SF 2917

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

A bill for an act
relating to manufactured housing; providing for regulation of lending practices
and default; providing notices and remedies; amending Minnesota Statutes 2006,
sections 327.64; 327.65; 327.66; 327B.01, by adding subdivisions; 327B.08, by
adding a subdivision; 327B.09, by adding a subdivision; 327B.12; proposing
coding for new law in Minnesota Statutes, chapter 325B.

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

Section 1.

new text begin [325B.095] INTEREST, POINTS, FINANCE CHARGES, FEES, AND
OTHER CHARGES.
new text end

new text begin Subdivision 1. new text end

new text begin Financed interest, points, finance charges, fees, and other
charges. new text end

new text begin A manufactured home lender making or modifying a manufactured home loan
to a borrower located in this state must not include in the principal amount of any loan
all or any portion of any lender fee in an aggregate amount exceeding five percent of the
loan amount. "Lender fee" means interest, points, finance charges, fees, and other charges
payable in connection with the manufactured home loan: (1) by the borrower to any
manufactured home lender or broker or to any assignee of any manufactured home lender
or broker; or (2) by the lender to a broker. Lender fee does not includes recording fees,
taxes, passthroughs, or other amounts that are paid by any person to any government
entity, filing office, or other third party that is not a manufactured home lender or broker
or to any assignee of any manufactured home lender or broker. Lender fee also does not
include any amount that is set aside to pay taxes or insurance on any property securing the
manufactured home loan. "Loan amount" means: (1) for a line of credit, the maximum
principal amount of the line of credit; and (2) for any other manufactured home loan, the
principal amount of the loan excluding all interest, points, finance charges, fees, and other
charges. A manufactured home lender or broker shall not charge, receive, or collect any
excess financed interest, points, finance charges, fees, or other charges described in this
subdivision, or any interest, points, finance charges, fees, or other charges with respect
to this excess.
new text end

new text begin Subd. 2. new text end

new text begin Prepayment penalties. new text end

new text begin A manufactured home lender or broker shall not
enter into a subprime loan that contains a provision requiring or permitting the imposition
of a penalty, fee, premium, or other charge in the event the manufactured home loan is
prepaid in whole or in part.
new text end

new text begin Subd. 3. new text end

new text begin Exemption. new text end

new text begin This section does not apply to a residential mortgage loan
originated by a federal or state chartered bank, savings bank, or credit union.
new text end

Sec. 2.

Minnesota Statutes 2006, section 327.64, is amended to read:

327.64 NOTICE OF DEFAULT; SERVICE.

Subdivision 1.

Generally.

When a default occurs under the terms of a security
agreement covering a manufactured home as collateral, and the secured party desires to
repossess the manufactured home, the secured party shall commence the repossession in a
manner authorized by this section.

new text begin Subd. 1a. new text end

new text begin First notice of default. new text end

new text begin At least 180 days prior to seeking a court order
pursuant to section 326.65, a secured party must send a first notice of default by registered
or certified mail to the occupant of the manufactured home, and if the occupant is not
the debtor, the debtor. The notice required by this section must be in at least 14-point
boldface type and must be printed on colored paper that does not obscure or overshadow
the content of the notice.
new text end

new text begin Subd. 1b. new text end

new text begin Contents of first notice of default. new text end

new text begin The notice required by this section
must appear substantially as follows:
new text end

new text begin A repossession is being prepared which could result in your loss of ownership of
your house and any accumulated value (equity) you may have in this property. As of .......
at ......., you owe $....... to bring your home loan current. You must pay this amount in
order to prevent your house from going through the repossession process.
new text end

new text begin As soon as possible, you are encouraged to contact your lender, (name of lender) at
(phone number) to discuss possible options for preventing repossession as well as seek
counseling with the foreclosure prevention counselor in your area. Nearby community
agencies will answer your questions, offer free advice, and help you create a plan. You
can contact the Minnesota Home Ownership Center at 651-659-6646 or www.hocmn.org
to get the phone number and location of the nearest counseling organization. Call today.
Waiting limits your options.
new text end

new text begin You will have 180 days to become current on your loan. If you do not do so, your
lender will get a court order for repossession and you will need to vacate the home.
new text end

Subd. 2.

new text begin Second new text end notice new text begin of default new text end ; service.

