SF 2917

2nd 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, subdivision 2, by adding a subdivision; 327.65; 327.66;
327B.01, by adding subdivisions; 327B.09, by adding a subdivision; proposing
coding for new law in Minnesota Statutes, chapters 327; 327B.

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

Section 1.

Minnesota Statutes 2006, section 327.64, subdivision 2, is amended to read:

Subd. 2.

Notice; service.

new text begin (a) new text end A secured party may commence repossession of
a manufactured home by personally serving upon the occupant of the mobile home a
notice and, if the occupant is not the debtor, 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.

new text begin (b) 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
651-699-6646 or www.hocmn.org to get the telephone 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 30 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. 2.

Minnesota Statutes 2006, section 327.64, is amended by adding a subdivision
to read:

new text begin Subd. 3. new text end

new text begin Second notice required; right to reinstate. new text end

new text begin Thirty days after issuing the
notice of default, as described in subdivision 2, the secured party must send a registered
certified letter to the last known address of the debtor that the debtor has only 30 days to
reinstate the loan by paying the defaulted amount and any additional fees incurred by the
secured party in order to regain possession of the home prior to the court order. Nothing
in this subdivision precludes a secured party from proceeding with the other remedies
provided to repossess the manufactured 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 30-day 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
section 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 327.64 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. new text begin Sections 565.25, subdivision 2, and 565.251 do
not apply to a repossession proceeding under this section. new text end

Sec. 4.

new text begin [327.651] VOLUNTARY REPOSSESSION.
new text end

new text begin The secured party and the debtor and occupant, if the debtor is not the occupant, may
agree in writing on a voluntary surrender of the title and possession of the manufactured
home to the secured party prior to or after the end of the 30-day period specified under
section 327.64. The secured party may file the agreement and any other documents
necessary to transfer the title in the manner required under chapter 336. When this
provision is exercised, notice under section 327.64, subdivision 3, is not applicable.
new text end

Sec. 5.

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 30 day 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 deleted text begin $15 deleted text end new text begin $100 new text end , 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. new text begin The secured party need not accept any partial
payment of the amount to which the secured party is entitled under this section. The
debtor, or an occupant of a manufactured home acting on behalf of the debtor, has no right
to cure the default after the expiration of the 30-day period specified under section 327.64. new text end

Sec. 6.

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. 7.

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

new text begin Subd. 4b. 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. 8.

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. 9.

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. 10.

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:
new text end

new text begin (1) payments vary with income;
new text end

new text begin (2) payments of principal and interest are deferred until the maturity date of the
loan or the sale of the residence;
new text end

new text begin (3) principal or interest is forgivable under specified conditions; or
new text end

new text begin (4) where no interest or an annual interest rate of two percent or less is charged
in connection with the loan, and excludes existing loan modifications and payment
extensions mutually agreed upon by the secured party and debtor.
new text end

Sec. 11.

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) 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 (2) 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 (3) 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 (4) 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;
new text end

new text begin (5) 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 (6) 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:
new text end

new text begin (i) payments vary with income;
new text end

new text begin (ii) payments of principal or interest are not required or can be deferred under
specified conditions;
new text end

new text begin (iii) principal or interest is forgivable under specified conditions; or
new text end

new text begin (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 (7) engage in churning; and
new text end

new text begin (8) 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. This excludes existing loan
extensions and modifications.
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. 12.

new text begin [327B.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) 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:
new text end

new text begin (1) five percent of the loan amount for loans over $60,000;
new text end

new text begin (2) six percent of the loan amount for loans less than $60,000, but greater than or
equal to $40,000; or
new text end

new text begin (3) eight percent of the loan amount for loans of less than $40,000.
new text end

new text begin (b) "Lender fee" means interest, origination points, finance charges, fees, and other
charges payable in connection with the manufactured home loan:
new text end

new text begin (1) by the borrower to any manufactured home lender or broker or to any assignee of
any manufactured home lender or broker; or
new text end

new text begin (2) by the lender to a broker.
new text end

new text begin Lender fee does not include discount points, provided there is a concomitant benefit
to the borrower, recording fees, taxes, pass-throughs, 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.
new text end

new text begin (c) "Loan amount" means:
new text end

new text begin (1) for a line of credit, the maximum principal amount of the line of credit; and
new text end

new text begin (2) for any other manufactured home loan, the principal amount of the loan,
excluding all interest, points, finance charges, fees, and other charges.
new text end

new text begin (d) 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 No manufactured home loan may contain 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 unless the
penalty, fee, premium, or other charge constitutes consideration for an equal or greater
benefit to the borrower.
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 manufactured home loan
originated by a federal or state chartered bank, savings bank, or credit union.
new text end