Minnesota Legislature
SF 2966
3rd Engrossment - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am
KEY: stricken = removed, old language.
underscored = added, new language.
Current Version - 3rd Engrossment
1.1 A bill for an act 1.2 relating to mortgages; enacting the Minnesota 1.3 Residential Mortgage Originator and Servicer Licensing 1.4 Act; establishing licensing and enforcement 1.5 mechanisms; amending Minnesota Statutes 1996, sections 1.6 47.206, subdivision 1; 82.17, subdivision 4; 82.18; 1.7 and 82.27, subdivision 1; proposing coding for new law 1.8 as Minnesota Statutes, chapter 58; repealing Minnesota 1.9 Statutes 1996, section 82.175. 1.10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.11 ARTICLE 1 1.12 RESIDENTIAL MORTGAGE ORIGINATOR 1.13 AND SERVICER LICENSING 1.14 Section 1. [58.01] [CITATION.] 1.15 This chapter shall be cited as the "Minnesota Residential 1.16 Mortgage Originator and Servicer Licensing Act." 1.17 Sec. 2. [58.02] [DEFINITIONS.] 1.18 Subdivision 1. [SCOPE.] For purposes of this chapter, the 1.19 terms defined in this section have the meanings given to them. 1.20 Subd. 2. [ACT.] "Act" means the Minnesota Residential 1.21 Mortgage Originator and Servicer Licensing Act. 1.22 Subd. 3. [ADVANCE FEE.] "Advance fee" means a commission, 1.23 fee, charge, or compensation of any kind paid to a residential 1.24 mortgage originator before the closing of a loan, that is 1.25 intended in whole or in part as payment for the originator's 1.26 services in finding or attempting to find a loan for a 1.27 borrower. Advance fee does not include pass-through fees or 2.1 commitment or extended lock fees or other fees as determined by 2.2 the commissioner. 2.3 Subd. 4. [BORROWER.] "Borrower" means a person or persons 2.4 applying for a residential mortgage loan, a mortgagor, or the 2.5 person or persons on whose behalf the activities in subdivisions 2.6 12, 14, 22, and 23 are conducted. 2.7 Subd. 5. [CLOSING.] "Closing" means either or both of the 2.8 following: (1) the process whereby the real estate contract 2.9 between a buyer and a seller is consummated; or (2) the process 2.10 whereby the documents creating a security interest in real 2.11 property become effective between the borrower and the lender. 2.12 Subd. 6. [COMMISSIONER.] "Commissioner" means the 2.13 commissioner of commerce. 2.14 Subd. 7. [EMPLOYEE.] "Employee" means an individual who is 2.15 treated as an employee by the residential mortgage originator or 2.16 servicer for purposes of compliance with federal income tax laws. 2.17 Subd. 8. [ESCROW ACCOUNT.] "Escrow account" means a trust 2.18 account that is established and maintained to hold funds 2.19 received from a borrower, such as real estate taxes and 2.20 insurance premiums, incurred in connection with the servicing of 2.21 the mortgage. 2.22 Subd. 9. [EXEMPT PERSON.] "Exempt person" means a person 2.23 exempt from residential mortgage originator licensing 2.24 requirements, and a person exempt from residential mortgage 2.25 service licensing requirements. 2.26 Subd. 10. [FINANCIAL INSTITUTION.] "Financial institution" 2.27 means a bank, bank and trust, trust company with banking powers, 2.28 savings bank, savings association, or credit union, organized 2.29 under the laws of this state or the United States; a Minnesota 2.30 host state branch of an out-of-state state-chartered bank as 2.31 provided for in section 49.411; an industrial loan and thrift 2.32 under chapter 53; or a regulated lender under chapter 56. The 2.33 term "financial institution" also includes a subsidiary or 2.34 operating subsidiary of a financial institution or of a bank 2.35 holding company as defined in the federal Bank Holding Company 2.36 Act, United States Code, title 12, section 1841 et seq., if the 3.1 subsidiary or operating subsidiary can demonstrate to the 3.2 satisfaction of the commissioner that it is regulated and 3.3 subject to active and ongoing oversight and supervision by a 3.4 federal banking agency, as defined in the Federal Deposit 3.5 Insurance Act, United States Code, title 12, section 1811 et 3.6 seq., or the commissioner. 3.7 Subd. 11. [LENDER.] "Lender" means a person who makes 3.8 residential mortgage loans including a person who provides table 3.9 funding. 3.10 Subd. 12. [MAKING A RESIDENTIAL MORTGAGE LOAN.] "Making a 3.11 residential mortgage loan" means for compensation or gain, or 3.12 the expectation of compensation or gain, to advance funds or 3.13 make a commitment to advance funds in connection with a 3.14 residential mortgage. 3.15 Subd. 13. [MORTGAGE BROKER; BROKER.] "Mortgage broker" or 3.16 "broker" means a person who performs the activities described in 3.17 subdivisions 14 and 23. 3.18 Subd. 14. [MORTGAGE BROKERING; BROKERING.] "Mortgage 3.19 brokering" or "brokering" means helping to obtain from another 3.20 person, for a borrower, a residential mortgage loan or assisting 3.21 a borrower in obtaining a residential mortgage loan in return 3.22 for consideration to be paid by the borrower or lender or both. 3.23 Mortgage brokering or brokering includes, but is not limited to, 3.24 soliciting, placing, or negotiating a residential mortgage loan. 3.25 Subd. 15. [NET WORTH.] "Net worth" has the meaning given 3.26 it in section 58.07. 3.27 Subd. 16. [PERSON.] "Person" means a natural person, firm, 3.28 partnership, limited liability partnership, corporation, 3.29 association, limited liability company, or other form of 3.30 business organization and the officers, directors, employees, or 3.31 agents of that person. 3.32 Subd. 17. [PERSON IN CONTROL.] "Person in control" means 3.33 any member of senior management and other persons who possess, 3.34 directly or indirectly, the power to direct or cause the 3.35 direction of the management policies of an applicant or licensee 3.36 under this chapter, regardless of whether the person has any 4.1 ownership interest in the applicant or licensee. Control is 4.2 presumed to exist if a person, directly or indirectly, owns, 4.3 controls, or holds with power to vote ten percent or more of the 4.4 voting stock of an applicant or licensee or of a person who 4.5 owns, controls, or holds with power to vote ten percent or more 4.6 of the voting stock of an applicant or licensee. 4.7 Subd. 18. [RESIDENTIAL MORTGAGE LOAN.] "Residential 4.8 mortgage loan" means a loan made primarily for personal, family, 4.9 or household use and secured primarily by either a: (1) 4.10 mortgage on residential real property; or (2) certificates of 4.11 stock or other evidence of ownership interest in and proprietary 4.12 lease from corporations, partnerships, or other forms of 4.13 business organizations formed for the purpose of cooperative 4.14 ownership of residential real property. 4.15 Subd. 19. [RESIDENTIAL MORTGAGE ORIGINATOR.] "Residential 4.16 mortgage originator" means a person who, directly or indirectly, 4.17 for compensation or gain or in expectation of compensation or 4.18 gain, solicits or offers to solicit, or accepts or offers to 4.19 accept an application for a residential mortgage loan through 4.20 any medium or mode of communication from a borrower, or makes a 4.21 residential mortgage loan. "Residential mortgage originator" 4.22 includes a lender as defined in subdivision 11 and a broker as 4.23 defined in subdivision 13. 4.24 Subd. 20. [RESIDENTIAL MORTGAGE SERVICER; 4.25 SERVICER.] "Residential mortgage servicer" or "servicer" means a 4.26 person who engages in the activity of servicing a residential 4.27 mortgage as defined in subdivision 22. 