A secured party deleted text begin may commence
repossession of a manufactured home by deleted text end new text begin must new text end personally deleted text begin serving deleted text end new text begin serve new text end upon the occupant
of the deleted text begin mobile deleted text end new text begin manufactured new text end home deleted text begin a notice deleted text end and, if the occupant is not the debtor, deleted text begin by
sending a registered or certified letter to the last known address of the debtor under the
security agreement, both setting forth the circumstances constituting the default under the
security agreement and stating that the secured party will at the expiration of a 30-day
period following receipt of the notice seek a court order removing the occupant from the
manufactured home and repossessing the manufactured home, unless the debtor or the
occupant acting on behalf of the debtor cures the default prior to that time and in the
manner provided by section 327.66. If notice is mailed to a debtor in accordance with this
subdivision, the secured party by affidavit shall set forth the circumstances causing the
secured party to believe that the debtor could be reached at the address to which the notice
was mailed. The affidavit shall state that the secured party has no reason to believe that
the debtor might receive mailed notice at another address deleted text end new text begin by personally serve upon the
debtor, the second notice of default. This notice must be served upon the occupant and the
homeowner at least 120 days prior to seeking a court order pursuant to section 327.65 new text end .

new text begin Subd. 3. new text end

new text begin Contents of second notice of default. new text end

new text begin The second notice of default must
be in at least 14-point boldface type and must be printed on colored paper that does not
obscure or overshadow the content of the notice. Each notice of default shall specify:
new text end

new text begin (1) the name of the secured party, the debtor, each assignee of the loan, if any, and
the original or maximum principal amount secured by the loan;
new text end

new text begin (2) the date of the loan;
new text end

new text begin (3) the circumstances constituting the default under the security agreement, including
the amount in arrears on the loans as of the date of the notice;
new text end

new text begin (4) a description of the manufactured home upon which the loan is secured,
conforming substantially to that contained in the loan documents;
new text end

new text begin (5) the notice must also state: Your loan is currently in default. Contact us
immediately at (phone number) to discuss possible options for preventing repossession.
We encourage you to seek counseling with the foreclosure prevention counselor in your
area. Nearby community agencies will answer your questions, offer free advice, and
help you create a plan. You can contact the Minnesota Home Ownership Center at
651-659-6646 or www.hocmn.org to get the phone number and location of the nearest
counseling organization. Call today. Waiting limits your options.
new text end

new text begin If you do not become current on your loan within 120 days, we will seek a court
order repossessing the home, and by court order you will have to vacate the home.
new text end

Sec. 3.

Minnesota Statutes 2006, section 327.65, is amended to read:

327.65 COURT ORDER.

Except in cases of voluntary repossession, upon expiration of the deleted text begin 30-day deleted text end new text begin 180-day new text end
period specified in the notices required by section 327.64, a secured party must apply to
the district court in the county in which the manufactured home is located for an order
pursuant to chapter 565 directing the seizure and delivery of the manufactured home.
The application shall be accompanied by a copy of the security agreement entitling the
secured party to repossession of the manufactured home new text begin , a copy of the notices required
under 327.64, new text end and deleted text begin by the deleted text end new text begin an new text end affidavit deleted text begin required by section 327.64 if notice is mailed to the
debtor. deleted text end new text begin of service stating that the notices required under section 327.46 were properly
served upon the occupant, and if the occupant of the home is not the debtor, the debtor.
new text end The notices required by section 327.64 shall not be considered as satisfying any of the
notice requirements under chapter 565.

