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SF 3818

1st Engrossment - 91st Legislature (2019 - 2020) Posted on 03/12/2020 02:38pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 1st Engrossment

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A bill for an act
relating to commerce; requiring notices for reverse mortgage loans; amending
Minnesota Statutes 2018, section 47.58, subdivisions 1, 8, by adding subdivisions.

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

Section 1.

Minnesota Statutes 2018, section 47.58, subdivision 1, is amended to read:


Subdivision 1.

Definitions.

For the purposes of this section, the terms defined in this
subdivision have the meanings given them.

(a) "Reverse mortgage loan" means a loan:

(1) Made to a borrower wherein the committed principal amount is paid to the borrower
in equal or unequal installments over a period of months or years, interest is assessed, and
authorized closing costs are incurred as specified in the loan agreement;

(2) Which is secured by a mortgage on residential property owned solely by the borrower;
and

(3) Which is due upon the death of the last surviving borrower, or upon the borrower
terminating use of the property as principal residence so as to disqualify the property from
the homestead credit refund given in chapter 290A.

(b) "Lender" means any bank subject to chapter 48, credit union subject to chapter 52,
savings bank organized and operated pursuant to chapter 50, savings association subject to
chapter 51A, any residential mortgage originator subject to chapter 58, or any insurance
company as defined in section 60A.02, subdivision 4. "Lender" also includes any federally
chartered banknew text begin or savings associationnew text end supervised by the comptroller of the currency or
deleted text begin federally chartered savings association supervised by the Federal Home Loan Bank Board
or
deleted text end federally chartered credit union supervised by the National Credit Union Administration,
to the extent permitted by federal law.

(c) "Borrower" includes any natural person holding an interest in severalty or as joint
tenant or tenant-in-common in the property securing a reverse mortgage loan.

(d) "Outstanding loan balance" means the current net amount of money owed by the
borrower to the lender whether or not that sum is suspended pursuant to the terms of the
reverse mortgage loan agreement or is immediately due and payable. The outstanding loan
balance is calculated by adding the current totals of the items described in clauses (1) to (5)
and subtracting the current totals of the item described in clause (6):

(1) The sum of all payments made by the lender which are necessary to clear the property
securing the loan of any outstanding mortgage encumbrance or mechanics or material
supplier's lien.

(2) The total disbursements made by the lender to date pursuant to the loan agreement
as formulated in accordance with subdivision 3.

(3) All taxes, assessments, insurance premiums and other similar charges paid to date
by the lender pursuant to subdivision 6, which charges were not reimbursed by the borrower
within 60 days.

(4) All actual closing costs which the borrower has deferred, if a deferral provision is
contained in the loan agreement as authorized by subdivision 7.

(5) The total accrued interest to date, as authorized by subdivision 5.

(6) All payments made by the borrower pursuant to subdivision 4.

(e) "Actual closing costs" mean reasonable charges or sums ordinarily paid at the time
of closing for the following, whether or not retained by the lender:

(1) Any insurance premiums on policies covering the mortgaged property including but
not limited to premiums for title insurance, fire and extended coverage insurance, flood
insurance, and private mortgage insurance.

(2) Abstracting, title examination and search, and examination of public records related
to the mortgaged property.

(3) The preparation and recording of any or all documents required by law or custom
for closing a reverse mortgage loan agreement.

(4) Appraisal and survey of real property securing a reverse mortgage loan.

(5) A single service charge, which service charge shall include any consideration, not
otherwise specified in this section as an "actual closing cost," paid by the borrower to the
lender for or in relation to the acquisition, making, refinancing or modification of a reverse
mortgage loan, and shall also include any consideration received by the lender for making
a commitment for a reverse mortgage loan, whether or not an actual loan follows the
commitment. The service charge shall not exceed one percent of the bona fide committed
principal amount of the reverse mortgage loan.