4.28 Subd. 21. [RESIDENTIAL REAL PROPERTY; RESIDENTIAL REAL 4.29 ESTATE.] "Residential real property" or "residential real 4.30 estate" means real property improved or intended to be improved 4.31 by a structure designed principally for the occupancy of from 4.32 one to four families. 4.33 Subd. 22. [SERVICING; SERVICING A RESIDENTIAL MORTGAGE.] 4.34 "Servicing" or "servicing a residential mortgage loan" means 4.35 through any medium or mode of communication the collection or 4.36 remittance for, or the right or obligation to collect or remit 5.1 for a lender, mortgagee, note owner, noteholder, or for a 5.2 person's own account, of payments, interest, principal, and 5.3 escrow items such as insurance and taxes for property subject to 5.4 a residential mortgage loan. 5.5 Subd. 23. [SOLICITING, PLACING, OR NEGOTIATING A 5.6 RESIDENTIAL MORTGAGE LOAN.] "Soliciting, placing, or negotiating 5.7 a residential mortgage loan" means for compensation or gain or 5.8 expectation of compensation or gain, whether directly or 5.9 indirectly, accepting or offering to accept an application for a 5.10 residential mortgage loan, assisting, or offering to assist a 5.11 borrower in applying for a residential mortgage loan, or 5.12 negotiating or offering to negotiate the terms or conditions of 5.13 a residential mortgage loan with a lender on behalf of a 5.14 borrower. 5.15 Subd. 24. [TABLE FUNDING.] "Table funding" means a closing 5.16 or settlement at which a residential mortgage loan is funded by 5.17 a lender by way of a contemporaneous advance of residential 5.18 mortgage loan funds and an assignment of the residential 5.19 mortgage loan to the lender advancing the funds. 5.20 Subd. 25. [TRUST ACCOUNT.] "Trust account" means a 5.21 negotiable order of withdrawal account, demand deposit, or 5.22 checking account maintained for the purpose of segregating trust 5.23 funds from other funds. A "trust account" must not allow the 5.24 financial institution a right of set-off against the money owed 5.25 it by the account holder. 5.26 Subd. 26. [TRUST FUNDS.] "Trust funds" means funds 5.27 received by a residential mortgage originator or servicer in a 5.28 fiduciary capacity for later distribution, such as appraisal or 5.29 credit report fees, taxes, or insurance premiums. Trust funds 5.30 includes commitment, lock, extended lock, and advance fees. 5.31 Sec. 3. [58.03] [CLASSES OF LICENSE.] 5.32 The commissioner may issue the following classes of license 5.33 under this chapter: 5.34 (1) a residential mortgage originator license; and 5.35 (2) a residential mortgage servicer license. 5.36 Sec. 4. [58.04] [LICENSING REQUIREMENT.] 6.1 Subdivision 1. [RESIDENTIAL MORTGAGE ORIGINATOR LICENSING 6.2 REQUIREMENTS.] (a) Beginning August 1, 1999, no person shall act 6.3 as a residential mortgage originator, or make residential 6.4 mortgage loans without first obtaining a license from the 6.5 commissioner according to the licensing procedures provided in 6.6 this chapter. 6.7 (b) The following persons are exempt from the residential 6.8 mortgage originator licensing requirements: 6.9 (1) an employee of one mortgage originator licensee or one 6.10 person holding a certificate of exemption; 6.11 (2) a person engaged solely in commercial mortgage 6.12 activities; 6.13 (3) a person licensed as a real estate broker under chapter 6.14 82, and an individual licensee who is licensed to the broker if: 6.15 (i) the individual licensee acts only under the name, 6.16 authority, and supervision of the broker to whom the licensee is 6.17 licensed; 6.18 (ii) the broker obtains a certificate of exemption 6.19 according to section 58.05, subdivision 2; 6.20 (iii) the broker does not collect an advance fee for its 6.21 residential mortgage-related activities; and 6.22 (iv) the residential mortgage origination activities are 6.23 incidental to the real estate licensee's primary activities as a 6.24 real estate broker or salesperson; 6.25 (4) a person making no more than five residential mortgage 6.26 loans with its own funds, during any 12-month period; 6.27 (5) a financial institution as defined in section 58.02, 6.28 subdivision 10; 6.29 (6) an agency of the federal government, or of a state or 6.30 municipal government; 6.31 (7) an employee or employer pension plan making loans only 6.32 to its participants; 6.33 (8) a person acting in a fiduciary capacity, such as a 6.34 trustee or receiver, as a result of a specific order issued by a 6.35 court of competent jurisdiction; or 6.36 (9) a person exempted by order of the commissioner. 7.1 Subd. 2. [RESIDENTIAL MORTGAGE SERVICER LICENSING 7.2 REQUIREMENTS.] (a) Beginning August 1, 1999, no person shall 7.3 engage in activities or practices that fall within the 7.4 definition of "servicing a residential mortgage loan" under 7.5 section 58.02, subdivision 22, without first obtaining a license 7.6 from the commissioner according to the licensing procedures 7.7 provided in this chapter. 7.8 (b) The following persons are exempt from the residential 7.9 mortgage servicer licensing requirements: 7.10 (1) a person licensed as a residential mortgage originator; 7.11 (2) an employee of one licensee or one person holding a 7.12 certificate of exemption based on an exemption under this 7.13 subdivision; 7.14 (3) a person engaged solely in commercial mortgage 7.15 activities; 7.16 (4) a person servicing loans made with its own funds, if no 7.17 more than five such loans are made in any 12-month period; 7.18 (5) a financial institution as defined in section 58.02, 7.19 subdivision 10; 7.20 (6) an agency of the federal government, or of a state or 7.21 municipal government; 7.22 (7) an employee or employer pension plan making loans only 7.23 to its participants; 7.24 (8) a person acting in a fiduciary capacity, such as a 7.25 trustee or receiver, as a result of a specific order issued by a 7.26 court of competent jurisdiction; or 7.27 (9) a person exempted by order of the commissioner. 7.28 Subd. 3. [CONDUCTING BUSINESS UNDER LICENSE.] No person 7.29 required to be licensed under this chapter may, without a 7.30 license, do business under a name or title or circulate or use 7.31 advertising or make representations or give information to a 7.32 person, that indicates or reasonably implies activity within the 7.33 scope of this chapter. 7.34 Subd. 4. [APPLICABILITY TO BANKS AND CREDIT 7.35 UNIONS.] Except for section 58.13, this chapter does not apply 7.36 to a bank, savings bank, savings association, or credit union 8.1 subject to supervision by either a federal regulatory agency or 8.2 the commissioner. 8.3 Sec. 5. [58.05] [EXEMPTIONS FROM LICENSE.] 8.4 Subdivision 1. [EXEMPTION FROM LICENSURE.] An exempt 8.5 person as defined by section 58.04, subdivision 1, paragraph 8.6 (b), and subdivision 2, paragraph (b), is exempt from the 8.7 licensing requirements of this chapter, but is subject to all 8.8 other provisions of this chapter. 8.9 Subd. 2. [ELIGIBILITY FOR EXEMPTION.] To qualify as an 8.10 exempt person, a person, except an employee exempt under section 8.11 58.04, subdivision 1, paragraph (b), clause (1), or subdivision 8.12 2, paragraph (b), clause (2), or an individual real estate 8.13 licensee exempt under section 58.04, subdivision 1, paragraph 8.14 (b), clause (3), must obtain a certificate of exemption from the 8.15 commissioner. A certificate of exemption will be issued upon 8.16 the person's filing, on a form provided by the commissioner, a 8.17 statement indicating the basis on which the exemption is claimed 8.18 and, if applicable, the name and address of the state or federal 8.19 regulatory agency or body to which complaints regarding the 8.20 person's residential mortgage originating or servicing 8.21 activities may be directed. 