Sec. 4.

Minnesota Statutes 2006, section 327.66, is amended to read:

327.66 CURE OF DEFAULT.

A debtor, or an occupant of a manufactured home acting on behalf of a debtor, may
within the deleted text begin 30 day deleted text end new text begin 180-day new text end period specified in the notices required by section 327.64, cure
a default by tendering full payment of the sums then in arrears under the terms of the
security agreement, or by otherwise remedying the default, and by paying the reasonable
costs, not to exceed the sum of $15, incurred by the secured party to enforce the security
agreement. Cure of a default in accordance with the provisions of this section shall
suspend the secured party's right to seek repossession of the manufactured home under the
provisions of sections 327.61 to 327.67.

Sec. 5.

Minnesota Statutes 2006, section 327B.01, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Borrower. new text end

new text begin "Borrower" means a person or persons applying for a
manufactured home loan.
new text end

Sec. 6.

Minnesota Statutes 2006, section 327B.01, is amended by adding a subdivision
to read:

new text begin Subd. 4a. new text end

new text begin Churning. new text end

new text begin "Churning" means knowingly or intentionally making,
providing, or arranging for a manufactured home loan when the new manufactured home
loan does not provide a reasonable, tangible net benefit to the borrower considering all of
the circumstances including the terms of both the new and refinanced loans, the cost of the
new loan, and the borrower's circumstances.
new text end

Sec. 7.

Minnesota Statutes 2006, section 327B.01, is amended by adding a subdivision
to read:

new text begin Subd. 8a. new text end

new text begin Fully indexed rate. new text end

new text begin "Fully indexed rate" equals the index rate prevailing
at the time a loan to a borrower is originated, plus the margin that will apply after the
expiration of an introductory interest rate.
new text end

Sec. 8.

Minnesota Statutes 2006, section 327B.01, is amended by adding a subdivision
to read:

new text begin Subd. 11a. new text end

new text begin Licensee. new text end

new text begin "Licensee" means a person who is licensed as a dealer, limited
dealer, or manufacturer by the Department of Labor and Industry.
new text end

Sec. 9.

Minnesota Statutes 2006, section 327B.01, is amended by adding a subdivision
to read:

new text begin Subd. 11b. new text end

new text begin Limited dealer or limited retailer. new text end

new text begin "Limited dealer" or "limited
retailer" means any person who is an owner of a manufactured home park, authorized as
principal only, to engage in the sale, offering for sale, soliciting, or advertising the sale
of used manufactured homes located in the owned manufactured home park, who is the
title holder and engages in no more than ten sales annually.
new text end

Sec. 10.

Minnesota Statutes 2006, section 327B.01, is amended by adding a
subdivision to read:

new text begin Subd. 13a. new text end

new text begin Manufactured home lender. new text end

new text begin "Manufactured home lender" means a
person who makes a manufactured home loan to a borrower, including a person who
provides table funding. A manufactured home lender includes an affiliate, subsidiary, or
any person acting as an agent of the lender.
new text end

Sec. 11.

Minnesota Statutes 2006, section 327B.01, is amended by adding a subdivision
to read:

new text begin Subd. 13b. new text end

new text begin Manufactured home loan. new text end

new text begin "Manufactured home loan" means a loan
made to a person or persons for the purchase, refinancing, improvement, or repair of a
manufactured home.
new text end

Sec. 12.

Minnesota Statutes 2006, section 327B.01, is amended by adding a
subdivision to read:

new text begin Subd. 14a. new text end

new text begin Manufacturing facility. new text end

new text begin "Manufacturing facility" means the physical
site where a manufacturer engages in the business of manufacturing, assembly, or
production of manufactured homes.
new text end

Sec. 13.

