language to be deleted (2) new language
relating to commerce; requiring notices for reverse mortgage loans;
amending Minnesota Statutes 2020, section 47.58, subdivisions 1, 8, by adding subdivisions.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
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 bank supervised by the comptroller of the currency or federally chartered savings association supervised by the Federal Home Loan Bank Board or 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.
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; and
(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 counselor.
Presented to the governor March 25, 2021
Signed by the governor March 26, 2021, 1:37 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes