2004 Minnesota Statutes

CHAPTER 58. Mortgage originator and service licensing

     58.01 Citation. 

    This chapter shall be cited as the "Minnesota Residential 
 Mortgage Originator and Servicer Licensing Act." 

    HIST: 1998 c 343 art 1 s 1 

     58.02 Definitions. 

    Subdivision 1.    Scope.  For purposes of this chapter, 
 the terms defined in this section have the meanings given to 
 them. 

    Subd. 2.    Act.  "Act" means the Minnesota Residential 
 Mortgage Originator and Servicer Licensing Act. 

    Subd. 3.    Advance fee.  "Advance fee" means a 
 commission, fee, charge, or compensation of any kind paid to a 
 residential mortgage originator before the closing of a loan, 
 that is intended in whole or in part as payment for the 
 originator's services in finding or attempting to find a loan 
 for a borrower.  Advance fee does not include pass-through fees 
 or commitment or extended lock fees or other fees as determined 
 by the commissioner. 

    Subd. 3a.    Advertisement.  "Advertisement" includes, 
 but is not limited to, any illustration, circular, or statement 
 that presents information to the public in either a paper, 
 electronic, or other medium that is intended to attract clients, 
 generate interest, or otherwise make known the existence of the 
 licensee and which addresses services, fees, or products 
 provided by or available through the licensee, including, but 
 not limited to, interest rates, loan origination fees, types of 
 available loans, discount points, closing costs, or sample 
 mortgage terms. 

    Subd. 4.    Borrower.  "Borrower" means a person or 
 persons applying for a residential mortgage loan, a mortgagor, 
 or the person or persons on whose behalf the activities in 
 subdivisions 12, 14, 22, and 23 are conducted. 

    Subd. 5.    Closing.  "Closing" means either or both of 
 the following:  (1) the process whereby the real estate contract 
 between a buyer and a seller is consummated; or (2) the process 
 whereby the documents creating a security interest in real 
 property become effective between the borrower and the lender. 

    Subd. 6.    Commissioner.  "Commissioner" means the 
 commissioner of commerce. 

    Subd. 7.    Employee.  "Employee" means an individual 
 who is treated as an employee by the residential mortgage 
 originator or servicer for purposes of compliance with federal 
 income tax laws. 

    Subd. 8.    Escrow account.  "Escrow account" means a 
 trust account that is established and maintained to hold funds 
 received from a borrower, such as real estate taxes and 
 insurance premiums, incurred in connection with the servicing of 
 the mortgage. 

    Subd. 9.    Exempt person.  "Exempt person" means a 
 person exempt from residential mortgage originator licensing 
 requirements, and a person exempt from residential mortgage 
 service licensing requirements. 

    Subd. 10.    Financial institution.  "Financial 
 institution" means a bank, bank and trust, trust company with 
 banking powers, savings bank, savings association, or credit 
 union, organized under the laws of this state, any other state, 
 or the United States; an industrial loan and thrift under 
 chapter 53; or a regulated lender under chapter 56.  The term 
 "financial institution" also includes a subsidiary or operating 
 subsidiary of a financial institution or of a bank holding 
 company as defined in the federal Bank Holding Company Act, 
 United States Code, title 12, section 1841 et seq., if the 
 subsidiary or operating subsidiary can demonstrate to the 
 satisfaction of the commissioner that it is regulated and 
 subject to active and ongoing oversight and supervision by a 
 federal banking agency, as defined in the Federal Deposit 
 Insurance Act, United States Code, title 12, section 1811 et 
 seq., or the commissioner.  

    Subd. 11.    Lender.  "Lender" means a person who makes 
 residential mortgage loans including a person who provides table 
 funding. 

    Subd. 12.    Making a residential mortgage loan.  
 "Making a residential mortgage loan" means for compensation or 
 gain, or the expectation of compensation or gain, to advance 
 funds or make a commitment to advance funds in connection with a 
 residential mortgage. 

    Subd. 13.    Mortgage broker; broker.  "Mortgage broker" 
 or "broker" means a person who performs the activities described 
 in subdivisions 14 and 23. 

    Subd. 14.    Mortgage brokering; brokering.  "Mortgage 
 brokering" or "brokering" means helping to obtain from another 
 person, for a borrower, a residential mortgage loan or assisting 
 a borrower in obtaining a residential mortgage loan in return 
 for consideration to be paid by the borrower or lender or both.  
 Mortgage brokering or brokering includes, but is not limited to, 
 soliciting, placing, or negotiating a residential mortgage loan. 

    Subd. 15. Repealed, 2000 c 427 s 21 

    Subd. 16.    Person.  "Person" means a natural person, 
 firm, partnership, limited liability partnership, corporation, 
 association, limited liability company, or other form of 
 business organization and the officers, directors, employees, or 
 agents of that person. 

    Subd. 17.    Person in control.  "Person in control" 
 means any member of senior management and other persons who 
 possess, directly or indirectly, the power to direct or cause 
 the direction of the management policies of an applicant or 
 licensee under this chapter, regardless of whether the person 
 has any ownership interest in the applicant or licensee.  
 Control is presumed to exist if a person, directly or 
 indirectly, owns, controls, or holds with power to vote ten 
 percent or more of the voting stock of an applicant or licensee 
 or of a person who owns, controls, or holds with power to vote 
 ten percent or more of the voting stock of an applicant or 
 licensee. 

    Subd. 18.    Residential mortgage loan.  "Residential 
 mortgage loan" means a loan made primarily for personal, family, 
 or household use and secured primarily by either:  (1) a 
 mortgage on residential real property; or (2) certificates of 
 stock or other evidence of ownership interest in and proprietary 
 lease from corporations, partnerships, or other forms of 
 business organizations formed for the purpose of cooperative 
 ownership of residential real property. 

    Subd. 19.    Residential mortgage originator.  
 "Residential mortgage originator" means a person who, directly 
 or indirectly, for compensation or gain or in expectation of 
 compensation or gain, solicits or offers to solicit, or accepts 
 or offers to accept an application for a residential mortgage 
 loan through any medium or mode of communication from a 
 borrower, or makes a residential mortgage loan.  "Residential 
 mortgage originator" includes a lender as defined in subdivision 
 11 and a broker as defined in subdivision 13. 

