SF 3818

as introduced - 91st Legislature (2019 - 2020) Posted on 03/11/2020 04:52pm

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 bank new text begin or savings association new 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) "Alternate individual" means an individual described in Code of Federal Regulations,
title 24, section 206.40, designated by the borrower as the individual to contact if the borrower
does not respond to communications regarding the reverse mortgage loan.
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, the borrower's heirs, and the borrower's
family members; determining whether a borrower continues to occupy a home as a primary
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 alternate individual. new text end

new text begin (a) If a borrower has designated
an alternate individual in a reverse mortgage loan agreement, the reverse mortgage loan
servicer must provide the borrower and alternate individual notice of (1) delinquencies,
defaults, unfulfilled obligations under the agreement, and (2) any other circumstances that
may result in foreclosure if there is a failure to cure or comply.
new text end

new text begin (b) The notice required under paragraph (a) must be provided by the reverse mortgage
loan servicer to the borrower and alternate individual via all methods of communication
provided on the form described in subdivision 8.
new text end

new text begin (c) A reverse mortgage loan servicer may demonstrate compliance with this subdivision
by recording with the county recorder or registrar of titles an affidavit by a person having
knowledge of the facts stating the notice required by this subdivision has been delivered to
the borrower and alternate individual. 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 (d) Notice to an alternate individual may be provided:
new text end

new text begin (1) simultaneously with the notice provided to the borrower; or
new text end

new text begin (2) to the alternate individual after the borrower fails to respond to the initial notice
within the time period stated in the notice.
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 communicate with an alternate individual regarding (1) delinquencies, defaults,
unfulfilled obligations under the reverse mortgage loan agreement, or (2) any other
circumstances that may result in foreclosure if there is a failure to cure or comply. Absent
a recorded affidavit described in paragraph (c), there is a rebuttable presumption that the
reverse mortgage loan servicer failed to communicate with an alternate individual.
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 Notice to independent counseling agency. new text end

new text begin (a) A reverse mortgage loan
servicer must provide notice to the independent counseling agency identified in the agreement
of (1) delinquencies, defaults, unfulfilled obligations under a reverse mortgage loan
agreement, and (2) any other circumstances that may result in foreclosure if there is a failure
to cure or comply.
new text end

new text begin (b) The notice must be provided:
new text end

new text begin (1) simultaneously with the notice provided to the borrower and the alternate individual;
or
new text end

new text begin (2) after a borrower or an alternate individual fails to respond to the initial notice within
the time period stated in the notice.
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 begin and
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 counselor deleted text begin . deleted text end new 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 designate an alternate individual to receive communications regarding (A)
delinquencies, defaults, unfulfilled obligations under the agreement, and (B) any other
circumstances that may result in foreclosure if there is a failure to cure or comply. If a
borrower wants to designate an alternate individual, the following blank form must be
provided to the borrower in 14-point type:
new text end

new text begin Designation of Alternate Individual
new text end

new text begin I, (name of borrower), designate the person named below as an alternate individual that
my lender or servicer must contact and to whom my lender or servicer must send all
communications regarding my mortgage, including communications about missed payments
or other loan obligation, if my lender or servicer is unable to contact or communicate with
me regarding these matters. I authorize the person named below to communicate on my
behalf if the lender or servicer is unable to contact or communicate with me.
new text end

new text begin Designee Contact Information:
new text end

new text begin Name: .
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