Minnesota Statutes 2006, section 327B.01, is amended by adding a
subdivision to read:

new text begin Subd. 14b. new text end

new text begin Negative amortization. new text end

new text begin "Negative amortization" occurs when the
borrower's compliance with any repayment option offered pursuant to the terms of the
manufactured home loan is insufficient to satisfy the interest accruing on the loan,
resulting in an increase in the loan balance. Negative amortization does not occur when a
manufactured home loan is originated, subsidized, or guaranteed by or through a state,
tribal, or local government, or nonprofit organization, and bears one or more of the
following nonstandard payment terms that substantially benefit the borrower: payments
vary with income; payments of principal and interest are deferred until the maturity date
of the loan or the sale of the residence; principal or interest is forgivable under specified
conditions; or where no interest or an annual interest rate of two percent or less is charged
in connection with the loan.
new text end

Sec. 14.

Minnesota Statutes 2006, section 327B.01, is amended by adding a
subdivision to read:

new text begin Subd. 16a. new text end

new text begin Owner. new text end

new text begin "Owner" means any person holding title to a manufactured
home park or manufactured homes.
new text end

Sec. 15.

Minnesota Statutes 2006, section 327B.01, is amended by adding a
subdivision to read:

new text begin Subd. 19a. new text end

new text begin Subprime loan. new text end

new text begin "Subprime loan" means, in the case of an adjustable rate
loan secured by a first lien on a manufactured home that can increase in interest rate but
not decrease in interest rate below the fully indexed rate at the time of origination, a loan
for which the annual percentage rate (APR) is greater than two percentage points above the
yield on United States Treasury securities having comparable periods of maturity, as of the
15th day of the preceding month if the rate is set between the first and the 14th day of the
month and as of the 15th day of the current month if the rate is set on or after the 15th day.
new text end

new text begin For all other loans secured by a first lien on a manufactured home, the term means a
loan for which the APR is greater than three percentage points above the yield on United
States Treasury securities having comparable periods of maturity, as of the 15th day of the
preceding month if the rate is set between the first and the 14th day of the month and as of
the 15th day of the current month if the rate is set on or after the 15th day.
new text end

new text begin For loans secured by a subordinate lien on a manufactured home, the term means a
loan for which the APR is greater than five percentage points above the yield on United
States Treasury securities having comparable periods of maturity, as of the 15th day of the
preceding month if the rate is set between the first and the 14th day of the month and as of
the 15th day of the current month if the rate is set on or after the 15th day.
new text end

new text begin For purposes of this section, the annual percentage rate has the meaning given in
Code of Federal Regulations, title 12, part 226.
new text end

Sec. 16.

Minnesota Statutes 2006, section 327B.08, is amended by adding a
subdivision to read:

new text begin Subd. 6. new text end

new text begin Duty of agency. new text end

new text begin (a) A person acting as a broker shall be considered to
have created an agency relationship with the borrower in all cases and shall comply with
the following duties:
new text end

new text begin (1) brokers shall act in the borrower's best interest and in the utmost good faith
toward borrowers, and shall not compromise a borrower's right or interest in favor of
another's right or interest, including a right or interest of the broker. A broker shall
not accept, give, or charge any undisclosed compensation or realize any undisclosed
remuneration, either through direct or indirect means, that inures to the benefit of the
broker on an expenditure made for the borrower;
new text end

new text begin (2) brokers will carry out all lawful instructions given by borrowers;
new text end

new text begin (3) brokers will disclose to borrowers all material facts of which the broker has
knowledge which might reasonably affect the borrower's rights, interests, and/or ability to
receive the borrower's intended benefit from the manufactured home loan, but not facts
which are reasonably susceptible to the knowledge of the borrower;
new text end

new text begin (4) brokers will use reasonable care in performing duties; and
new text end

new text begin (5) brokers will account to a borrower for all the borrower's money and property
received as an agent.
new text end

new text begin (b) The duty of agency between broker and borrower applies when the broker is
acting in the capacity of manufactured home loan broker as described in section 327B.01,
subdivision 3;
new text end

new text begin (c) Nothing in this section prohibits a broker from contracting for or collecting a
reasonable fee for services rendered and which had been disclosed to the borrower in
advance of the provision of such services.
new text end

new text begin (d) Nothing in this section requires a broker to obtain a loan containing terms or
conditions not available to the broker in the broker's usual course of business, or to obtain
a loan for the borrower from a manufactured home loan lender with whom the broker does
not have a business relationship.
new text end

Sec. 17.