    Subd. 20.    Residential mortgage servicer; servicer.  
 "Residential mortgage servicer" or "servicer" means a person who 
 engages in the activity of servicing a residential mortgage as 
 defined in subdivision 22. 

    Subd. 21.    Residential real property; residential real 
 estate.  "Residential real property" or "residential real 
 estate" means real property improved or intended to be improved 
 by a structure designed principally for the occupancy of from 
 one to four families. 

    Subd. 22.    Servicing; servicing a residential mortgage 
 loan.  "Servicing" or "servicing a residential mortgage loan" 
 means through any medium or mode of communication the collection 
 or remittance of, or the right or obligation to collect or remit 
 for a lender, mortgagee, note owner, noteholder, or for a 
 person's own account, payments, interest, principal, and escrow 
 items such as insurance and taxes for property subject to a 
 residential mortgage loan. 

    Subd. 23.    Soliciting, placing, or negotiating a 
 residential mortgage loan.  "Soliciting, placing, or 
 negotiating a residential mortgage loan" means for compensation 
 or gain or expectation of compensation or gain, whether directly 
 or indirectly, accepting or offering to accept an application 
 for a residential mortgage loan, assisting, or offering to 
 assist a borrower in applying for a residential mortgage loan, 
 or negotiating or offering to negotiate the terms or conditions 
 of a residential mortgage loan with a lender on behalf of a 
 borrower. 

    Subd. 24. Repealed, 2004 c 203 art 1 s 11 

    Subd. 25.    Trust account.  "Trust account" means a 
 negotiable order of withdrawal account, demand deposit, or 
 checking account maintained for the purpose of segregating trust 
 funds from other funds.  A "trust account" must not allow the 
 financial institution a right of set-off against the money owed 
 it by the account holder. 

    Subd. 26.    Trust funds.  "Trust funds" means funds 
 received by a residential mortgage originator or servicer in a 
 fiduciary capacity for later distribution, such as appraisal or 
 credit report fees, taxes, or insurance premiums.  Trust funds 
 includes commitment, lock, extended lock, and advance fees. 

    HIST: 1998 c 343 art 1 s 2; 1999 c 86 art 1 s 14; 2000 c 427 s 
 10; 2001 c 56 s 8 

     58.03 Classes of license. 

    The commissioner may issue the following classes of license 
 under this chapter: 

    (1) a residential mortgage originator license; and 

    (2) a residential mortgage servicer license. 

    HIST: 1998 c 343 art 1 s 3 

     58.04 Licensing requirement. 

    Subdivision 1.    Residential mortgage originator 
 licensing requirements.  (a) Beginning August 1, 1999, no 
 person shall act as a residential mortgage originator, or make 
 residential mortgage loans without first obtaining a license 
 from the commissioner according to the licensing procedures 
 provided in this chapter. 

    (b) The following persons are exempt from the residential 
 mortgage originator licensing requirements: 

    (1) an employee of one mortgage originator licensee or one 
 person holding a certificate of exemption; 

    (2) a person licensed as a real estate broker under chapter 
 82 who is not licensed to another real estate broker; 

    (3) an individual real estate licensee who is licensed to a 
 real estate broker as described in clause (2) if: 

    (i) the individual licensee acts only under the name, 
 authority, and supervision of the broker to whom the licensee is 
 licensed; 

    (ii) the broker to whom the licensee is licensed obtains a 
 certificate of exemption according to section 58.05, subdivision 
 2; 

    (iii) the broker does not collect an advance fee for its 
 residential mortgage-related activities; and 

    (iv) the residential mortgage origination activities are 
 incidental to the real estate licensee's primary activities as a 
 real estate broker or salesperson; 

    (4) an individual licensed as a property/casualty or 
 life/health insurance agent under chapter 60K if: 

    (i) the insurance agent acts on behalf of only one 
 residential mortgage originator, which is in compliance with 
 chapter 58; 

    (ii) the insurance agent has entered into a written 
 contract with the mortgage originator under the terms of which 
 the mortgage originator agrees to accept responsibility for the 
 insurance agent's residential mortgage-related activities; 

    (iii) the insurance agent obtains a certificate of 
 exemption under section 58.05, subdivision 2; and 

    (iv) the insurance agent does not collect an advance fee 
 for the insurance agent's residential mortgage-related 
 activities; 

    (5) a person who is not in the business of making 
 residential mortgage loans and who makes no more than three such 
 loans, with its own funds, during any 12-month period; 

    (6) a financial institution as defined in section 58.02, 
 subdivision 10; 

    (7) an agency of the federal government, or of a state or 
 municipal government; 

    (8) an employee or employer pension plan making loans only 
 to its participants; 

    (9) a person acting in a fiduciary capacity, such as a 
 trustee or receiver, as a result of a specific order issued by a 
 court of competent jurisdiction; or 

    (10) a person exempted by order of the commissioner.  

    Subd. 2.    Residential mortgage servicer licensing 
 requirements.  (a) Beginning August 1, 1999, no person shall 
 engage in activities or practices that fall within the 
 definition of "servicing a residential mortgage loan" under 
 section 58.02, subdivision 22, without first obtaining a license 
 from the commissioner according to the licensing procedures 
 provided in this chapter. 

    (b) The following persons are exempt from the residential 
 mortgage servicer licensing requirements: 

    (1) a person licensed as a residential mortgage originator; 

    (2) an employee of one licensee or one person holding a 
 certificate of exemption based on an exemption under this 
 subdivision; 

    (3) a person servicing loans made with its own funds, if no 
 more than three such loans are made in any 12-month period; 

    (4) a financial institution as defined in section 58.02, 
 subdivision 10; 

    (5) an agency of the federal government, or of a state or 
 municipal government; 

    (6) an employee or employer pension plan making loans only 
 to its participants; 

    (7) a person acting in a fiduciary capacity, such as a 
 trustee or receiver, as a result of a specific order issued by a 
 court of competent jurisdiction; or 

    (8) a person exempted by order of the commissioner. 

