2007 Minnesota Statutes

47.206 INTEREST RATE OR DISCOUNT POINT AGREEMENTS.
    Subdivision 1. Definitions. For the purposes of this section, the terms defined in this
subdivision have the meanings given them.
(a) "Lender" means a person or entity referred to in section 47.20, subdivision 1, a credit
union, or a person making a conventional loan as defined under section 47.20, subdivision 2,
clause (3), or cooperative apartment loan as defined under section 47.20, subdivision 2, clause (4),
except that conventional loans or cooperative apartment loans include any loan or advance of
credit in an original principal balance of less than $200,000. "Lender" also means a mortgage
broker as defined in paragraph (e).
(b) "Loan" means loans and advances of credit authorized under section 47.20, subdivision
1 , clauses (1) to (4), and conventional loans as defined under section 47.20, subdivision 2, clause
(3), or cooperative apartment loans as defined under section 47.20, subdivision 2, clause (4),
except that conventional loans or cooperative apartment loans also include all loans and advances
of credit in an original principal balance of less than $200,000. "Loan" does not include a loan or
advance of credit secured by a mortgage upon real property containing more than one residential
unit or secured by a security interest in shares of more than one residential unit in a building
owned or leased by a cooperative apartment corporation.
(c) "Borrower" means a natural person who has submitted an application for a loan to a lender.
(d) "Interest rate or discount point agreement" or "agreement" means a contract between a
lender and a borrower under which the lender agrees, subject to the lender's underwriting and
approval requirements, to make a loan at a specified interest rate or number of discount points, or
both, and the borrower agrees to make a loan on those terms. The term also includes an offer by a
lender that is accepted by a borrower under which the lender promises to guarantee or lock in an
interest rate or number of discount points, or both, for a specific period of time.
(e) "Mortgage broker" includes:
(1) a person who performs or offers to perform the activities of "mortgage brokering" or
"soliciting, placing, or negotiating a residential mortgage loan" as defined by chapter 58; or
(2) the employees of a person described in clause (1).
    Subd. 2. Disclosures. A lender offering borrowers the opportunity to enter into an agreement
in advance of closing shall disclose, in writing, to the borrowers at the time the offer is made: (1)
a definite expiration date or term of the agreement, which may not be less than the reasonably
anticipated closing date or time required to process, approve, and close the loan; (2) the
circumstances, if any, under which the borrower will be permitted to close at a lower rate of
interest or points than expressed in the agreement; (3) the steps required to process, approve, and
close the loan, including the actions required of the borrower and lender; (4) that the agreement is
enforceable by the borrower; and (5) the consideration required for the agreement.
    Subd. 3. Agreements to be in writing. A borrower or lender may not maintain an action
on an agreement unless the agreement is in writing or is permitted by subdivision 4, expresses
consideration, sets forth the relevant terms and conditions, and is signed by the borrower and
the lender.
    Subd. 4. Oral agreements and acceptances prohibited. A lender may not offer or induce a
borrower to accept an oral agreement and a borrower may not be permitted to orally accept an
agreement, provided that if the borrower and lender have not executed a written agreement, this
subdivision does not prohibit the offer and acceptance of an oral agreement which is offered and
accepted during a period no greater than ten days before closing.
    Subd. 5. Statement of current terms not an offer. An oral or written statement of current
loan terms and conditions, including interest rates and number of discount points, is not an offer
or an inducement by a lender to enter into an agreement. A written statement of current loan terms
and conditions must be accompanied by a disclaimer that the statement is not an offer to enter into
an agreement and that an offer may only be made pursuant to subdivisions 3 and 4.
    Subd. 6. Prohibited acts. A person, including a lender, may not advise, encourage, or induce
a borrower or third party to misrepresent information that is the subject of a loan application or
to violate the terms of the agreement. Neither a mortgage lender nor a mortgage broker shall
advertise mortgage terms, including interest rate and discount points, which were not available
from the lender or broker on the date or dates specified in the advertisement. For purposes of
this section, "advertisement" shall include a list or sampler of mortgage terms compiled from
information provided by the lender or broker, with or without charge to the lender or broker, by a
newspaper, and shall also include advertising on the Internet.
    Subd. 7. Penalties. (a) Except as provided in paragraph (c), a lender who violates this section
or who causes unreasonable delay in processing a loan application beyond the expiration date of
the agreement is liable to the borrower for a penalty in an amount not to exceed the borrower's
actual out-of-pocket damages, including the present value of the increased interest costs over the
normal life of the loan, or specific performance of the agreement. This paragraph applies to an
agreement entered into after January 1, 1987.
(b) In addition to the penalty in paragraph (a), a lender is liable to the borrower for $500 for
each violation of this section or for unreasonable delay in processing a loan application which
causes the agreement to expire before closing.
(c) A lender who violates subdivision 4 is jointly and severally liable to the borrower for
specific performance of the agreement or for a penalty in the amount of $500 or an amount not to
exceed the borrower's actual out-of-pocket damages, including the present value of the increased
costs over the normal life of the loan, whichever is greater, due to the good faith reliance of the
borrower on the lender's oral representation.
(d) For purposes of this subdivision, evidence of unreasonable delay includes, but is not
limited to:
(1) failure of the lender to return telephone calls or otherwise respond to the borrower's
inquiries concerning the status of the loan;
(2) the addition by the lender of new requirements for processing or approving the loan that
were not disclosed to the borrower under subdivision 2, clause (3), unless the requirements result
from governmental agency or secondary mortgage market changes, other than changes in interest
rates, that occur after the date of the agreement; or
(3) failure by the lender to take actions necessary to process or approve the loan within a
reasonable period of time, if the borrower provided information requested by the lender in a
timely manner.
History: 1987 c 336 s 5; 1996 c 439 art 5 s 1; 1997 c 157 s 9; 1998 c 343 art 2 s 1