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