    Subd. 3.    Conducting business under license.  No 
 person required to be licensed under this chapter may, without a 
 license, do business under a name or title or circulate or use 
 advertising or make representations or give information to a 
 person, that indicates or reasonably implies activity within the 
 scope of this chapter. 

    No person licensed under this chapter may do business under 
 more than one name or title. 

    Subd. 4.    Applicability to banks and credit unions.  
 Except for sections 58.13 and 58.137, subdivisions 2 and 3, this 
 chapter does not apply to a bank, savings bank, savings 
 association, or credit union, or to any subsidiary of any of 
 them, that is subject to supervision by either a federal 
 regulatory agency or the commissioner. 

    HIST: 1998 c 343 art 1 s 4; 1999 c 151 s 34; 2000 c 427 s 
 11-13; 2002 c 342 s 7 

     58.05 Exemptions from license. 

    Subdivision 1.    Exempt person.  An exempt 
 person as defined by section 58.04, subdivision 1, paragraph 
 (b), and subdivision 2, paragraph (b), is exempt from the 
 licensing requirements of this chapter, but is subject to all 
 other provisions of this chapter. 

    Subd. 2. Repealed, 2000 c 427 s 21 

    Subd. 3.    Certificate of exemption.  A person must 
 obtain a certificate of exemption from the commissioner to 
 qualify as an exempt person under section 58.04, subdivision 1, 
 paragraph (b), as a real estate broker under clause (2), an 
 insurance agent under clause (4), a financial institution under 
 clause (6), or by order of the commissioner under clause (10); 
 or under section 58.04, subdivision 2, paragraph (b), as a 
 financial institution under clause (4), or by order of the 
 commissioner under clause (8). 

    HIST: 1998 c 343 art 1 s 5; 2000 c 427 s 14 

     58.06 Application requirements for residential mortgage 
  originators and servicers. 

    Subdivision 1.    License application form.  Application 
 for a residential mortgage originator or a residential mortgage 
 servicer license must be in writing, under oath, and on a form 
 obtained from and prescribed by the commissioner. 

    Subd. 2.    Application contents.  The application must 
 contain the name and complete business address or addresses of 
 the license applicant.  If the license applicant is a 
 partnership, limited liability partnership, association, limited 
 liability company, corporation, or other form of business 
 organization, the application must contain the names and 
 complete business addresses of each partner, member, director, 
 and principal officer.  The application must also include a 
 description of the activities of the license applicant, in the 
 detail and for the periods the commissioner may require.  The 
 application must also include all of the following: 

    (a) an affirmation under oath that the applicant: 

    (1) will maintain competent staff and adequate staffing 
 levels, through direct employees or otherwise, to meet the 
 requirements of this chapter; 

    (2) will advise the commissioner of any material changes to 
 the information submitted in the most recent application within 
 ten days of the change; 

    (3) will advise the commissioner in writing immediately of 
 any bankruptcy petitions filed against or by the applicant or 
 licensee; 

    (4) is financially solvent; 

    (5) complies with federal and state tax laws; 

    (6) complies with sections 345.31 to 345.60, the Minnesota 
 unclaimed property law; and 

    (7) is, or that a person in control of the license 
 applicant is, at least 18 years of age; 

    (b) information as to the mortgage lending, servicing, or 
 brokering experience of the applicant and persons in control of 
 the applicant; 

    (c) information as to criminal convictions, excluding 
 traffic violations, of persons in control of the license 
 applicant; 

    (d) whether a court of competent jurisdiction has found 
 that the applicant or persons in control of the applicant have 
 engaged in conduct evidencing gross negligence, fraud, 
 misrepresentation, or deceit in performing an act for which a 
 license is required under this chapter; 

    (e) whether the applicant or persons in control of the 
 applicant have been the subject of:  an order of suspension or 
 revocation, cease and desist order, or injunctive order, or 
 order barring involvement in an industry or profession issued by 
 this or another state or federal regulatory agency or by the 
 Secretary of Housing and Urban Development within the ten-year 
 period immediately preceding submission of the application; and 

    (f) other information required by the commissioner. 

    HIST: 1998 c 343 art 1 s 6; 1999 c 151 s 35 

  58.07 Repealed, 1999 c 151 s 49 

     58.08 Bonds; letters of credit. 

    Subdivision 1.    Residential mortgage 
 originators.  A residential mortgage originator licensee 
 engaging in servicing a residential mortgage loan shall 
 continuously maintain a surety bond or irrevocable letter of 
 credit in an amount not less than $50,000 in a form approved by 
 the commissioner, issued by an insurance company or bank 
 authorized to do so in this state.  The bond or irrevocable 
 letter of credit must be available for the recovery of expenses, 
 fines, and fees levied by the commissioner under this chapter 
 relating to servicing, and for losses or damages incurred by 
 borrowers as the result of a licensee's servicing-related 
 noncompliance with the requirements of this chapter, sections 
 325D.43 to 325D.48, and 325F.67 to 325F.69, or breach of 
 contract. 

    The bond or irrevocable letter of credit must be submitted 
 with the originator's license application, and evidence of 
 continued coverage must be submitted with each renewal.  Any 
 change in the bond or letter of credit must be submitted for 
 approval by the commissioner, within ten days of its execution. 

    Subd. 2.    Residential mortgage servicers. 
  A residential mortgage servicer licensee shall continuously 
 maintain a surety bond or irrevocable letter of credit in an 
 amount not less than $100,000 in a form approved by the 
 commissioner, issued by an insurance company or bank authorized 
 to do so in this state.  The bond or irrevocable letter of 
 credit must be available for the recovery of expenses, fines, 
 and fees levied by the commissioner under this chapter, and for 
 losses or damages incurred by borrowers or other aggrieved 
 parties as the result of a licensee's noncompliance with the 
 requirements of this chapter, sections 325D.43 to 325D.48, and 
 325F.67 to 325F.69, or breach of contract relating to activities 
 regulated by this chapter.  

