Code of 
  3.28  Federal Regulations, title 12, section 226.4, paragraphs (a) and 
  3.29  (b), as amended from time to time, except interest or the 
  3.30  time-price differential; 
  3.31     (2) all charges for items listed under Code of Federal 
  3.32  Regulations, title 12, section 226.4, paragraph (c), clause (7), 
  3.33  as amended from time to time, but only if the lender receives 
  3.34  direct or indirect compensation in connection with the charge or 
  3.35  the charge is paid to an affiliate of the lender; 
  3.36     (3) all compensation not otherwise specified in this 
  4.1   definition paid directly or indirectly to a mortgage broker, 
  4.2   including a broker that originates a home loan in its own name 
  4.3   through an advance of funds and subsequently assigns the home 
  4.4   loan to the person advancing the funds; 
  4.5      (4) the premium of any single premium credit life, credit 
  4.6   disability, credit unemployment, or other life or health 
  4.7   insurance; and 
  4.8      (5) all prepayment of fees or penalties. 
  4.9   Points and fees does not include the following: 
  4.10     (i) taxes, filing fees, recording, and other charges and 
  4.11  fees paid or to be paid to public officials for determining the 
  4.12  existence of, or the perfecting, releasing, or satisfying a 
  4.13  security interest; or 
  4.14     (ii) charges paid to a person other than the lender, an 
  4.15  affiliate of the lender, a mortgage broker, or an affiliate of a 
  4.16  mortgage broker, as follows:  fees for flood certification; fees 
  4.17  for pest infestation and flood determinations; appraisal fees; 
  4.18  fees for inspections performed prior to loan closing; credit 
  4.19  report fees; survey fees; attorney fees, if the borrower has the 
  4.20  right to select the attorney from an approved list or otherwise; 
  4.21  notary fees; escrow charges that are not required to be 
  4.22  disclosed under Code of Federal Regulations, title 12, section 
  4.23  226.4, paragraphs (a) and (b); title insurance premiums; or fire 
  4.24  insurance or flood insurance premiums, provided that the 
  4.25  conditions in Code of Federal Regulations, title 12, section 
  4.26  226.4, paragraph (d), clause (2), are met. 
  4.27     (h) "Predatory lending" means making high-cost loans. 
  4.28     (i) "Total loan amount" means the total credit received by 
  4.29  the borrower as part of the loan, excluding points and fees. 
  4.30     Sec. 2.  [EFFECTIVE DATE.] 
  4.31     Section 1 is effective August 1, 2002.