| 1 | 1 | | 1.1 A bill for an act |
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| 2 | 2 | | 1.2 relating to commerce; excluding loans that satisfy the federal qualified mortgage |
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| 3 | 3 | | 1.3 points and fees threshold from the definition of conventional loan; amending |
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| 4 | 4 | | 1.4 Minnesota Statutes 2024, section 47.20, subdivision 2. |
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| 5 | 5 | | 1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: |
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| 6 | 6 | | 1.6 Section 1. Minnesota Statutes 2024, section 47.20, subdivision 2, is amended to read: |
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| 7 | 7 | | 1.7 Subd. 2.Definitions.For the purposes of this section the terms defined in this subdivision |
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| 8 | 8 | | 1.8have the meanings given them: |
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| 9 | 9 | | 1.9 (1) "Actual closing costs" mean reasonable charges for or sums paid for the following, |
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| 10 | 10 | | 1.10whether or not retained by the mortgagee or lender: |
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| 11 | 11 | | 1.11 (a) Any insurance premiums including but not limited to premiums for title insurance, |
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| 12 | 12 | | 1.12fire and extended coverage insurance, flood insurance, and private mortgage insurance, but |
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| 13 | 13 | | 1.13excluding any charges or sums retained by the mortgagee or lender as self-insured retention. |
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| 14 | 14 | | 1.14 (b) Abstracting, title examination and search, and examination of public records. |
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| 15 | 15 | | 1.15 (c) The preparation and recording of any or all documents required by law or custom |
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| 16 | 16 | | 1.16for closing a conventional or cooperative apartment loan. |
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| 17 | 17 | | 1.17 (d) Appraisal and survey of real property securing a conventional loan or real property |
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| 18 | 18 | | 1.18owned by a cooperative apartment corporation of which a share or shares of stock or a |
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| 19 | 19 | | 1.19membership certificate or certificates are to secure a cooperative apartment loan. |
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| 20 | 20 | | 1.20 (e) A single service charge, which includes any consideration, not otherwise specified |
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| 21 | 21 | | 1.21herein as an "actual closing cost" paid by the borrower and received and retained by the |
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| 22 | 22 | | 1.22lender for or related to the acquisition, making, refinancing or modification of a conventional |
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| 23 | 23 | | 1Section 1. |
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| 24 | 24 | | 25-03861 as introduced02/20/25 REVISOR RSI/NS |
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| 25 | 25 | | SENATE |
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| 26 | 26 | | STATE OF MINNESOTA |
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| 27 | 27 | | S.F. No. 2296NINETY-FOURTH SESSION |
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| 28 | 28 | | (SENATE AUTHORS: HOWE and Seeberger) |
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| 29 | 29 | | OFFICIAL STATUSD-PGDATE |
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| 30 | 30 | | Introduction and first reading03/10/2025 |
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| 31 | 31 | | Referred to Commerce and Consumer Protection 2.1or cooperative apartment loan, and also includes any consideration received by the lender |
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| 32 | 32 | | 2.2for making a borrower's interest rate commitment or for making a borrower's loan |
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| 33 | 33 | | 2.3commitment, whether or not an actual loan follows the commitment. The term service charge |
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| 34 | 34 | | 2.4does not include forward commitment fees. The service charge shall not exceed one percent |
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| 35 | 35 | | 2.5of the original bona fide principal amount of the conventional or cooperative apartment |
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| 36 | 36 | | 2.6loan, except that in the case of a construction loan, the service charge shall not exceed two |
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| 37 | 37 | | 2.7percent of the original bona fide principal amount of the loan. That portion of the service |
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| 38 | 38 | | 2.8charge imposed because the loan is a construction loan shall be itemized and a copy of the |
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| 39 | 39 | | 2.9itemization furnished the borrower. A lender shall not collect from a borrower the additional |
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| 40 | 40 | | 2.10one percent service charge permitted for a construction loan if it does not perform the service |
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| 41 | 41 | | 2.11for which the charge is imposed or if third parties perform and charge the borrower for the |
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| 42 | 42 | | 2.12service for which the lender has imposed the charge. |
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| 43 | 43 | | 2.13 (f) Charges and fees necessary for or related to the transfer of real or personal property |