8.22 Sec. 6. [58.06] [APPLICATION REQUIREMENTS FOR RESIDENTIAL 8.23 MORTGAGE ORIGINATORS AND SERVICERS.] 8.24 Subdivision 1. [LICENSE APPLICATION FORM.] Application for 8.25 a residential mortgage originator or a residential mortgage 8.26 servicer license must be in writing, under oath, and on a form 8.27 obtained from and prescribed by the commissioner. 8.28 Subd. 2. [APPLICATION CONTENTS.] The application must 8.29 contain the name and complete business address or addresses of 8.30 the license applicant. If the license applicant is a 8.31 partnership, limited liability partnership, association, limited 8.32 liability company, corporation, or other form of business 8.33 organization, the application must contain the names and 8.34 complete business addresses of each partner, member, director, 8.35 and principal officer. The application must also include a 8.36 description of the activities of the license applicant, in the 9.1 detail and for the periods the commissioner may require. The 9.2 application must also include all of the following: 9.3 (a) an affirmation under oath that the applicant: 9.4 (1) will maintain competent staff and adequate staffing 9.5 levels, through direct employees or otherwise, to meet the 9.6 requirements of this chapter; 9.7 (2) will advise the commissioner of any material changes to 9.8 the information submitted in the most recent application within 9.9 ten days of the change; 9.10 (3) will advise the commissioner in writing immediately of 9.11 any bankruptcy petitions filed against or by the applicant or 9.12 licensee; 9.13 (4) is financially solvent and in compliance with net worth 9.14 requirements; 9.15 (5) complies with federal and state tax laws; 9.16 (6) complies with sections 345.31 to 345.60, the Minnesota 9.17 unclaimed property law; and 9.18 (7) is, or that a person in control of the license 9.19 applicant is, at least 18 years of age; 9.20 (b) information as to the mortgage lending, servicing, or 9.21 brokering experience of the applicant and persons in control of 9.22 the applicant; 9.23 (c) information as to criminal convictions, excluding 9.24 traffic violations, of persons in control of the license 9.25 applicant; 9.26 (d) whether a court of competent jurisdiction has found 9.27 that the applicant or persons in control of the applicant have 9.28 engaged in conduct evidencing gross negligence, fraud, 9.29 misrepresentation, or deceit in performing an act for which a 9.30 license is required under this chapter; 9.31 (e) whether the applicant or persons in control of the 9.32 applicant have been the subject of: an order of suspension or 9.33 revocation, cease and desist order, or injunctive order, or 9.34 order barring involvement in an industry or profession issued by 9.35 this or another state or federal regulatory agency or by the 9.36 Secretary of Housing and Urban Development within the ten-year 10.1 period immediately preceding submission of the application; and 10.2 (f) other information required by the commissioner. 10.3 Sec. 7. [58.07] [NET WORTH FOR ORIGINATORS AND SERVICERS.] 10.4 Subdivision 1. [REQUIREMENT.] A licensee who is issued a 10.5 residential mortgage originator license shall maintain a minimum 10.6 net worth of $25,000. A licensee who is issued a residential 10.7 mortgage servicer's license shall maintain a minimum net worth 10.8 of $250,000. 10.9 Subd. 2. [COMPUTATION.] Net worth must be computed 10.10 according to generally accepted accounting principles and must 10.11 reflect any adjustment to net worth required by the Government 10.12 National Mortgage Association. 10.13 Subd. 3. [CERTIFIED FINANCIALS.] The commissioner may 10.14 require the submission of financial data audited by an 10.15 independent certified public accountant when it is considered 10.16 necessary for an investigation or examination. 10.17 Sec. 8. [58.08] [BONDS; LETTERS OF CREDIT.] 10.18 Subdivision 1. [REQUIREMENT OF RESIDENTIAL MORTGAGE 10.19 ORIGINATORS.] A residential mortgage originator licensee shall 10.20 continuously maintain a surety bond or irrevocable letter of 10.21 credit in an amount not less than $50,000 in a form approved by 10.22 the commissioner, issued by an insurance company or bank 10.23 authorized to do so in this state. The bond must be available 10.24 for the recovery of expenses, fines, and fees levied by the 10.25 commissioner under this chapter, and for losses or damages 10.26 incurred by borrowers as the result of a licensee's 10.27 noncompliance with the requirements of this chapter, sections 10.28 325D.43 to 325D.48, and 325F.67 to 325F.69, or breach of 10.29 contract. 10.30 The bond or irrevocable letter of credit must be submitted 10.31 with the originator's license application, and evidence of 10.32 continued coverage must be submitted with each renewal. Any 10.33 change in the bond or letter of credit must be submitted for 10.34 approval by the commissioner, within ten days of its execution. 10.35 Subd. 2. [REQUIREMENT OF RESIDENTIAL MORTGAGE 10.36 SERVICERS.] A residential mortgage servicer licensee shall 11.1 continuously maintain a surety bond or irrevocable letter of 11.2 credit in an amount not less than $100,000 in a form approved by 11.3 the commissioner, issued by an insurance company or bank 11.4 authorized to do so in this state. The bond must be available 11.5 for the recovery of expenses, fines, and fees levied by the 11.6 commissioner under this chapter, and for losses or damages 11.7 incurred by borrowers or other aggrieved parties as the result 11.8 of a licensee's noncompliance with the requirements of this 11.9 chapter, sections 325D.43 to 325D.48, and 325F.67 to 325F.69, or 11.10 breach of contract relating to activities regulated by this 11.11 chapter. 11.12 The bond or irrevocable letter of credit must be submitted 11.13 with the servicer's license application and evidence of 11.14 continued coverage must be submitted with each renewal. Any 11.15 change in the bond or letter of credit must be submitted for 11.16 approval by the commissioner, within ten days of its execution. 11.17 Subd. 3. [EXEMPTION.] Subdivisions 1 and 2 do not apply to 11.18 mortgage originators or mortgage servicers who are approved as 11.19 seller/servicers by the Federal National Mortgage Association or 11.20 the Federal Home Loan Mortgage Corporation. 11.21 Sec. 9. [58.09] [TERM OF LICENSE.] 11.22 Initial licenses for residential mortgage originators and 11.23 residential mortgage servicers issued under this chapter expire 11.24 on July 31, 2001, and are renewable on August 1, 2001, and on 11.25 August 1 of each odd-numbered year after that date. A new 11.26 licensee whose license expires less than 12 months from the date 11.27 of issuance shall pay a fee equal to one-half the applicable 11.28 initial license fee set forth in section 58.10, subdivision 1, 11.29 clause (1) or (3). 11.30 Sec. 10. [58.10] [FEES.] 11.31 Subdivision 1. [AMOUNTS.] The following fees must be paid 11.32 to the commissioner: 11.33 (1) for an initial residential mortgage originator license, 11.34 $800; 11.35 (2) for a renewal license, $400; 11.36 (3) for an initial residential mortgage servicer's license, 12.1 $1,000; 12.2 (4) for a renewal license, $500; 12.3 (5) license service fees as set forth in chapter 45; and 12.4 (6) for a certificate of exemption, $100. 12.5 Subd. 2. [FORFEITURE.] All fees are nonrefundable except 12.6 that an overpayment of a fee must be refunded upon proper 12.7 application. 12.8 Sec. 11. [58.11] [LICENSE RENEWAL.] 