    The bond or irrevocable letter of credit must be submitted 
 with the servicer's license application and evidence of 
 continued coverage must be submitted with each renewal.  Any 
 change in the bond or letter of credit must be submitted for 
 approval by the commissioner, within ten days of its execution. 

    Subd. 3.    Exemption.  Subdivisions 1 and 2 do not 
 apply to mortgage originators or mortgage servicers who are 
 approved as seller/servicers by the Federal National Mortgage 
 Association or the Federal Home Loan Mortgage Corporation. 

    Subd. 4.    Irrevocable letter of credit.  As used in 
 this chapter, an irrevocable letter of credit must be accepted 
 only if it is clean, irrevocable, and contains an evergreen 
 clause. 

    (a) "Clean" means a letter of credit that is not 
 conditioned on the delivery of any other documents or materials. 

    (b) "Irrevocable" means a letter of credit that cannot be 
 modified or revoked without the consent of the beneficiary once 
 the beneficiary is established. 

    (c) "Evergreen clause" means one that specifically states 
 the expiration of a letter of credit will not take place without 
 a 60-day notice by the issuer and one that allows the issuer to 
 conduct an annual review of the account party's financial 
 condition.  If prior notice of expiration is not given by the 
 issuer, the letter of credit is automatically extended for one 
 year. 

    A clean irrevocable letter of credit must be accepted only 
 if it is issued by a financial institution that is authorized to 
 engage in banking in any of the 50 states or under the laws of 
 the United States, and whose business is substantially confined 
 to banking and supervised by the state commissioner of commerce 
 or similar official, and that has a long-term debt rating by a 
 recognized national rating agency of investment grade or 
 better.  If no long-term debt rating is available, the financial 
 institution must have the equivalent investment grade financial 
 characteristics. 

    HIST: 1998 c 343 art 1 s 8; 1999 c 151 s 36; 2000 c 427 s 15 

     58.09 Term of license. 

    Initial licenses for residential mortgage originators and 
 residential mortgage servicers issued under this chapter expire 
 on July 31, 2001, and are renewable on August 1, 2001, and on 
 August 1 of each odd-numbered year after that date.  A new 
 licensee whose license expires less than 12 months from the date 
 of issuance shall pay a fee equal to one-half the applicable 
 initial license fee set forth in section 58.10, subdivision 1, 
 clause (1) or (3). 

    HIST: 1998 c 343 art 1 s 9 

     58.10 Fees. 

    Subdivision 1.    Amounts.  The following fees must be 
 paid to the commissioner: 

    (1) for an initial residential mortgage originator license, 
 $850, $50 of which is credited to the consumer education account 
 in the special revenue fund; 

    (2) for a renewal license, $450, $50 of which is credited 
 to the consumer education account in the special revenue fund; 

    (3) for an initial residential mortgage servicer's license, 
 $1,000; 

    (4) for a renewal license, $500; and 

    (5) for a certificate of exemption, $100. 

    Subd. 2.    Forfeiture.  All fees are nonrefundable 
 except that an overpayment of a fee must be refunded upon proper 
 application. 

    Subd. 3.    Consumer education account; money credited and 
 appropriated.  (a) The consumer education account is created 
 in the special revenue fund.  Money credited to this account may 
 be appropriated to the commissioner for the purpose of making 
 grants to programs and campaigns designed to help consumers 
 avoid being victimized by unscrupulous lenders and mortgage 
 brokers.  Preference shall be given to programs and campaigns 
 designed by coalitions of public sector, private sector, and 
 nonprofit agencies, institutions, companies, and organizations. 

    (b) A sum sufficient is appropriated annually from the 
 consumer education account to the commissioner to make the 
 grants described in paragraph (a). 

    HIST: 1998 c 343 art 1 s 10; 2000 c 427 s 16; 2001 c 208 s 3,4 

     58.11 License renewal. 

    Subdivision 1.    Term.  Licenses are renewable on 
 August 1, 2001, and on August 1 of each odd-numbered year after 
 that date. 

    Subd. 2.    Timely renewal.  (a) A person whose 
 application is properly and timely filed who has not received 
 notice of denial of renewal is considered approved for renewal 
 and the person may continue to transact business as a 
 residential mortgage originator or servicer whether or not the 
 renewed license has been received on or before August 1 of the 
 renewal year.  Application for renewal of a license is 
 considered timely filed if received by the commissioner by, or 
 mailed with proper postage and postmarked by, July 15 of the 
 renewal year.  An application for renewal is considered properly 
 filed if made upon forms duly executed and sworn to, accompanied 
 by fees prescribed by this chapter, and containing any 
 information that the commissioner requires. 

    (b) A person who fails to make a timely application for 
 renewal of a license and who has not received the renewal 
 license as of August 1 of the renewal year is unlicensed until 
 the renewal license has been issued by the commissioner and is 
 received by the person. 

    Subd. 3.    Contents of renewal application.  
 Application for the renewal of an existing license must contain 
 the information specified in section 58.06, subdivision 2; 
 however, only the requested information having changed from the 
 most recent prior application need be submitted. 

    Subd. 4.    Cancellation.  A licensee ceasing an 
 activity or activities regulated by this chapter and desiring to 
 no longer be licensed shall so inform the commissioner in 
 writing and, at the same time, surrender the license and all 
 other symbols or indicia of licensure.  The licensee shall 
 include a plan for the withdrawal from regulated business, 
 including a timetable for the disposition of the business.  

    HIST: 1998 c 343 art 1 s 11 

     58.12 Denial, suspension, revocation of licenses. 

    Subdivision 1.    Powers of commissioner.  (a) The 
 commissioner may by order take any or all of the following 
 actions: 

    (1) bar a person from engaging in residential mortgage 
 origination or servicing; 

    (2) deny, suspend, or revoke a residential mortgage 
 originator or a servicer license; 

    (3) censure a licensee; 

    (4) impose a civil penalty as provided for in section 
 45.027, subdivision 6; or 

    (5) revoke an exemption or certificate of exemption.  