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| 44 | 44 | | 2.14securing a conventional or cooperative apartment loan or the closing of a conventional or |
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| 45 | 45 | | 2.15cooperative apartment loan paid by the borrower and received by any party other than the |
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| 46 | 46 | | 2.16lender. |
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| 47 | 47 | | 2.17 (2) "Contract for deed" means an executory contract for the conveyance of real estate, |
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| 48 | 48 | | 2.18the original principal amount of which is less than $300,000. A commitment for a contract |
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| 49 | 49 | | 2.19for deed shall include an executed purchase agreement or earnest money contract wherein |
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| 50 | 50 | | 2.20the seller agrees to finance any part or all of the purchase price by a contract for deed. |
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| 51 | 51 | | 2.21 (3) "Conventional loan" means a loan or advance of credit, other than a. Conventional |
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| 52 | 52 | | 2.22loan does not include the following: |
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| 53 | 53 | | 2.23 (a) A loan or advance of credit made by a credit union or made pursuant to section |
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| 54 | 54 | | 2.24334.011, to a noncorporate borrower in an original principal amount of less than or equal |
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| 55 | 55 | | 2.25to the conforming loan limit established by the Federal Housing Finance Agency under the |
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| 56 | 56 | | 2.26Housing and Recovery Act of 2018, Public Law 110-289, secured by a mortgage upon real |
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| 57 | 57 | | 2.27property containing one or more residential units or upon which at the time the loan is made |
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| 58 | 58 | | 2.28it is intended that one or more residential units are to be constructed, and which is not insured |
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| 59 | 59 | | 2.29or guaranteed by the secretary of housing and urban development, by the administrator of |
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| 60 | 60 | | 2.30veterans affairs, or by the administrator of the Farmers Home Administration, and which |
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| 61 | 61 | | 2.31is not made pursuant to the authority granted in subdivision 1, clause (3) or (4). The term |
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| 62 | 62 | | 2.32mortgage does not include contracts for deed or installment land contracts. |
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| 63 | 63 | | 2.33 (b) A loan or advance of credit, secured by a mortgage upon real property containing |
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| 64 | 64 | | 2.34one or more residential units or upon which one or more residential units are intended to |
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| 65 | 65 | | 2Section 1. |
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| 66 | 66 | | 25-03861 as introduced02/20/25 REVISOR RSI/NS 3.1be constructed at the time the loan or advance of credit is made, in which the points and |
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| 67 | 67 | | 3.2fees the borrower is charged by all lenders in connection with the loan or advance of credit |
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| 68 | 68 | | 3.3do not exceed the amounts specified under Code of Federal Regulations, title 12, section |
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| 69 | 69 | | 3.41026.43(e)(3). |
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| 70 | 70 | | 3.5 (4) "Cooperative apartment loan" means a loan or advance of credit, other than a loan |
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| 71 | 71 | | 3.6or advance of credit made by a credit union or made pursuant to section 334.011, to a |
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| 72 | 72 | | 3.7noncorporate borrower in an original principal amount of less than $100,000, secured by a |
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| 73 | 73 | | 3.8security interest on a share or shares of stock or a membership certificate or certificates |
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| 74 | 74 | | 3.9issued to a stockholder or member by a cooperative apartment corporation, which may be |
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| 75 | 75 | | 3.10accompanied by an assignment by way of security of the borrower's interest in the proprietary |
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| 76 | 76 | | 3.11lease or occupancy agreement in property issued by the cooperative apartment corporation |
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| 77 | 77 | | 3.12and which is not insured or guaranteed by the secretary of housing and urban development, |
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| 78 | 78 | | 3.13by the administrator of veterans affairs, or by the administrator of the Farmers Home |
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| 79 | 79 | | 3.14Administration. |
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| 80 | 80 | | 3.15 (5) "Cooperative apartment corporation" means a corporation or cooperative organized |
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| 81 | 81 | | 3.16under chapter 308A or 317A, the shareholders or members of which are entitled, solely by |
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| 82 | 82 | | 3.17reason of their ownership of stock or membership certificates in the corporation or |