12.9 Subdivision 1. [TERM.] Licenses are renewable on August 1, 12.10 2001, and on August 1 of each odd-numbered year after that date. 12.11 Subd. 2. [TIMELY RENEWAL.] (a) A person whose application 12.12 is properly and timely filed who has not received notice of 12.13 denial of renewal is considered approved for renewal and the 12.14 person may continue to transact business as a residential 12.15 mortgage originator or servicer whether or not the renewed 12.16 license has been received on or before August 1 of the renewal 12.17 year. Application for renewal of a license is considered timely 12.18 filed if received by the commissioner by, or mailed with proper 12.19 postage and postmarked by, July 15 of the renewal year. An 12.20 application for renewal is considered properly filed if made 12.21 upon forms duly executed and sworn to, accompanied by fees 12.22 prescribed by this chapter, and containing any information that 12.23 the commissioner requires. 12.24 (b) A person who fails to make a timely application for 12.25 renewal of a license and who has not received the renewal 12.26 license as of August 1 of the renewal year is unlicensed until 12.27 the renewal license has been issued by the commissioner and is 12.28 received by the person. 12.29 Subd. 3. [CONTENTS OF RENEWAL APPLICATION.] Application 12.30 for the renewal of an existing license must contain the 12.31 information specified in section 58.06, subdivision 2; however, 12.32 only the requested information having changed from the most 12.33 recent prior application need be submitted. 12.34 Subd. 4. [CANCELLATION.] A licensee ceasing an activity or 12.35 activities regulated by this chapter and desiring to no longer 12.36 be licensed shall so inform the commissioner in writing and, at 13.1 the same time, surrender the license and all other symbols or 13.2 indicia of licensure. The licensee shall include a plan for the 13.3 withdrawal from regulated business, including a timetable for 13.4 the disposition of the business. 13.5 Sec. 12. [58.12] [DENIAL, SUSPENSION, REVOCATION OF 13.6 LICENSES.] 13.7 Subdivision 1. [POWERS OF COMMISSIONER.] (a) The 13.8 commissioner may by order take any or all of the following 13.9 actions: 13.10 (1) bar a person from engaging in residential mortgage 13.11 origination or servicing; 13.12 (2) deny, suspend, or revoke a residential mortgage 13.13 originator or a servicer license; 13.14 (3) censure a licensee; 13.15 (4) impose a civil penalty as provided for in section 13.16 45.027, subdivision 6; or 13.17 (5) revoke an exemption or certificate of exemption. 13.18 (b) In order to take the action in paragraph (a), the 13.19 commissioner must find: 13.20 (1) that the order is in the public interest; and 13.21 (2) that the residential mortgage originator, servicer, 13.22 applicant, or other person, an officer, director, partner, 13.23 employee, or agent or any person occupying a similar status or 13.24 performing similar functions, or a person in control of the 13.25 originator, servicer, applicant, or other person has: 13.26 (i) violated any provision of this chapter or rule or order 13.27 under this chapter; 13.28 (ii) filed an application for a license that is incomplete 13.29 in any material respect or contains a statement that, in light 13.30 of the circumstances under which it is made, is false or 13.31 misleading with respect to a material fact; 13.32 (iii) failed to maintain compliance with the affirmations 13.33 made under section 58.06, subdivision 2; 13.34 (iv) violated a standard of conduct or engaged in a 13.35 fraudulent, coercive, deceptive, or dishonest act or practice, 13.36 whether or not the act or practice involves the residential 14.1 mortgage lending business; 14.2 (v) engaged in an act or practice, whether or not the act 14.3 or practice involves the business of making a residential 14.4 mortgage loan, that demonstrates untrustworthiness, financial 14.5 irresponsibility, or incompetence; 14.6 (vi) pled guilty, with or without explicitly admitting 14.7 guilt, pled nolo contendere, or been convicted of a felony, 14.8 gross misdemeanor, or a misdemeanor involving moral turpitude; 14.9 (vii) paid a civil penalty or been the subject of 14.10 disciplinary action by the commissioner, or an order of 14.11 suspension or revocation, cease and desist order or injunction 14.12 order or order barring involvement in an industry or profession 14.13 issued by this or any other state or federal regulatory agency 14.14 or by the Secretary of Housing and Urban Development; 14.15 (viii) been found by a court of competent jurisdiction to 14.16 have engaged in conduct evidencing gross negligence, fraud, 14.17 misrepresentation, or deceit; 14.18 (ix) refused to cooperate with an investigation or 14.19 examination by the commissioner; 14.20 (x) failed to pay any fee or assessment imposed by the 14.21 commissioner; or 14.22 (xi) failed to comply with state and federal tax 14.23 obligations. 14.24 Subd. 2. [ORDERS OF THE COMMISSIONER.] To begin a 14.25 proceeding under this section, the commissioner shall issue an 14.26 order requiring the subject of the proceeding to show cause why 14.27 action should not be taken against the person according to this 14.28 section. The order must be calculated to give reasonable notice 14.29 of the time and place for the hearing and must state the reasons 14.30 for entry of the order. The commissioner may by order summarily 14.31 suspend a license or exemption or summarily bar a person from 14.32 engaging in residential mortgage origination or servicing, 14.33 pending a final determination of an order to show cause. If a 14.34 license or exemption is summarily suspended or if the person is 14.35 summarily barred from any involvement in the residential 14.36 mortgage loan business, pending final determination of an order 15.1 to show cause, a hearing on the merits must be held within 30 15.2 days of the issuance of the order of summary suspension or bar. 15.3 All hearings must be conducted under chapter 14. After the 15.4 hearing, the commissioner shall enter an order disposing of the 15.5 matter as the facts require. If the subject of the order fails 15.6 to appear at a hearing after having been duly notified of it, 15.7 the person is considered in default, and the proceeding may be 15.8 determined against the subject of the order upon consideration 15.9 of the order to show cause, the allegations of which may be 15.10 considered to be true. 15.11 Subd. 3. [ACTIONS AGAINST LAPSED LICENSE.] If a license or 15.12 certificate of exemption lapses, is surrendered, withdrawn, 15.13 terminated, or otherwise becomes ineffective, the commissioner 15.14 may institute a proceeding under this subdivision within two 15.15 years after the license or certificate of exemption was last 15.16 effective and enter a revocation or suspension order as of the 15.17 last date on which the license or certificate of exemption was 15.18 in effect, and may impose a civil penalty as provided for in 15.19 this section or section 45.027, subdivision 6. 15.20 Sec. 13. [58.13] [STANDARDS OF CONDUCT.] 