    (b) In order to take the action in paragraph (a), the 
 commissioner must find:  

    (1) that the order is in the public interest; and 

    (2) that the residential mortgage originator, servicer, 
 applicant, or other person, an officer, director, partner, 
 employee, or agent or any person occupying a similar status or 
 performing similar functions, or a person in control of the 
 originator, servicer, applicant, or other person has: 

    (i) violated any provision of this chapter or rule or order 
 under this chapter; 

    (ii) filed an application for a license that is incomplete 
 in any material respect or contains a statement that, in light 
 of the circumstances under which it is made, is false or 
 misleading with respect to a material fact; 

    (iii) failed to maintain compliance with the affirmations 
 made under section 58.06, subdivision 2; 

    (iv) violated a standard of conduct or engaged in a 
 fraudulent, coercive, deceptive, or dishonest act or practice, 
 whether or not the act or practice involves the residential 
 mortgage lending business; 

    (v) engaged in an act or practice, whether or not the act 
 or practice involves the business of making a residential 
 mortgage loan, that demonstrates untrustworthiness, financial 
 irresponsibility, or incompetence; 

    (vi) pled guilty, with or without explicitly admitting 
 guilt, pled nolo contendere, or been convicted of a felony, 
 gross misdemeanor, or a misdemeanor involving moral turpitude; 

    (vii) paid a civil penalty or been the subject of 
 disciplinary action by the commissioner, or an order of 
 suspension or revocation, cease and desist order or injunction 
 order or order barring involvement in an industry or profession 
 issued by this or any other state or federal regulatory agency 
 or by the Secretary of Housing and Urban Development; 

    (viii) been found by a court of competent jurisdiction to 
 have engaged in conduct evidencing gross negligence, fraud, 
 misrepresentation, or deceit; 

    (ix) refused to cooperate with an investigation or 
 examination by the commissioner; 

    (x) failed to pay any fee or assessment imposed by the 
 commissioner; or 

    (xi) failed to comply with state and federal tax 
 obligations. 

    Subd. 2.    Orders of the commissioner.  To begin a 
 proceeding under this section, the commissioner shall issue an 
 order requiring the subject of the proceeding to show cause why 
 action should not be taken against the person according to this 
 section.  The order must be calculated to give reasonable notice 
 of the time and place for the hearing and must state the reasons 
 for entry of the order.  The commissioner may by order summarily 
 suspend a license or exemption or summarily bar a person from 
 engaging in residential mortgage origination or servicing, 
 pending a final determination of an order to show cause.  If a 
 license or exemption is summarily suspended or if the person is 
 summarily barred from any involvement in the residential 
 mortgage loan business, pending final determination of an order 
 to show cause, a hearing on the merits must be held within 30 
 days of the issuance of the order of summary suspension or bar.  
 All hearings must be conducted under chapter 14.  After the 
 hearing, the commissioner shall enter an order disposing of the 
 matter as the facts require.  If the subject of the order fails 
 to appear at a hearing after having been duly notified of it, 
 the person is considered in default, and the proceeding may be 
 determined against the subject of the order upon consideration 
 of the order to show cause, the allegations of which may be 
 considered to be true. 

    Subd. 3.    Actions against lapsed license.  If a 
 license or certificate of exemption lapses, is surrendered, 
 withdrawn, terminated, or otherwise becomes ineffective, the 
 commissioner may institute a proceeding under this subdivision 
 within two years after the license or certificate of exemption 
 was last effective and enter a revocation or suspension order as 
 of the last date on which the license or certificate of 
 exemption was in effect, and may impose a civil penalty as 
 provided for in this section or section 45.027, subdivision 6. 

    HIST: 1998 c 343 art 1 s 12 

     58.13 Standards of conduct. 

    Subdivision 1.    Generally.  No person acting as a 
 residential mortgage originator or servicer, including a person 
 required to be licensed under this chapter, and no person exempt 
 from the licensing requirements of this chapter under section 
 58.04, shall: 

    (1) fail to maintain a trust account to hold trust funds 
 received in connection with a residential mortgage loan; 

    (2) fail to deposit all trust funds into a trust account 
 within three business days of receipt; commingle trust funds 
 with funds belonging to the licensee or exempt person; or use 
 trust account funds for any purpose other than that for which 
 they are received; 

    (3) unreasonably delay the processing of a residential 
 mortgage loan application, or the closing of a residential 
 mortgage loan.  For purposes of this clause, evidence of 
 unreasonable delay includes but is not limited to those factors 
 identified in section 47.206, subdivision 7, clause (d); 

    (4) fail to disburse funds according to its contractual or 
 statutory obligations; 

    (5) fail to perform in conformance with its written 
 agreements with borrowers, investors, other licensees, or exempt 
 persons; 

    (6) charge a fee for a product or service where the product 
 or service is not actually provided, or misrepresent the amount 
 charged by or paid to a third party for a product or service; 

    (7) fail to comply with sections 345.31 to 345.60, the 
 Minnesota unclaimed property law; 

    (8) violate any provision of any other applicable state or 
 federal law regulating residential mortgage loans including, 
 without limitation, sections 47.20 to 47.208; 

    (9) make or cause to be made, directly or indirectly, any 
 false, deceptive, or misleading statement or representation in 
 connection with a residential loan transaction including, 
 without limitation, a false, deceptive, or misleading statement 
 or representation regarding the borrower's ability to qualify 
 for any mortgage product; 

    (10) conduct residential mortgage loan business under any 
 name other than that under which the license or certificate of 
 exemption was issued; 

    (11) compensate, whether directly or indirectly, coerce or 
 intimidate an appraiser for the purpose of influencing the 
 independent judgment of the appraiser with respect to the value 
 of real estate that is to be covered by a residential mortgage 
 or is being offered as security according to an application for 
 a residential mortgage loan; 

    (12) issue any document indicating conditional 
 qualification or conditional approval for a residential mortgage 
 loan, unless the document also clearly indicates that final 
 qualification or approval is not guaranteed, and may be subject 
 to additional review; 

    (13) make or assist in making any residential mortgage loan 
 with the intent that the loan will not be repaid and that the 
 residential mortgage originator will obtain title to the 
 property through foreclosure; 