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| 83 | 83 | | 3.18association, to occupy one or more residential units in a building owned or leased by the |
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| 84 | 84 | | 3.19corporation or association. |
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| 85 | 85 | | 3.20 (6) "Forward commitment fee" means a fee or other consideration paid to a lender for |
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| 86 | 86 | | 3.21the purpose of securing a binding forward commitment by or through the lender to make |
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| 87 | 87 | | 3.22conventional loans to two or more credit worthy purchasers, including future purchasers, |
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| 88 | 88 | | 3.23of residential units, or a fee or other consideration paid to a lender for the purpose of securing |
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| 89 | 89 | | 3.24a binding forward commitment by or through the lender to make conventional loans to two |
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| 90 | 90 | | 3.25or more credit worthy purchasers, including future purchasers, of units to be created out of |
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| 91 | 91 | | 3.26existing structures pursuant to chapter 515B, or a fee or other consideration paid to a lender |
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| 92 | 92 | | 3.27for the purpose of securing a binding forward commitment by or through the lender to make |
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| 93 | 93 | | 3.28cooperative apartment loans to two or more credit worthy purchasers, including future |
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| 94 | 94 | | 3.29purchasers, of a share or shares of stock or a membership certificate or certificates in a |
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| 95 | 95 | | 3.30cooperative apartment corporation; provided, that the forward commitment rate of interest |
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| 96 | 96 | | 3.31does not exceed the maximum lawful rate of interest effective as of the date the forward |
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| 97 | 97 | | 3.32commitment is issued by the lender. |
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| 98 | 98 | | 3.33 (7) "Borrower's interest rate commitment" means a binding commitment made by a |
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| 99 | 99 | | 3.34lender to a borrower wherein the lender agrees that, if a conventional or cooperative |
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| 100 | 100 | | 3.35apartment loan is made following issuance of and pursuant to the commitment, the |
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| 101 | 101 | | 3Section 1. |
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| 102 | 102 | | 25-03861 as introduced02/20/25 REVISOR RSI/NS 4.1conventional or cooperative apartment loan shall be made at a rate of interest not in excess |
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| 103 | 103 | | 4.2of the rate of interest agreed to in the commitment, provided that the rate of interest agreed |
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| 104 | 104 | | 4.3to in the commitment is not in excess of the maximum lawful rate of interest effective as |
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| 105 | 105 | | 4.4of the date the commitment is issued by the lender to the borrower. |
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| 106 | 106 | | 4.5 (8) "Borrower's loan commitment" means a binding commitment made by a lender to a |
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| 107 | 107 | | 4.6borrower wherein the lender agrees to make a conventional or cooperative apartment loan |
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| 108 | 108 | | 4.7pursuant to the provisions, including the interest rate, of the commitment, provided that the |
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| 109 | 109 | | 4.8commitment rate of interest does not exceed the maximum lawful rate of interest effective |
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| 110 | 110 | | 4.9as of the date the commitment is issued and the commitment when issued and agreed to |
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| 111 | 111 | | 4.10shall constitute a legally binding obligation on the part of the mortgagee or lender to make |
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| 112 | 112 | | 4.11a conventional or cooperative apartment loan within a specified time period in the future at |
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| 113 | 113 | | 4.12a rate of interest not exceeding the maximum lawful rate of interest effective as of the date |
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| 114 | 114 | | 4.13the commitment is issued by the lender to the borrower; provided that a lender who issues |
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| 115 | 115 | | 4.14a borrower's loan commitment pursuant to the provisions of a forward commitment is |
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| 116 | 116 | | 4.15authorized to issue the borrower's loan commitment at a rate of interest not to exceed the |
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| 117 | 117 | | 4.16maximum lawful rate of interest effective as of the date the forward commitment is issued |
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| 118 | 118 | | 4.17by the lender. |
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| 119 | 119 | | 4.18 (9) "Finance charge" means the total cost of a conventional or cooperative apartment |
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| 120 | 120 | | 4.19loan including extensions or grant of credit regardless of the characterization of the same |