Minnesota Statutes 2006, section 327B.09, is amended by adding a
subdivision to read:

new text begin Subd. 6. new text end

new text begin Standards of conduct. new text end

new text begin (a) No manufactured home lender shall:
new text end

new text begin (1) fail to maintain a trust account to hold trust funds received in connection with a
manufactured home loan;
new text end

new text begin (2) fail to deposit all trust funds into a trust account within three business days of
receipt; comingle trust funds with funds belonging to the licensee or exempt person; or use
trust account funds for any purpose other than that for which they are received;
new text end

new text begin (3) unreasonably delay the processing of a manufactured home loan application,
or, if applicable, the closing of a manufactured home loan. For purposes of this clause,
evidence of unreasonable delay includes but is not limited to those factors identified in
section 47.206, subdivision 7, clause (d);
new text end

new text begin (4) fail to disburse funds according to its contractual or statutory obligations;
new text end

new text begin (5) fail to perform in conformance with its written agreements with borrowers,
investors, other licensees, or other parties;
new text end

new text begin (6) charge a fee for a product or service where the product or service is not actually
provided, or misrepresent the amount charged by or paid to a third party for a product
or service;
new text end

new text begin (7) violate any provision of any other state or federal law applicable to a person
making manufactured home loans;
new text end

new text begin (8) make or cause to be made, directly or indirectly, any false, deceptive, or
misleading statement or representation in connection with a manufactured home loan
transaction including, without limitation, a false, deceptive, or misleading statement or
representation regarding the borrower's ability to qualify for any manufactured home
loan product;
new text end

new text begin (9) compensate, whether directly or indirectly, coerce, or intimidate an appraiser for
the purpose of influencing the independent judgment of the appraiser with respect to the
value of personal property that is to be covered by a manufactured home loan or is being
offered as security according to an application for a manufactured home loan;
new text end

new text begin (10) issue any document indicating conditional qualification or conditional approval
for a manufactured home loan, unless the document also clearly indicates that final
qualification or approval is not guaranteed, and may be subject to additional review;
new text end

new text begin (11) make or assist in making any manufactured home loan without verifying the
reasonable ability of the borrower to repay the loan, taking into consideration taxes and
insurance in connection with the manufactured home. For loans in which the interest rate
may vary, the reasonable ability to pay shall be determined based on a fully indexed rate
and a repayment schedule which achieves full amortization over the life of the loan;
new text end

new text begin (12) provide or offer to provide for a borrower, any brokering or lending services
under an arrangement with a person other than a licensee or exempt person, provided that
a person may rely upon a written representation by the manufactured home lender that it is
in compliance with the applicable licensing requirements;
new text end

new text begin (13) claim to represent a broker or lender, unless the person is an employee of the
broker or lender, or unless the person has entered into a written agency agreement with
the broker or lender;
new text end

new text begin (14) make, provide, or arrange for a manufactured home loan for a higher interest
rate or on less favorable terms than the rate or terms for which the borrower qualifies
based on criteria typically used by that lender to evaluate rate and term offerings;
new text end

new text begin (15) make, publish, disseminate, circulate, place before the public, or cause to be
made, directly or indirectly, any advertisement or marketing materials of any type, or any
statement or representation relating to the business of manufactured home loans that is
false, deceptive, or misleading;
new text end

