2006 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."
History: 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.
History: 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.
History: 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.
History: 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).
History: 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.
History: 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.
History: 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).
History: 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).
History: 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.
History: 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.
History: 1998 c 343 art 1 s 12

58.125 PROHIBITION ON SERVICE AS A RESIDENTIAL MORTGAGE ORIGINATOR.
    Subdivision 1. Definitions. (a) "Dishonesty" means directly or indirectly to cheat or defraud;
to cheat or defraud for monetary gain or its equivalent; or to wrongfully take property belonging
to another in violation of any criminal statute. Dishonesty includes acts involving want of
integrity, lack of probity, or a disposition to distort, cheat, or act deceitfully or fraudulently, and
may include crimes which federal, state, or local laws define as dishonest.
(b) "Breach of trust" means a wrongful act, use, misappropriation, or omission with
respect to any property or fund which has been committed to a person in a fiduciary or official
capacity, or the misuse of one's official or fiduciary position to engage in a wrongful act, use,
misappropriation, or omission.
    Subd. 2. Generally. Except with the prior written consent of the commissioner under
subdivision 4, any individual, who has been convicted of a criminal offense involving dishonesty
or a breach of trust or money laundering, or has agreed to or entered into a pretrial diversion or
similar program in connection with a prosecution for such offense, may not serve as a residential
mortgage originator or be employed in that capacity by a person licensed as a mortgage originator.
    Subd. 3. De minimis offenses. Approval is automatically granted and an application will
not be required if the covered offense is considered de minimis because it meets all of the
following criteria:
(1) there is only one conviction or program entry of record for a covered offense;
(2) the offense was punishable by imprisonment for a term of less than one year and/or a fine
of less than $1,000, and the individual did not serve time in jail;
(3) the conviction or program was entered at least five years before the date an application
would otherwise be required; and
(4) the offense did not involve a financial institution or residential mortgage loans.
    Subd. 4. Prior consent. (a) An application for prior consent of the commissioner under
this section must be in writing, under oath, and on a form obtained from and prescribed by the
commissioner. The following factors must be considered by the commissioner when reviewing
an application:
(1) the specific nature of the offense and the circumstances surrounding the offense;
(2) evidence of rehabilitation since the offense;
(3) the age of the person at the time of conviction; and
(4) whether or not restitution has been made.
(b) The receipt by an individual of prior consent of the commissioner under this section must
not be construed as imposing upon an employer an affirmative obligation to employ that individual
in any capacity. Nothing in this section precludes an employer from denying employment based
upon the existence of a criminal offense specified in subdivision 2 or for any other lawful reason.
History: 2005 c 118 s 8

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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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, with respect
to advance fees, the account must be controlled by an unaffiliated accountant, attorney, or bank.
    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.
History: 1998 c 343 art 1 s 16; 2004 c 203 art 1 s 2,3; 2005 c 118 s 9

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.
History: 1998 c 343 art 1 s 17