    (14) provide or offer to provide for a borrower, any 
 brokering or lending services under an arrangement with a person 
 other than a licensee or exempt person, provided that a person 
 may rely upon a written representation by the residential 
 mortgage originator that it is in compliance with the licensing 
 requirements of this chapter; 

    (15) claim to represent a licensee or exempt person, unless 
 the person is an employee of the licensee or exempt person or 
 unless the person has entered into a written agency agreement 
 with the licensee or exempt person; 

    (16) fail to comply with the record keeping and 
 notification requirements identified in section 58.14 or fail to 
 abide by the affirmations made on the application for licensure; 

    (17) represent that the licensee or exempt person is acting 
 as the borrower's agent after providing the nonagency disclosure 
 required by section 58.15, unless the disclosure is retracted 
 and the licensee or exempt person complies with all of the 
 requirements of section 58.16; 

    (18) make, provide, or arrange for a residential mortgage 
 loan that is of a lower investment grade if the borrower's 
 credit score or, if the originator does not utilize credit 
 scoring or if a credit score is unavailable, then comparable 
 underwriting data, indicates that the borrower may qualify for a 
 residential mortgage loan, available from or through the 
 originator, that is of a higher investment grade, unless the 
 borrower is informed that the borrower may qualify for a higher 
 investment grade loan with a lower interest rate and/or lower 
 discount points, and consents in writing to receipt of the lower 
 investment grade loan. 

    For purposes of this section, "investment grade" refers to 
 a system of categorizing residential mortgage loans in which the 
 loans are:  (i) commonly referred to as "prime" or "subprime"; 
 (ii) commonly designated by an alphabetical character with "A" 
 being the highest investment grade; and (iii) are distinguished 
 by interest rate or discount points or both charged to the 
 borrower, which vary according to the degree of perceived risk 
 of default based on factors such as the borrower's credit, 
 including credit score and credit patterns, income and 
 employment history, debt ratio, loan-to-value ratio, and prior 
 bankruptcy or foreclosure; 

    (19) make, publish, disseminate, circulate, place before 
 the public, or cause to be made, directly or indirectly, any 
 advertisement or marketing materials of any type, or any 
 statement or representation relating to the business of 
 residential mortgage loans that is false, deceptive, or 
 misleading; 

    (20) advertise loan types or terms that are not available 
 from or through the licensee or exempt person on the date 
 advertised, or on the date specified in the advertisement.  For 
 purposes of this clause, advertisement includes, but is not 
 limited to, a list of sample mortgage terms, including interest 
 rates, discount points, and closing costs provided by licensees 
 or exempt persons to a print or electronic medium that presents 
 the information to the public; 

    (21) use or employ phrases, pictures, return addresses, 
 geographic designations, or other means that create the 
 impression, directly or indirectly, that a licensee or other 
 person is a governmental agency, or is associated with, 
 sponsored by, or in any manner connected to, related to, or 
 endorsed by a governmental agency, if that is not the case; or 

    (22) violate section 82.49, relating to table funding. 

    Subd. 2.    Statements, representations, or advertising. 
  A statement, representation, or advertisement is deceptive or 
 misleading if it has the capacity or tendency to deceive or 
 mislead a borrower or potential borrower.  The commissioner 
 shall consider the following factors in deciding whether a 
 statement, representation, or advertisement is deceptive or 
 misleading:  the overall impression that the statement, 
 representation, or advertisement reasonably creates; the 
 particular type of audience to which it is directed; and whether 
 it may be reasonably comprehended by the segment of the public 
 to which it is directed.  

    HIST: 1998 c 343 art 1 s 13; 2004 c 203 art 1 s 1; art 2 s 61 

  58.135 Repealed, 2001 c 56 s 12 

     58.136 Rates and charges. 

    Notwithstanding any other law to the contrary, a 
 residential mortgage originator making a residential mortgage 
 loan to a borrower located in this state must comply with any 
 applicable limits on the rate and amount of interest, discount 
 points, finance charges, fees, and other charges as found in the 
 laws of this state. 

    Nothing in this section authorizes a residential mortgage 
 originator to make loans on terms and conditions that would not 
 be available to it in the absence of this section. 

    This section applies to residential mortgage originators 
 located in this state and residential mortgage originators 
 located outside this state. 

    HIST: 2001 c 56 s 9 

     58.137 Interest, points, finance charges, fees, and 
  other charges. 

    Subdivision 1.    Financed interest, points, finance 
 charges, fees, and other charges.  A residential mortgage 
 originator making or modifying a residential mortgage loan to a 
 borrower located in this state must not include in the principal 
 amount of any residential mortgage loan all or any portion of 
 any lender fee in an aggregate amount exceeding five percent of 
 the loan amount.  This subdivision shall not apply to 
 residential mortgage loans which are insured or guaranteed by 
 the secretary of housing and urban development or the 
 administrator of veterans affairs or the administrator of the 
 Farmers Home Administration or any successor. 

    "Lender fee" means interest, points, finance charges, fees, 
 and other charges payable by the borrower to any residential 
 mortgage originator or to any assignee of any residential 
 mortgage originator.  Lender fee does not include recording 
 fees, mortgage registration taxes, passthroughs, or other 
 amounts that are paid by any person to any government entity, 
 filing office, or other third party that is not a residential 
 mortgage originator or an assignee of a residential mortgage 
 originator.  Lender fee also does not include any amount that is 
 set aside to pay taxes or insurance on any property securing the 
 residential mortgage loan. 

    "Loan amount" means:  (1) for a line of credit, the maximum 
 principal amount of the line of credit; and (2) for any other 
 residential mortgage loan, the principal amount of the 
 residential mortgage loan excluding all interest, points, 
 finance charges, fees, and other charges.  A residential 
 mortgage originator shall not charge, receive, or collect any 
 excess financed interest, points, finance charges, fees, or 
 other charges described in this subdivision, or any interest, 
 points, finance charges, fees, or other charges with respect to 
 this excess. 