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| 121 | 121 | | 4.20and includes interest, finders fees, and other charges levied by a lender directly or indirectly |
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| 122 | 122 | | 4.21against the person obtaining the conventional or cooperative apartment loan or against a |
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| 123 | 123 | | 4.22seller of real property securing a conventional loan or a seller of a share or shares of stock |
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| 124 | 124 | | 4.23or a membership certificate or certificates in a cooperative apartment corporation securing |
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| 125 | 125 | | 4.24a cooperative apartment loan, or any other party to the transaction except any actual closing |
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| 126 | 126 | | 4.25costs and any forward commitment fee. The finance charges plus the actual closing costs |
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| 127 | 127 | | 4.26and any forward commitment fee, charged by a lender shall include all charges made by a |
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| 128 | 128 | | 4.27lender other than the principal of the conventional or cooperative apartment loan. The finance |
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| 129 | 129 | | 4.28charge, with respect to wraparound mortgages, shall be computed based upon the face |
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| 130 | 130 | | 4.29amount of the wraparound mortgage note, which face amount shall consist of the aggregate |
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| 131 | 131 | | 4.30of those funds actually advanced by the wraparound lender and the total outstanding principal |
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| 132 | 132 | | 4.31balances of the prior note or notes which have been made a part of the wraparound mortgage |
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| 133 | 133 | | 4.32note. |
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| 134 | 134 | | 4.33 (10) "Lender" means any person making a conventional or cooperative apartment loan, |
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| 135 | 135 | | 4.34or any person arranging financing for a conventional or cooperative apartment loan. The |
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| 136 | 136 | | 4Section 1. |
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| 137 | 137 | | 25-03861 as introduced02/20/25 REVISOR RSI/NS 5.1term also includes the holder or assignee at any time of a conventional or cooperative |
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| 138 | 138 | | 5.2apartment loan. |
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| 139 | 139 | | 5.3 (11) "Loan yield" means the annual rate of return obtained by a lender over the term of |
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| 140 | 140 | | 5.4a conventional or cooperative apartment loan and shall be computed as the annual percentage |
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| 141 | 141 | | 5.5rate as computed in accordance with sections 226.5 (b), (c), and (d) of Regulation Z, Code |
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| 142 | 142 | | 5.6of Federal Regulations, title 12, part 226, but using the definition of finance charge provided |
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| 143 | 143 | | 5.7for in this subdivision. For purposes of this section, with respect to wraparound mortgages, |
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| 144 | 144 | | 5.8the rate of interest or loan yield shall be based upon the principal balance set forth in the |
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| 145 | 145 | | 5.9wraparound note and mortgage and shall not include any interest differential or yield |
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| 146 | 146 | | 5.10differential between the stated interest rate on the wraparound mortgage and the stated |
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| 147 | 147 | | 5.11interest rate on the one or more prior mortgages included in the stated loan amount on a |
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| 148 | 148 | | 5.12wraparound note and mortgage. |
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| 149 | 149 | | 5.13 (12) "Person" means an individual, corporation, business trust, partnership or association |
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| 150 | 150 | | 5.14or any other legal entity. |
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| 151 | 151 | | 5.15 (13) "Residential unit" means any structure used principally for residential purposes or |
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| 152 | 152 | | 5.16any portion thereof, and includes a unit in a common interest community, a nonowner |
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| 153 | 153 | | 5.17occupied residence, and any other type of residence regardless of whether the unit is used |
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| 154 | 154 | | 5.18as a principal residence, secondary residence, vacation residence, or residence of some other |
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| 155 | 155 | | 5.19denomination. |
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| 156 | 156 | | 5.20 (14) "Vendor" means any person or persons who agree to sell real estate and finance |
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| 157 | 157 | | 5.21any part or all of the purchase price by a contract for deed. The term also includes the holder |
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| 158 | 158 | | 5.22or assignee at any time of the vendor's interest in a contract for deed. |
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| 159 | 159 | | 5Section 1. |
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| 160 | 160 | | 25-03861 as introduced02/20/25 REVISOR RSI/NS |
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