(6) Charges and fees necessary for or related to the transfer of real property securing a
reverse mortgage loan or the closing of a reverse mortgage loan agreement paid by the
borrower and received by any party other than the lender.

new text begin (f) "Third-party designee" means an individual designated in the reverse mortgage loan
agreement by the borrower to receive the communications described in subdivision 6a from
a servicer.
new text end

new text begin (g) "Reverse mortgage loan servicer" or "servicer" means a person who performs servicing
activities for a reverse mortgage loan.
new text end

new text begin (h) "Servicing activities" means disbursing loan proceeds; monitoring payments due;
communicating with and responding to a borrower, a borrower's heirs, and a borrower's
family members; determining whether a borrower continues to occupy a property as a
principal residence; managing delinquencies and defaults; initiating, assisting, or facilitating
a foreclosure; or performing any other service required by the lender or by the terms of the
reverse mortgage loan agreement.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2020, and applies to reverse
mortgage loans originated on or after that date.
new text end

Sec. 2.

Minnesota Statutes 2018, section 47.58, is amended by adding a subdivision to
read:


new text begin Subd. 6a. new text end

new text begin Communication with third-party designee. new text end

new text begin (a) The reverse mortgage loan
servicer must, by first-class mail, send copies of unanswered written communications and
all subsequent written communications from the servicer to the borrower regarding
delinquencies, defaults, and unfulfilled obligations under the loan agreement to a third-party
designee at the address listed on the authorization form described in subdivision 8.
new text end

new text begin (b) The servicer may:
new text end

new text begin (1) mail the communications required under paragraph (a) to the third-party designee at
the same time the communications are mailed to the borrower; or
new text end

new text begin (2) communicate with the third-party designee regarding the borrower's failure to respond
to the communications described in paragraph (a) by e-mail at the e-mail address listed on
the authorization form described in subdivision 8.
new text end

new text begin (c) The authorization form described in subdivision 8 shall be considered sufficient
authorization for the servicer to communicate with a third-party designee who initiates
communication with the servicer via phone, e-mail, or United States mail.
new text end

new text begin (d) Compliance with this subdivision may be established by recording with the county
recorder or registrar of titles, as appropriate, an affidavit, which includes the reverse mortgage
document recording number, executed by a person having knowledge of the facts, and
stating that the actions required by paragraph (a) have been taken. The affidavit is prima
facie evidence of the facts stated in the affidavit and recordation is prima facie evidence of
compliance with this subdivision.
new text end

new text begin (e) A borrower has a cause of action under section 582.043, subdivision 7, if the servicer
fails to comply with paragraph (a), provided that the action is taken prior to the expiration
of the redemption period specified under section 580.23. There is a rebuttable presumption
that the servicer failed to communicate with a third-party designee absent a recorded affidavit,
as described in paragraph (d).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2020, for reverse mortgage
loans originated on or after that date.
new text end

Sec. 3.

Minnesota Statutes 2018, section 47.58, is amended by adding a subdivision to
read:


new text begin Subd. 6b. new text end

new text begin Communication with independent counseling agency. new text end

new text begin (a) If a reverse
mortgage loan servicer must take the actions required under subdivision 6a, paragraph (a),
the servicer must mail a copy of unanswered written communications and copies of
subsequent written communications from the servicer regarding delinquencies, defaults,
and unfulfilled obligations under a reverse mortgage loan agreement to the independent
counseling agency identified in the loan agreement.
new text end

new text begin (b) The servicer may mail the communications described in paragraph (a) to the
independent counseling agency at the same time the communications are mailed to the
borrower and third-party designee.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2020, for reverse mortgage
loans originated on or after that date.
new text end

Sec. 4.

Minnesota Statutes 2018, section 47.58, subdivision 8, is amended to read:


Subd. 8.

Counseling; requirement; penalty.