15.21 Subdivision 1. [GENERALLY.] No person acting as a 15.22 residential mortgage originator or servicer, including a person 15.23 required to be licensed under this chapter, and no person exempt 15.24 from the licensing requirements of this chapter under section 15.25 58.04, shall: 15.26 (1) fail to maintain a trust account to hold trust funds 15.27 received in connection with a residential mortgage loan; 15.28 (2) fail to deposit all trust funds into a trust account 15.29 within three business days of receipt; commingle trust funds 15.30 with funds belonging to the licensee or exempt person; or use 15.31 trust account funds for any purpose other than that for which 15.32 they are received; 15.33 (3) unreasonably delay the processing of a residential 15.34 mortgage loan application, or the closing of a residential 15.35 mortgage loan. For purposes of this clause, evidence of 15.36 unreasonable delay includes but is not limited to those factors 16.1 identified in section 47.206, subdivision 7, clause (d); 16.2 (4) fail to disburse funds according to its contractual or 16.3 statutory obligations; 16.4 (5) fail to perform in conformance with its written 16.5 agreements with borrowers, investors, other licensees, or exempt 16.6 persons; 16.7 (6) charge a fee for a product or service where the product 16.8 or service is not actually provided, or misrepresent the amount 16.9 charged by or paid to a third party for a product or service; 16.10 (7) fail to comply with sections 345.31 to 345.60, the 16.11 Minnesota unclaimed property law; 16.12 (8) violate any provision of any other applicable state or 16.13 federal law regulating residential mortgage loans including, 16.14 without limitation, sections 47.20 to 47.208; 16.15 (9) make or cause to be made, directly or indirectly, any 16.16 false, deceptive, or misleading statement or representation in 16.17 connection with a residential loan transaction including, 16.18 without limitation, a false, deceptive, or misleading statement 16.19 or representation regarding the borrower's ability to qualify 16.20 for any mortgage product; 16.21 (10) conduct residential mortgage loan business under any 16.22 name other than that under which the license or certificate of 16.23 exemption was issued; 16.24 (11) compensate, whether directly or indirectly, coerce or 16.25 intimidate an appraiser for the purpose of influencing the 16.26 independent judgment of the appraiser with respect to the value 16.27 of real estate that is to be covered by a residential mortgage 16.28 or is being offered as security according to an application for 16.29 a residential mortgage loan; 16.30 (12) issue any document indicating conditional 16.31 qualification or conditional approval for a residential mortgage 16.32 loan, unless the document also clearly indicates that final 16.33 qualification or approval is not guaranteed, and may be subject 16.34 to additional review; 16.35 (13) make or assist in making any residential mortgage loan 16.36 with the intent that the loan will not be repaid and that the 17.1 residential mortgage originator will obtain title to the 17.2 property through foreclosure; 17.3 (14) provide or offer to provide for a borrower, any 17.4 brokering or lending services under an arrangement with a person 17.5 other than a licensee or exempt person, provided that a person 17.6 may rely upon a written representation by the residential 17.7 mortgage originator that it is in compliance with the licensing 17.8 requirements of this chapter; 17.9 (15) claim to represent a licensee or exempt person, unless 17.10 the person is an employee of the licensee or exempt person or 17.11 unless the person has entered into a written agency agreement 17.12 with the licensee or exempt person; 17.13 (16) fail to comply with the recordkeeping and notification 17.14 requirements identified in section 58.14 or fail to abide by the 17.15 affirmations made on the application for licensure; 17.16 (17) represent that the licensee or exempt person is acting 17.17 as the borrower's agent after providing the non-agency 17.18 disclosure required by section 58.15, unless the disclosure is 17.19 retracted and the licensee or exempt person complies with all of 17.20 the requirements of section 58.16; 17.21 (18) make, provide, or arrange for a residential mortgage 17.22 loan that is of a lower investment grade if the borrower's 17.23 credit score or, if the originator does not utilize credit 17.24 scoring or if a credit score is unavailable, then comparable 17.25 underwriting data, indicates that the borrower may qualify for a 17.26 residential mortgage loan, available from or through the 17.27 originator, that is of a higher investment grade, unless the 17.28 borrower is informed that the borrower may qualify for a higher 17.29 investment grade loan with a lower interest rate and/or lower 17.30 discount points, and consents in writing to receipt of the lower 17.31 investment grade loan. 17.32 For purposes of this section, "investment grade" refers to 17.33 a system of categorizing residential mortgage loans in which the 17.34 loans are: (i) commonly referred to as "prime" or "subprime;" 17.35 (ii) commonly designated by an alphabetical character with "A" 17.36 being the highest investment grade; and (iii) are distinguished 18.1 by interest rate or discount points or both charged to the 18.2 borrower, which vary according to the degree of perceived risk 18.3 of default based on factors such as the borrower's credit, 18.4 including credit score and credit patterns, income and 18.5 employment history, debt ratio, loan-to-value ratio, and prior 18.6 bankruptcy or foreclosure; 18.7 (19) make, publish, disseminate, circulate, place before 18.8 the public, or cause to be made, directly or indirectly, any 18.9 advertisement or marketing materials of any type, or any 18.10 statement or representation relating to the business of 18.11 residential mortgage loans that is false, deceptive, or 18.12 misleading; 18.13 (20) advertise loan types or terms that are not available 18.14 from or through the licensee or exempt person on the date 18.15 advertised, or on the date specified in the advertisement. For 18.16 purposes of this clause, advertisement includes, but is not 18.17 limited to, a list of sample mortgage terms, including interest 18.18 rates, discount points, and closing costs provided by licensees 18.19 or exempt persons to a print or electronic medium that presents 18.20 the information to the public; and 18.21 (21) use or employ phrases, pictures, return addresses, 18.22 geographic designations, or other means that create the 18.23 impression, directly or indirectly, that a licensee or other 18.24 person is a governmental agency, or is associated with, 18.25 sponsored by, or in any manner connected to, related to, or 18.26 endorsed by a governmental agency, if that is not the case. 18.27 Subd. 2. [STATEMENTS, REPRESENTATIONS, OR ADVERTISING.] A 18.28 statement, representation, or advertisement is deceptive or 18.29 misleading if it has the capacity or tendency to deceive or 18.30 mislead a borrower or potential borrower. The commissioner 18.31 shall consider the following factors in deciding whether a 18.32 statement, representation, or advertisement is deceptive or 18.33 misleading: the overall impression that the statement, 18.34 representation, or advertisement reasonably creates; the 18.35 particular type of audience to which it is directed; and whether 18.36 it may be reasonably comprehended by the segment of the public 19.1 to which it is directed. 19.2 Sec. 14. [58.14] [RECORDKEEPING AND NOTIFICATION 19.3 REQUIREMENTS.] 19.4 Subdivision 1. [CHANGE IN LICENSING DATA.] A licensee must 19.5 advise the commissioner of any material changes to the 19.6 information submitted in the most recent license application 19.7 within ten days of the change. 19.8 Subd. 2. [NOTICE OF BANKRUPTCY PETITIONS.] A licensee or 19.9 person who has been issued a certificate of exemption must 19.10 advise the commissioner in writing immediately of any bankruptcy 19.11 petitions filed against or by the licensee. 19.12 Subd. 3. [DOCUMENTATION AND RESOLUTION OF COMPLAINTS.] A 19.13 licensee or exempt person must investigate and attempt to 19.14 resolve complaints made regarding acts or practices subject to 19.15 the provisions of this chapter. If a complaint is received in 19.16 writing, the licensee or exempt person must maintain a file 19.17 containing all materials relating to the complaint and 19.18 subsequent investigation for a period of 26 months. 