    Subd. 2.    Prepayment penalties.  (a) A residential 
 mortgage originator making a residential mortgage loan to a 
 borrower located in this state shall not charge, receive, or 
 collect any prepayment penalty, fee, premium, or other charge: 

    (1) for any partial prepayment of the residential mortgage 
 loan; or 

    (2) for any prepayment of the residential mortgage loan 
 upon the sale of any residential real property, or the sale of 
 any stock, interest, or lease relating to cooperative ownership 
 of residential real property, securing the loan; or 

    (3) for any prepayment of the residential mortgage loan if 
 the prepayment is made more than 42 months after the date of the 
 note or other agreement for the residential mortgage loan; or 

    (4) for any prepayment of the residential mortgage loan if 
 the aggregate amount of all prepayment penalties, fees, 
 premiums, and other charges exceeds the lesser of (i) an amount 
 equal to two percent of the unpaid principal balance of the 
 residential mortgage loan at the time of prepayment, or (ii) an 
 amount equal to 60 days' interest, at the interest rate in 
 effect on the residential mortgage loan at the time of 
 prepayment, on the unpaid principal balance of the residential 
 mortgage loan at the time of prepayment. 

    (b) If a residential mortgage originator offers or makes 
 residential mortgage loans to any borrowers located in this 
 state with prepayment penalties, fees, premiums, or other 
 charges exceeding the maximum amount under paragraph (a), clause 
 (4), then the residential mortgage originator shall provide the 
 following disclosure to each prospective borrower located in 
 this state that requests a residential mortgage loan from the 
 residential mortgage originator, whether or not the prospective 
 borrower receives a residential mortgage loan: 

                      THIS IS VERY IMPORTANT 

 THIS LENDER CHARGES YOU A SUBSTANTIAL PENALTY IF YOU PAY OFF OR 
 REFINANCE YOUR LOAN BEFORE MATURITY.  ASK THE LENDER HOW MUCH 
 THE PENALTY WILL BE FOR YOUR LOAN. 

    The residential mortgage originator shall read the 
 disclosure to the prospective borrower when the prospective 
 borrower requests a residential mortgage loan, and again within 
 three days before the borrower signs the note or other agreement 
 for the residential mortgage loan.  The residential mortgage 
 originator also shall provide the disclosure to the prospective 
 borrower in writing so that it is received by the prospective 
 borrower within five days after the residential mortgage 
 originator receives the prospective borrower's request for a 
 residential mortgage loan, and again within three days before 
 the prospective borrower signs the note or other agreement for 
 the residential mortgage loan.  The written disclosure must be 
 stated in at least 16-point capitalized boldface type on a 
 single sheet of paper that contains only the disclosure, the 
 date on which the disclosure form is sent or provided, the name, 
 address, and telephone number of the residential mortgage 
 originator, the name and address of the prospective borrower, 
 and, at the option of the residential mortgage originator, the 
 prospective borrower's dated and signed acknowledgment of 
 receipt of the disclosure form.  The provisions of the 
 disclosure form, other than the disclosure in this subdivision, 
 are not required to be in at least 16-point capitalized boldface 
 type.  The prospective borrower shall be permitted to keep a 
 copy of each written disclosure form.  When a prospective 
 borrower asks a residential mortgage originator for information 
 about a prepayment penalty, the residential mortgage originator 
 shall give the prospective borrower the requested information, 
 and shall tell the borrower the highest aggregate amount of the 
 prepayment penalties, fees, premiums, and other charges that the 
 residential mortgage originator would charge to the prospective 
 borrower for prepayment of the residential mortgage loan one 
 year after it is funded, based on a hypothetical unpaid 
 principal balance of $100,000 and also based on the highest 
 interest rate that the residential mortgage originator would 
 charge to the prospective borrower.  A mortgage originator 
 responding to requests for residential mortgage loans via the 
 Internet may make the disclosure in a manner acceptable to the 
 commissioner. 

    Subd. 3.    Application.  This section applies to 
 residential mortgage originators located in this state and 
 residential mortgage originators located outside this state. 

    HIST: 2002 c 342 s 8 

     58.14 Record-keeping and notification requirements. 

    Subdivision 1.    Change in licensing data.  A licensee 
 must advise the commissioner of any material changes to the 
 information submitted in the most recent license application 
 within ten days of the change. 

    Subd. 2.    Notice of bankruptcy petitions.  A licensee 
 or person who has been issued a certificate of exemption must 
 advise the commissioner in writing immediately of any bankruptcy 
 petitions filed against or by the licensee. 

    Subd. 3.    Documentation and resolution of complaints.  
 A licensee or exempt person must investigate and attempt to 
 resolve complaints made regarding acts or practices subject to 
 the provisions of this chapter.  If a complaint is received in 
 writing, the licensee or exempt person must maintain a file 
 containing all materials relating to the complaint and 
 subsequent investigation for a period of 26 months. 

    Subd. 4.    Trust account records for mortgage 
 originators.  A residential mortgage originator shall keep and 
 maintain for 26 months a record of all trust funds, sufficient 
 to identify the transaction, date and source of receipt, and 
 date and identification of disbursement. 

    Subd. 5.    Record retention.  A licensee or exempt 
 person must keep and maintain for 26 months the business 
 records, including advertisements, regarding residential 
 mortgage loans applied for, originated, or serviced in the 
 course of its business. 

    HIST: 1998 c 343 art 1 s 14; 2001 c 56 s 10 

     58.15 Disclosure requirements for residential mortgage 
  originators. 

    Subdivision 1.    Nonagency disclosure.  If a 
 residential mortgage originator or exempt person does not 
 contract or offer to contract to act as an agent of a borrower, 
 or accept an advance fee, it must, within three business days of 
 accepting an application for a residential mortgage loan, 
 provide the borrower with a written disclosure as provided in 
 subdivision 2. 

    Subd. 2.    Form and content requirements.  The 
 disclosure must be a separate document, 8-1/2 inches by 11 
 inches, must be signed by the borrower and must contain the 
 following statement in 14-point boldface print: 

      Originator  IS NOT ACTING AS YOUR AGENT IN CONNECTION 
    WITH OBTAINING A RESIDENTIAL MORTGAGE LOAN.  WHILE WE SEEK 
    TO ASSIST YOU IN MEETING YOUR FINANCIAL NEEDS, WE CANNOT 
    GUARANTEE THE LOWEST OR BEST TERMS AVAILABLE IN THE MARKET. 