Prior to accepting a final and complete
application for a reverse mortgage loan or assessing any fees, a lender must:

(a) refer the prospective borrower to an independent housing counseling agency for
reverse mortgage counseling. The lender shall provide the prospective borrower with a list
of at least three independent housing counseling agencies. The lender shall positively promote
the benefits of reverse mortgage counseling to the potential borrower; and

(b) receive a certification from the applicant or the applicant's authorized representative
that the applicant has received counseling as defined in this subdivision from an independent
housing counseling agency. The certification must be signed by the applicant and the
counselor from the independent agency and must include the date of the counseling, and
the name, address, and telephone number of both the counselor from the independent agency
and the applicant. The lender shall maintain the certification in an accurate, reproducible,
and accessible format for the term of the reverse mortgage. A failure by the lender to comply
with this subdivision results in a $1,000 civil penalty payable to the borrower.

For the purposes of this subdivision:

(1) "independent counseling agency" means an agency approved by the United States
Department of Housing and Urban Development, domiciled in Minnesota, to provide loan
counseling that has no business relationship with the lender and, except for an authorized
foreclosure prevention counseling agency, as defined in section 580.021, subdivision 2,
neither makes loans nor refers borrowers to any person or entity that makes loans; and

(2) "counseling" means that during a session, which must be no less than 60 minutes,
the following services are provided to the borrower:

(i) a review of the advantages and disadvantages of a reverse mortgage loan;

(ii) a discussion of the borrower's finances, assets, liabilities, expenses, and income needs
and a review of options other than a reverse mortgage loan that are available to the borrower,
including other housing, social services, health, and financial options;

(iii) a review of other home equity conversion or other loan options that are or may
become available to the borrower;

(iv) an explanation of the financial implication of entering into a reverse mortgage loan,
including the costs of the loan;

(v) an explanation that a reverse mortgage loan may have tax consequences, affect
eligibility for assistance under federal and state programs, and have an impact on the estate
and heirs of the borrower;

(vi) an explanation of the lending process;

(vii) an opportunity for the borrower to ask questions of the counselor;

(viii) an explanation that:

(A) the lender may not condition a reverse mortgage loan on the purchase of an annuity,
investment, life insurance, or long-term care insurance product; and

(B) a reverse mortgage loan cannot obligate the borrower to purchase an annuity,
investment, life insurance, or long-term care insurance product; deleted text beginand
deleted text end

(ix) notification to the borrower that, following the receipt of a written commitment to
make a reverse mortgage loan and prior to the expiration of the seven-day cooling off period
provided under subdivision 10, the borrower may seek additional information and an analysis
of the commitment from the counselordeleted text begin.deleted text endnew text begin; and
new text end

new text begin (x) an explanation of the borrower's right, before executing the reverse mortgage loan
agreement, to name a third-party designee to receive communications regarding
delinquencies, defaults, and unfulfilled obligations under the loan agreement. The counselor
must provide the borrower with the following blank form, which must be in at least 14-point
font, for the borrower to complete if desired and present to the lender when entering into
the loan agreement.
new text end

new text begin Authorization Form
new text end

new text begin I, (name of borrower), authorize my lender or servicer to send copies of any written
communications from the servicer regarding missed payments or other unfulfilled loan
obligations that could result in foreclosure, as provided under Minnesota Statutes, section
47.58, subdivisions 6a and 6b, to:
new text end

new text begin 1. the individual designated below, and
new text end

new text begin 2. the independent counseling agency providing me with the reverse mortgage loan
counseling required under Minnesota Statutes, section 47.58, subdivision 8.
new text end

new text begin I further authorize the person designated below to communicate with my lender or
servicer.
new text end

new text begin Designee Contact Information:
new text end

new text begin Name: .
new text end

new text begin Address: .
new text end

new text begin Telephone Number(s): .
new text end

new text begin E-mail Address: .
new text end

new text begin Name of Borrower (print name): .
new text end

new text begin Signature of Borrower: .
new text end

new text begin Date: .
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2020, for all reverse mortgage
loans originated on or after that date.
new text end