19.19 Subd. 4. [TRUST ACCOUNT RECORDS FOR MORTGAGE ORIGINATORS.] 19.20 A residential mortgage originator shall keep and maintain for 26 19.21 months a record of all trust funds, sufficient to identify the 19.22 transaction, date and source of receipt, and date and 19.23 identification of disbursement. 19.24 Subd. 5. [RECORD RETENTION.] A licensee or exempt person 19.25 must keep and maintain for 26 months the business records 19.26 regarding residential mortgage loans applied for, originated, or 19.27 serviced in the course of its business. 19.28 Sec. 15. [58.15] [DISCLOSURE REQUIREMENTS FOR RESIDENTIAL 19.29 MORTGAGE ORIGINATORS.] 19.30 Subdivision 1. [NON-AGENCY DISCLOSURE.] If a residential 19.31 mortgage originator or exempt person does not contract or offer 19.32 to contract to act as an agent of a borrower, or accept an 19.33 advance fee, it must, within 72 hours of accepting an 19.34 application for a residential mortgage loan, provide the 19.35 borrower with a written disclosure as provided in subdivision 2. 19.36 Subd. 2. [FORM AND CONTENT REQUIREMENTS.] The disclosure 20.1 must be a separate document, 8-1/2 inches by 11 inches, must be 20.2 signed by the borrower and must contain the following statement 20.3 in 14-point boldface print: 20.4 [ORIGINATOR] IS NOT ACTING AS YOUR AGENT IN CONNECTION WITH 20.5 OBTAINING A RESIDENTIAL MORTGAGE LOAN. WHILE WE SEEK TO 20.6 ASSIST YOU IN MEETING YOUR FINANCIAL NEEDS, WE CANNOT 20.7 GUARANTEE THE LOWEST OR BEST TERMS AVAILABLE IN THE MARKET. 20.8 Subd. 3. [ELECTRONIC APPLICATION DISCLOSURE REQUIREMENT.] 20.9 In case of an electronic residential mortgage application, the 20.10 disclosure requirements of this section may be satisfied by 20.11 providing the disclosure statement as a separate screen if the 20.12 disclosure must be acknowledged by the borrower before an 20.13 application is accepted. 20.14 Subd. 4. [EXEMPTION FROM DISCLOSURE REQUIREMENT.] If the 20.15 Department of Housing and Urban Development adopts and 20.16 implements a disclosure requirement for persons offering 20.17 mortgage origination services that the commissioner determines 20.18 to be substantially similar to the disclosure required in 20.19 subdivision 2, licensees and exempt persons complying with the 20.20 HUD disclosure shall be considered to have complied with the 20.21 requirements of subdivisions 1 and 2. 20.22 Sec. 16. [58.16] [RESIDENTIAL MORTGAGE ORIGINATORS; 20.23 STANDARDS OF CONDUCT FOR AGENCY OR ADVANCE FEE TRANSACTIONS.] 20.24 Subdivision 1. [COMPLIANCE.] Residential mortgage 20.25 originators who solicit or receive an advance fee in exchange 20.26 for assisting a borrower located in this state in obtaining a 20.27 loan secured by a lien on residential real estate, or who offer 20.28 to act as an agent of the borrower located in this state in 20.29 obtaining a loan secured by a lien on residential real estate 20.30 shall be considered to have created a fiduciary relationship 20.31 with the borrower and shall comply with the requirements of 20.32 subdivisions 2 to 7. 20.33 Subd. 2. [CONTRACT PROVISIONS.] A residential mortgage 20.34 originator who engages in the activities described in 20.35 subdivision 1 shall enter into a written contract with each 20.36 borrower and shall provide a copy of the written contract to 21.1 each borrower at or before the time of receipt of any fee or 21.2 valuable consideration paid for mortgage origination services. 21.3 The written contract must: 21.4 (1) specifically describe the services to be provided by 21.5 the residential mortgage originator and if the originator 21.6 collects an advance fee, the dates by which the services will be 21.7 performed; 21.8 (2) specifically identify whether the residential mortgage 21.9 originator may receive compensation from sources other than the 21.10 borrower in connection with the loan transaction; 21.11 (3) state the total amount of commission or compensation 21.12 that the borrower agrees to pay for the residential mortgage 21.13 originator's services, or the basis on which the compensation 21.14 will be computed; 21.15 (4) state the maximum rate of interest to be charged on any 21.16 residential mortgage loan obtained; 21.17 (5) contain a statement that notifies the borrower of the 21.18 right to cancel the contract according to subdivision 3; and 21.19 (6) disclose, with respect to the 12-month period ending 21.20 ten business days before the date of the contract in question, 21.21 the percentage of the mortgage originator's customers for whom 21.22 loans have actually been funded as a result of the residential 21.23 mortgage originator's services. 21.24 (c) If an advance fee is solicited or received the contract 21.25 must also: 21.26 (1) identify the trust account into which the fees or 21.27 consideration will be deposited; 21.28 (2) set forth the circumstances under which the residential 21.29 mortgage originator will be entitled to disbursement from the 21.30 trust account; and 21.31 (3) set forth the circumstances under which the borrower 21.32 will be entitled to a refund of all or part of the fee. 21.33 Subd. 3. [CANCELLATION.] A borrower who pays an advance 21.34 fee, or who enters into a contract for residential mortgage 21.35 services as set forth in subdivisions 1 and 2, has an 21.36 unconditional right to rescind the contract for residential 22.1 mortgage origination services at any time until midnight of the 22.2 third business day after the day on which the contract is 22.3 signed. Cancellation is evidenced by the borrower giving 22.4 written notice of cancellation to the residential mortgage 22.5 originator at the address stated in the contract. Notice of 22.6 cancellation, if given by mail, is effective upon deposit in a 22.7 mailbox properly addressed to the originator with postage 22.8 prepaid. Notice of cancellation need not take a particular form 22.9 and is sufficient if it indicates by any form of written 22.10 expression the intention of the borrower not be bound by the 22.11 contract. No act of a borrower or a residential mortgage 22.12 originator is effective to waive the right to rescind as 22.13 provided in this subdivision. 22.14 Subd. 4. [TRUST ACCOUNT.] The residential mortgage 22.15 originator shall deposit in a trust account within three 22.16 business days all fees received before the time a loan is 22.17 actually funded. The trust account must be in a financial 22.18 institution located within the state of Minnesota. 22.19 Subd. 5. [RECORDS.] The residential mortgage originator 22.20 shall maintain a separate record of all fees received for 22.21 services performed or to be performed as a residential mortgage 22.22 originator. Each record must set forth the date the funds are 22.23 received; the person from whom the funds are received; the 22.24 amount received; the date of deposit in the escrow account, the 22.25 account number, the date the funds are disbursed and the check 22.26 number of the disbursement, and a description of each 22.27 disbursement and the justification for the disbursement. 22.28 Subd. 6. [MONTHLY STATEMENT.] The residential mortgage 22.29 originator shall provide to each borrower at least monthly a 22.30 detailed written accounting of all disbursements of the 22.31 borrower's funds from the trust account. 22.32 Subd. 7. [DISCLOSURE OF LENDERS.] The residential mortgage 22.33 originator shall provide to each borrower at the expiration of 22.34 the contract a list of the lenders or loan sources to whom loan 22.35 applications were submitted on behalf of the borrower. 