    Subd. 3.    Electronic application disclosure requirement. 
  In case of an electronic residential mortgage application, 
 the disclosure requirements of this section may be satisfied by 
 providing the disclosure statement as a separate screen if the 
 disclosure must be acknowledged by the borrower before an 
 application is accepted.  

    Subd. 4.    Exemption from disclosure requirement.  If 
 the Department of Housing and Urban Development adopts and 
 implements a disclosure requirement for persons offering 
 mortgage origination services that the commissioner determines 
 to be substantially similar to the disclosure required in 
 subdivision 2, licensees and exempt persons complying with the 
 HUD disclosure shall be considered to have complied with the 
 requirements of subdivisions 1 and 2. 

    HIST: 1998 c 343 art 1 s 15; 2001 c 56 s 11 

     58.16 Residential mortgage originators; standards of 
  conduct for agency or advance fee transactions. 

    Subdivision 1.    Compliance.  Residential mortgage 
 originators who solicit or receive an advance fee in exchange 
 for assisting a borrower located in this state in obtaining a 
 loan secured by a lien on residential real estate, or who offer 
 to act as an agent of the borrower located in this state in 
 obtaining a loan secured by a lien on residential real estate 
 shall be considered to have created a fiduciary relationship 
 with the borrower and shall comply with the requirements of 
 subdivisions 2 to 7. 

    Subd. 2.    Contract provisions.  (a) A residential 
 mortgage originator who engages in the activities described in 
 subdivision 1 shall enter into a written contract with each 
 borrower and shall provide a copy of the written contract to 
 each borrower at or before the time of receipt of any fee or 
 valuable consideration paid for mortgage origination services.  
 The written contract must: 

    (1) specifically describe the services to be provided by 
 the residential mortgage originator and if the originator 
 collects an advance fee, the dates by which the services will be 
 performed; 

    (2) specifically identify whether the residential mortgage 
 originator may receive compensation from sources other than the 
 borrower in connection with the loan transaction; 

    (3) state the total amount of commission or compensation 
 that the borrower agrees to pay for the residential mortgage 
 originator's services, or the basis on which the compensation 
 will be computed; 

    (4) state the maximum rate of interest to be charged on any 
 residential mortgage loan obtained; 

    (5) contain a statement that notifies the borrower of the 
 right to cancel the contract according to subdivision 3 and 
 disclose the cancellation rights and procedures provided in 
 subdivision 3; and 

    (6) disclose, with respect to the 12-month period ending 
 ten business days before the date of the contract in question, 
 the percentage of the mortgage originator's customers for whom 
 loans have actually been funded as a result of the residential 
 mortgage originator's services.  

    (b) If an advance fee is solicited or received the contract 
 must also: 

    (1) identify the trust account into which the fees or 
 consideration will be deposited; 

    (2) set forth the circumstances under which the residential 
 mortgage originator will be entitled to disbursement from the 
 trust account; and 

    (3) set forth the circumstances under which the borrower 
 will be entitled to a refund of all or part of the fee. 

    Subd. 3.    Cancellation.  A borrower who pays an 
 advance fee, or who enters into a contract for residential 
 mortgage services as set forth in subdivisions 1 and 2, has an 
 unconditional right to rescind the contract for residential 
 mortgage origination services at any time until midnight of the 
 third business day after the day on which the contract is 
 signed.  Cancellation is evidenced by the borrower giving 
 written notice of cancellation to the residential mortgage 
 originator at the address stated in the contract.  Notice of 
 cancellation, if given by mail, is effective upon deposit in a 
 mailbox properly addressed to the originator with postage 
 prepaid.  Notice of cancellation need not take a particular form 
 and is sufficient if it indicates by any form of written 
 expression the intention of the borrower not be bound by the 
 contract.  No act of a borrower or a residential mortgage 
 originator is effective to waive the right to rescind as 
 provided in this subdivision. 

    Subd. 4.    Trust account.  The residential mortgage 
 originator shall deposit in a trust account within three 
 business days all fees received before the time a loan is 
 actually funded.  The trust account must be in a financial 
 institution located within the state of Minnesota and must be 
 controlled by an unaffiliated accountant, attorney, or bank 
 officer or employee. 

    Subd. 5.    Records.  The residential mortgage 
 originator shall maintain a separate record of all fees received 
 for services performed or to be performed as a residential 
 mortgage originator.  Each record must set forth the date the 
 funds are received; the person from whom the funds are received; 
 the amount received; the date of deposit in the escrow account, 
 the account number, the date the funds are disbursed and the 
 check number of the disbursement, and a description of each 
 disbursement and the justification for the disbursement. 

    Subd. 6.    Monthly statement.  The residential mortgage 
 originator shall provide to each borrower at least monthly a 
 detailed written accounting of all disbursements of the 
 borrower's funds from the trust account. 

    Subd. 7.    Disclosure of lenders.  The residential 
 mortgage originator shall provide to each borrower at the 
 expiration of the contract a list of the lenders or loan sources 
 to whom loan applications were submitted on behalf of the 
 borrower. 

    HIST: 1998 c 343 art 1 s 16; 2004 c 203 art 1 s 2,3 

     58.17 Scope of chapter. 

    Subdivision 1.    Residential mortgage originator 
 services.  This chapter applies when an offer of residential 
 mortgage origination services is made to a borrower in this 
 state or when the residential mortgage originator is located in 
 this state. 

    Subd. 2.    Residential mortgage servicing.  The 
 provisions of this chapter regarding residential mortgage 
 servicing apply when the borrower is a resident of this state. 

    Subd. 3.    Offer.  For purposes of this section, an 
 "offer" means any advertisement or solicitation of any type, 
 including an advertisement or solicitation in newspapers and 
 magazines, by mail, by telephone, on television, on radio, or 
 via the Internet or any other electronic medium of any kind, for 
 residential mortgage originator services.  The term "offer" 
 excludes an advertisement or solicitation that specifically 
 states that the services are not available to Minnesota 
 residents. 

    HIST: 1998 c 343 art 1 s 17