1.1                          A bill for an act 
  1.2             relating to financial institutions; regulating 
  1.3             mortgage prepayments; allowing written waivers of the 
  1.4             right to prepay without penalty under certain 
  1.5             circumstances; amending Minnesota Statutes 1994, 
  1.6             section 47.20, subdivisions 5 and 10. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 1994, section 47.20, 
  1.9   subdivision 5, is amended to read: 
  1.10     Subd. 5.  [PREPAYMENT PENALTY.] (a) Unless the mortgagor 
  1.11  waives its right to prepay the mortgage without penalty, in a 
  1.12  written waiver approved by the commissioner and signed by the 
  1.13  mortgagor, no conventional loan or loan authorized in 
  1.14  subdivision 1 made on or after the effective date of Laws 1977, 
  1.15  chapter 350 shall contain a provision requiring or permitting 
  1.16  the imposition of a penalty in the event the loan or advance of 
  1.17  credit is prepaid. 
  1.18     This section does not permit the imposition of a prepayment 
  1.19  penalty in the event that the property securing the mortgage is 
  1.20  sold or the mortgage is prepaid in part.  
  1.21     No prepayment penalty may be enforced after seven years 
  1.22  from the date of the mortgage. 
  1.23     (b) A precomputed conventional loan or precomputed loan 
  1.24  authorized in subdivision 1 shall provide for a refund of the 
  1.25  precomputed finance charge according to the actuarial method if 
  1.26  the loan is paid in full by cash, renewal or refinancing, or a 
  2.1   new loan, one month or more before the final installment due 
  2.2   date.  The actuarial method for the purpose of this section is 
  2.3   the amount of interest attributable to each fully unexpired 
  2.4   monthly installment period of the loan contract following the 
  2.5   date of prepayment in full, calculated as if the loan was made 
  2.6   on an interest-bearing basis at the rate of interest provided 
  2.7   for in the note based on the assumption that all payments were 
  2.8   made according to schedule.  A precomputed loan for the purpose 
  2.9   of this section means a loan for which the debt is expressed as 
  2.10  a sum comprised of the principal amount and the amount of 
  2.11  interest for the entire term of the loan computed actuarially in 
  2.12  advance on the assumption that all scheduled payments will be 
  2.13  made when due, and does not include a loan for which interest is 
  2.14  computed from time to time by application of a rate to the 
  2.15  unpaid principal balance, interest-bearing loans, or 
  2.16  simple-interest loans.  For the purpose of calculating a refund 
  2.17  for precomputed loans under this section, any portion of the 
  2.18  finance charge for extending the first payment period beyond one 
  2.19  month may be ignored.  Nothing in this section shall be 
  2.20  considered a limitation on discount points or other finance 
  2.21  charges charged or collected in advance, and nothing in this 
  2.22  section shall require a refund of the charges in the event of 
  2.23  prepayment.  Nothing in this section shall be considered to 
  2.24  supersede section 47.204. 
  2.25     Sec. 2.  Minnesota Statutes 1994, section 47.20, 
  2.26  subdivision 10, is amended to read: 
  2.27     Subd. 10.  [WAIVER.] Notwithstanding any other law Except 
  2.28  as provided in subdivision 5, the provisions of this section may 
  2.29  not be waived by any oral or written agreement executed by any 
  2.30  person. 
  2.31     Sec. 3.  [EFFECTIVE DATE.] 
  2.32     Sections 1 and 2 are effective for loans made, refinanced, 
  2.33  renewed, extended, or modified after June 30, 1995.