22.36 Sec. 17. [58.17] [SCOPE OF CHAPTER.] 23.1 Subdivision 1. [RESIDENTIAL MORTGAGE ORIGINATOR SERVICES.] 23.2 This chapter applies when an offer of residential mortgage 23.3 origination services is made to a borrower in this state or when 23.4 the residential mortgage originator is located in this state. 23.5 Subd. 2. [RESIDENTIAL MORTGAGE SERVICING.] The provisions 23.6 of this chapter regarding residential mortgage servicing apply 23.7 when the borrower is a resident of this state. 23.8 Subd. 3. [OFFER.] For purposes of this section, an "offer" 23.9 means any advertisement or solicitation of any type, including 23.10 an advertisement or solicitation in newspapers and magazines, by 23.11 mail, by telephone, on television, on radio, or via the internet 23.12 or any other electronic medium of any kind, for residential 23.13 mortgage originator services. The term "offer" excludes an 23.14 advertisement or solicitation that specifically states that the 23.15 services are not available to Minnesota residents. 23.16 Sec. 18. [REPEALER.] 23.17 Minnesota Statutes 1996, section 82.175, is repealed. 23.18 Sec. 19. [EFFECTIVE DATES.] 23.19 Sections 1 to 11 and 17 are effective July 1, 1998. 23.20 Sections 12 to 16 are effective July 1, 1999. 23.21 ARTICLE 2 23.22 CONFORMING CHANGES 23.23 Section 1. Minnesota Statutes 1996, section 47.206, 23.24 subdivision 1, is amended to read: 23.25 Subdivision 1. [DEFINITIONS.] For the purposes of this 23.26 section, the terms defined in this subdivision have the meanings 23.27 given them. 23.28 (a) "Lender" means a person or entity referred to in 23.29 section 47.20, subdivision 1, a credit union, or a person making 23.30 a conventional loan as defined under section 47.20, subdivision 23.31 2, clause (3), or cooperative apartment loan as defined under 23.32 section 47.20, subdivision 2, clause (4), except that 23.33 conventional loans or cooperative apartment loans include any 23.34 loan or advance of credit in an original principal balance of 23.35 less than $200,000. "Lender" also means a mortgage broker as 23.36 defined in paragraph (e). 24.1 (b) "Loan" means loans and advances of credit authorized 24.2 under section 47.20, subdivision 1, clauses (1) to (4), and 24.3 conventional loans as defined under section 47.20, subdivision 24.4 2, clause (3), or cooperative apartment loans as defined under 24.5 section 47.20, subdivision 2, clause (4), except that 24.6 conventional loans or cooperative apartment loans also include 24.7 all loans and advances of credit in an original principal 24.8 balance of less than $200,000. "Loan" does not include a loan 24.9 or advance of credit secured by a mortgage upon real property 24.10 containing more than one residential unit or secured by a 24.11 security interest in shares of more than one residential unit in 24.12 a building owned or leased by a cooperative apartment 24.13 corporation. 24.14 (c) "Borrower" means a natural person who has submitted an 24.15 application for a loan to a lender. 24.16 (d) "Interest rate or discount point agreement" or 24.17 "agreement" means a contract between a lender and a borrower 24.18 under which the lender agrees, subject to the lender's 24.19 underwriting and approval requirements, to make a loan at a 24.20 specified interest rate or number of discount points, or both, 24.21 and the borrower agrees to make a loan on those terms. The term 24.22 also includes an offer by a lender that is accepted by a 24.23 borrower under which the lender promises to guarantee or lock in 24.24 an interest rate or number of discount points, or both, for a 24.25 specific period of time. 24.26 (e) "Mortgage broker" includes: 24.27 (1) a person whonegotiates mortgage loans as described in24.28section 82.17, subdivision 4, clause (b), if the person does not24.29qualify for the exception set forth in section 82.18, clause24.30(o);performs or offers to perform the activities of "mortgage 24.31 brokering" or "soliciting, placing, or negotiating a residential 24.32 mortgage loan" as defined by chapter 58; or 24.33 (2) the employees ofthea person; or24.34(3) any person or firm which holds itself out to the public24.35as a mortgage broker, regardless of whether the person or firm24.36holds a limited broker's license pursuant to section 82.20,25.1subdivision 13described in clause (1). 25.2 Sec. 2. Minnesota Statutes 1996, section 82.17, 25.3 subdivision 4, is amended to read: 25.4 Subd. 4. "Real estate broker" or "broker" means any person 25.5 who: 25.6 (a) for another and for commission, fee, or other valuable 25.7 consideration or with the intention or expectation of receiving 25.8 the same directly or indirectly lists, sells, exchanges, buys or 25.9 rents, manages, or offers or attempts to negotiate a sale, 25.10 option, exchange, purchase or rental of an interest or estate in 25.11 real estate, or advertises or holds out as engaged in these 25.12 activities; 25.13 (b) for another and for commission, fee, or other valuable 25.14 consideration or with the intention or expectation of receiving 25.15 the same directly or indirectly negotiates or offers or attempts 25.16 to negotiate a loan, secured or to be secured by a mortgage or 25.17 other encumbrance on real estate, which is not a residential 25.18 mortgage loan as defined by section 58.02, subdivision 18; 25.19 (c) for another and for commission, fee, or other valuable 25.20 consideration or with the intention or expectation of receiving 25.21 the same directly or indirectly lists, sells, exchanges, buys, 25.22 rents, manages, offers or attempts to negotiate a sale, option, 25.23 exchange, purchase or rental of any business opportunity or 25.24 business, or its good will, inventory, or fixtures, or any 25.25 interest therein; 25.26 (d) for another and for commission, fee, or other valuable 25.27 consideration or with the intention or expectation of receiving 25.28 the same directly or indirectly offers, sells or attempts to 25.29 negotiate the sale of property that is subject to the 25.30 registration requirements of chapter 83, concerning subdivided 25.31 land; 25.32 (e) for another and for commission, fee, or other valuable 25.33 consideration or with the intention or expectation of receiving 25.34 the same, promotes the sale of real estate by advertising it in 25.35 a publication issued primarily for this purpose, if the person: 25.36 (1) negotiates on behalf of any party to a transaction; 26.1 (2) disseminates any information regarding the property to 26.2 any party or potential party to a transaction subsequent to the 26.3 publication of the advertisement, except that in response to an 26.4 initial inquiry from a potential purchaser, the person may 26.5 forward additional written information regarding the property 26.6 which has been prepared prior to the publication by the seller 26.7 or broker or a representative of either; 26.8 (3) counsels, advises, or offers suggestions to the seller 26.9 or a representative of the seller with regard to the marketing, 26.10 offer, sale, or lease of the real estate, whether prior to or 26.11 subsequent to the publication of the advertisement; 26.12 (4) counsels, advises, or offers suggestions to a potential 26.13 buyer or a representative of the seller with regard to the 26.14 purchase or rental of any advertised real estate; or 26.15 (5) engages in any other activity otherwise subject to 26.16 licensure under this chapter; 26.17 (f) engages wholly or in part in the business of selling 26.18 real estate to the extent that a pattern of real estate sales is 26.19 established, whether or not the real estate is owned by the 26.20 person. A person shall be presumed to be engaged in the 26.21 business of selling real estate if the person engages as 26.22 principal in five or more transactions during any 12-month 26.23 period, unless the person is represented by a licensed real 26.24 estate broker or salesperson;. 26.25(g) offers or makes more than five loans secured by real26.26estate during any 12-month period and who is not a bank, savings26.27bank, mutual savings bank, or savings association organized26.28under the laws of this state or the United States, trust26.29company, trust company acting as a fiduciary, or other financial26.30institution subject to the supervision of the commissioner of26.31commerce, or mortgagee or lender approved or certified by the26.32secretary of housing and urban development or approved or26.33certified by the administrator of veterans affairs, or approved26.34or certified by the administrator of the Farmers Home26.35Administration, or approved or certified by the Federal Home26.36Loan Mortgage Corporation, or approved or certified by the27.1Federal National Mortgage Association.27.2 Sec. 3. Minnesota Statutes 1996, section 82.18, is amended 27.3 to read: 27.4 82.18 [EXCEPTIONS.] 27.5 Unless a person is licensed or otherwise required to be 27.6 licensed under this chapter, the term real estate broker does 27.7 not include: 27.8 (a) a licensed practicing attorney if the attorney complies 27.9 in all respects with the trust account provisions of this 27.10 chapter; 27.11 (b) a receiver, trustee, administrator, guardian, executor, 27.12 or other person appointed by or acting under the judgment or 27.13 order of any court; 27.14 (c) any person owning and operating a cemetery and selling 27.15 lots therein solely for use as burial plots; 27.16 (d) any custodian, janitor, or employee of the owner or 27.17 manager of a residential building who leases residential units 27.18 in the building; 27.19 (e) any bank, trust company, savings association, 27.20 industrial loan and thrift company, regulated lender under 27.21 chapter 56, public utility, or land mortgage or farm loan 27.22 association organized under the laws of this state or the United 27.23 States, when engaged in the transaction of business within the 27.24 scope of its corporate powers as provided by law; 27.25 (f) public officers while performing their official duties; 27.26 (g) employees of persons enumerated in clauses (b), (e), 27.27 and (f), when engaged in the specific performance of their 27.28 duties; 27.29 (h) any person who acts as an auctioneer bonded in 27.30 conformity with section 330.02, when that person is engaged in 27.31 the specific performance of duties as an auctioneer, and when 27.32 that person has been employed to auction real estate by a person 27.33 licensed under this chapter or when the auctioneer has engaged a 27.34 licensed attorney to supervise the real estate transaction; 27.35 (i) any person who acquires real estate for the purpose of 27.36 engaging in and does engage in, or who is engaged in the 28.1 business of constructing residential, commercial or industrial 28.2 buildings for the purpose of resale if no more than 25 such 28.3 transactions occur in any 12-month period and the person 28.4 complies with section 82.24; 28.5 (j) any person who is licensed as a securities 28.6 broker-dealer or is licensed as a securities agent representing 28.7 a broker-dealer pursuant to chapter 80A and who offers to sell 28.8 or sells an interest or estate in real estate which is a 28.9 security as defined in section 80A.14, subdivision 18, and is 28.10 registered or exempt from registration or part of a transaction 28.11 exempt from registration pursuant to chapter 80A, when acting 28.12 solely as an incident to the sale of these securities; 28.13 (k) any person who offers to sell or sells a business 28.14 opportunity which is a franchise registered pursuant to chapter 28.15 80C, when acting solely to sell the franchise; 28.16 (l) any person who contracts with or solicits on behalf of 28.17 a provider a contract with a resident or prospective resident to 28.18 provide continuing care in a facility, pursuant to the 28.19 Continuing Care Facility Disclosure and Rehabilitation Act 28.20 (chapter 80D), when acting solely as incident to the contract; 28.21 (m) any broker-dealer or agent of a broker-dealer when 28.22 participating in a transaction in which all or part of a 28.23 business opportunity or business, including any interest 28.24 therein, is conveyed or acquired pursuant to an asset purchase, 28.25 merger, exchange of securities, or other business combination, 28.26 if the agent or broker-dealer is licensed pursuant to chapter 28.27 80A; 28.28 (n) an accountant acting incident to the practice of the 28.29 accounting profession if the accountant complies in all respects 28.30 with the trust account provisions of this chapter;. 28.31(o) a person who negotiates mortgage loans as described in28.32section 82.17, subdivision 4, clause (b), if the person is the28.33actual lender on at least 80 percent of all mortgage lending and28.34brokering transactions conducted by the person and if the person28.35is also a lender: (1) approved or certified by the secretary of28.36housing and urban development; (2) approved or certified by the29.1administrator of Veterans Affairs; (3) approved or certified by29.2the Administrator of the Farmers Home Administration; (4)29.3approved or certified by the Federal Home Loan Mortgage29.4Corporation; or (5) approved or certified by the Federal29.5National Mortgage Association.29.6 Sec. 4. Minnesota Statutes 1996, section 82.27, 29.7 subdivision 1, is amended to read: 29.8 Subdivision 1. The commissioner may by order deny, suspend 29.9 or revoke any license or may censure a licensee if the 29.10 commissioner finds (1) that the order is in the public interest, 29.11 and (2) that the applicant or licensee or, in the case of a 29.12 broker, any officer, director, partner, employee or agent or any 29.13 person occupying a similar status or performing similar 29.14 functions, or any person directly or indirectly controlling the 29.15 broker or closing agent or controlled by the broker or closing 29.16 agent: 29.17 (a) has filed an application for a license which is 29.18 incomplete in any material respect or contains any statement 29.19 which, in light of the circumstances under which it is made, is 29.20 false or misleading with respect to any material fact; 29.21 (b) has engaged in a fraudulent, deceptive, or dishonest 29.22 practice; 29.23 (c) is permanently or temporarily enjoined by any court of 29.24 competent jurisdiction from engaging in or continuing any 29.25 conduct or practice involving any aspect of the real estate 29.26 business; 29.27 (d) has failed to reasonably supervise brokers, 29.28 salespersons, or closing agents so as to cause injury or harm to 29.29 the public; 29.30 (e) has violated or failed to comply with any provision of 29.31 this chapter or any rule or order under this chapter; 29.32 (f) has, in the conduct of the licensee's affairs under the 29.33 license, been shown to be incompetent, untrustworthy, or 29.34 financially irresponsible;or29.35 (g) has acted on behalf of any party to a transaction, 29.36 where the licensee has a conflict of interest that may affect 30.1 the licensee's ability to represent that party, without the 30.2 knowledge and consent of the party; or 30.3 (h) has, while performing residential mortgage activities 30.4 regulated under chapter 58 violated any provision of chapter 58. 30.5 Sec. 5. [EFFECTIVE DATE.] 30.6 Sections 1 to 4 are effective August 1, 1999.