new text begin (16) advertise loan types or terms that are not available from or through the broker or
lender on the date advertised, or on the date specified in the advertisement. For purposes
of this clause, advertisement includes, but is not limited to, a list of sample loan terms,
including interest rates, discount, points, and closing costs provided by brokers or lenders
to a print or electronic medium that presents the information to the public;
new text end

new text begin (17) use or employ phrases, pictures, return addresses, geographic designations, or
other means that create the impression, directly or indirectly, that a broker or lender is a
governmental agency, or is associated with, sponsored by, or in any manner connected to,
related to, or endorsed by a governmental agency, if that is not the case;
new text end

new text begin (18) make, provide, or arrange for a manufactured home loan all or a portion of the
proceeds of which are used to fully or partially pay off a "special loan" unless the borrower
has obtained a written certification from an authorized independent loan counselor that
the borrower has received counseling on the advisability of the loan transaction. For
the purposes of this section, "special loan" means a loan for the purchase, refinance,
improvement, or repair of the manufactured home originated, subsidized, or guaranteed
by or through a state, tribal, or local government, or nonprofit organization, that bears
one or more of the following nonstandard payment terms which substantially benefit
the borrower: (i) payments vary with income; (ii) payments of principal or interest are
not required or can be deferred under specified conditions; (iii) principal or interest is
forgivable under specified conditions; or (iv) where no interest or an annual interest rate of
two percent or less is charged in connection with the loan. For the purposes of this section,
"authorized independent loan counselor" means a nonprofit, third-party individual or
organization providing homebuyer education programs, foreclosure prevention services,
loan counseling, or credit counseling certified by the United States Department of
Housing and Urban Development, the Minnesota Home Ownership Center, the Minnesota
Mortgage Foreclosure Prevention Association, AARP, or NeighborWorks America;
new text end

new text begin (19) engage in churning; and
new text end

new text begin (20) make, provide, or arrange for a manufactured home loan if the borrower's
compliance with any repayment option offered pursuant to the terms of the loan will result
in negative amortization during any six-month period.
new text end

new text begin (b) This subdivision shall not apply to a state or federally chartered bank, savings
bank, or credit union, an institution chartered by Congress under the Farm Credit Act,
or to a person making, providing, or arranging a manufactured home loan originated or
purchased by a state agency or a tribal or local unit of government.
new text end

Sec. 18.

Minnesota Statutes 2006, section 327B.12, is amended to read:

327B.12 ADDITIONAL REMEDIES AND ENFORCEMENT.

Subdivision 1.

Private remedies.

new text begin (a) new text end Any person injured or threatened with injury
by a dealer or manufacturer's violation of sections 327B.01 to 327B.12 may bring a private
action in any court of competent jurisdiction.

new text begin (b) A borrower injured by a violation of the standards, duties, prohibitions, or
requirements of sections 327B.08, subdivision 6; 325B.09, subdivision 6; or 325B.095
shall have a private right of action and the court shall award:
new text end

new text begin (1) actual, incidental, and consequential damages;
new text end

new text begin (2) statutory damages equal to the amount of all lender fees included in the amount of
the principal of the manufactured home loan as defined in section 325B.095, subdivision 1;
new text end

new text begin (3) punitive damages if appropriate, and as provided in sections 549.191 and 549.20;
and
new text end

new text begin (4) court costs and reasonable attorney fees.
new text end

Subd. 2.

Fraud remedies.

In addition to the remedies provided in sections 327B.01
to 327B.12, any violation of section 327B.08 or 327B.09 is a violation of section 325F.69,
subdivision 1 and the provisions of section 8.31 shall apply. new text begin A private right of action by a
borrower under this chapter is in the public interest.
new text end

new text begin Subd. 3. new text end

new text begin Remedies cumulative. new text end

new text begin The remedies provided in this section are
cumulative.
new text end

new text begin Subd. 4. new text end

new text begin Exemption. new text end

new text begin This section does not apply to a residential mortgage loan
originated by a federal or state chartered bank, savings bank, or credit union.
new text end