1.1    .................... moves to amend H. F. No. 1225, the delete everything amendment
1.2(H1225DE1), as follows:
1.3Page 19, delete section 4 and insert:

1.4    "Sec. 4. Minnesota Statutes 2006, section 58.02, is amended by adding a subdivision to
1.5read:
1.6    Subd. 30. Fully indexed rate. "Fully indexed rate" equals the index rate prevailing
1.7at the time a residential mortgage loan is originated, plus the margin that will apply after
1.8the expiration of an introductory interest rate."
1.9Page 19, delete section 5 and insert:

1.10    "Sec. 5. Minnesota Statutes 2006, section 58.13, subdivision 1, is amended to read:
1.11    Subdivision 1. Generally. (a) No person acting as a residential mortgage originator
1.12or servicer, including a person required to be licensed under this chapter, and no person
1.13exempt from the licensing requirements of this chapter under section 58.04, except as
1.14otherwise provided in paragraph (b), shall:
1.15    (1) fail to maintain a trust account to hold trust funds received in connection with a
1.16residential mortgage loan;
1.17    (2) fail to deposit all trust funds into a trust account within three business days of
1.18receipt; commingle trust funds with funds belonging to the licensee or exempt person; or
1.19use trust account funds for any purpose other than that for which they are received;
1.20    (3) unreasonably delay the processing of a residential mortgage loan application,
1.21or the closing of a residential mortgage loan. For purposes of this clause, evidence of
1.22unreasonable delay includes but is not limited to those factors identified in section 47.206,
1.23subdivision 7 , clause (d);
1.24    (4) fail to disburse funds according to its contractual or statutory obligations;
1.25    (5) fail to perform in conformance with its written agreements with borrowers,
1.26investors, other licensees, or exempt persons;
2.1    (6) charge a fee for a product or service where the product or service is not actually
2.2provided, or misrepresent the amount charged by or paid to a third party for a product
2.3or service;
2.4    (7) fail to comply with sections 345.31 to 345.60, the Minnesota unclaimed property
2.5law;
2.6    (8) violate any provision of any other applicable state or federal law regulating
2.7residential mortgage loans including, without limitation, sections 47.20 to 47.208;
2.8    (9) make or cause to be made, directly or indirectly, any false, deceptive, or
2.9misleading statement or representation in connection with a residential loan transaction
2.10including, without limitation, a false, deceptive, or misleading statement or representation
2.11regarding the borrower's ability to qualify for any mortgage product;
2.12    (10) conduct residential mortgage loan business under any name other than that
2.13under which the license or certificate of exemption was issued;
2.14    (11) compensate, whether directly or indirectly, coerce or intimidate an appraiser for
2.15the purpose of influencing the independent judgment of the appraiser with respect to the
2.16value of real estate that is to be covered by a residential mortgage or is being offered as
2.17security according to an application for a residential mortgage loan;
2.18    (12) issue any document indicating conditional qualification or conditional approval
2.19for a residential mortgage loan, unless the document also clearly indicates that final
2.20qualification or approval is not guaranteed, and may be subject to additional review;
2.21    (13) make or assist in making any residential mortgage loan with the intent that the
2.22loan will not be repaid and that the residential mortgage originator will obtain title to
2.23the property through foreclosure;
2.24    (14) provide or offer to provide for a borrower, any brokering or lending services
2.25under an arrangement with a person other than a licensee or exempt person, provided that
2.26a person may rely upon a written representation by the residential mortgage originator that
2.27it is in compliance with the licensing requirements of this chapter;
2.28    (15) claim to represent a licensee or exempt person, unless the person is an employee
2.29of the licensee or exempt person or unless the person has entered into a written agency
2.30agreement with the licensee or exempt person;
2.31    (16) fail to comply with the record keeping and notification requirements identified
2.32in section 58.14 or fail to abide by the affirmations made on the application for licensure;
2.33    (17) represent that the licensee or exempt person is acting as the borrower's agent
2.34after providing the nonagency disclosure required by section 58.15, unless the disclosure
2.35is retracted and the licensee or exempt person complies with all of the requirements of
2.36section 58.16;
3.1    (18) make, provide, or arrange for a residential mortgage loan that is of a lower
3.2investment grade if the borrower's credit score or, if the originator does not utilize credit
3.3scoring or if a credit score is unavailable, then comparable underwriting data, indicates
3.4that the borrower may qualify for a residential mortgage loan, available from or through
3.5the originator, that is of a higher investment grade, unless the borrower is informed that
3.6the borrower may qualify for a higher investment grade loan with a lower interest rate
3.7and/or lower discount points, and consents in writing to receipt of the lower investment
3.8grade loan.;
3.9    For purposes of this section, "investment grade" refers to a system of categorizing
3.10residential mortgage loans in which the loans are: (i) commonly referred to as "prime" or
3.11"subprime"; (ii) commonly designated by an alphabetical character with "A" being the
3.12highest investment grade; and (iii) are distinguished by interest rate or discount points
3.13or both charged to the borrower, which vary according to the degree of perceived risk
3.14of default based on factors such as the borrower's credit, including credit score and
3.15credit patterns, income and employment history, debt ratio, loan-to-value ratio, and prior
3.16bankruptcy or foreclosure;
3.17    (19) make, publish, disseminate, circulate, place before the public, or cause to be
3.18made, directly or indirectly, any advertisement or marketing materials of any type, or any
3.19statement or representation relating to the business of residential mortgage loans that is
3.20false, deceptive, or misleading;
3.21    (20) advertise loan types or terms that are not available from or through the licensee
3.22or exempt person on the date advertised, or on the date specified in the advertisement.
3.23For purposes of this clause, advertisement includes, but is not limited to, a list of sample
3.24mortgage terms, including interest rates, discount points, and closing costs provided by
3.25licensees or exempt persons to a print or electronic medium that presents the information
3.26to the public;
3.27    (21) use or employ phrases, pictures, return addresses, geographic designations, or
3.28other means that create the impression, directly or indirectly, that a licensee or other
3.29person is a governmental agency, or is associated with, sponsored by, or in any manner
3.30connected to, related to, or endorsed by a governmental agency, if that is not the case; or
3.31    (22) violate section 82.49, relating to table funding.;
3.32    (23) make, provide, or arrange for a residential mortgage loan without verifying
3.33the borrower's reasonable ability to pay the scheduled payments of the following, as
3.34applicable: principal; interest; real estate taxes; homeowner's insurance, assessments,
3.35and mortgage insurance premiums. For loans in which the interest rate may vary, the
3.36reasonable ability to pay shall be determined based on a fully indexed rate and a repayment
4.1schedule which achieves full amortization over the life of the loan. For all residential
4.2mortgage loans, the borrower's income and financial resources must be verified by tax
4.3returns, payroll receipts, bank records, or other similarly reliable documents.
4.4    Nothing in this section shall be construed to limit a mortgage originator's or exempt
4.5person's ability to rely on criteria other than the borrower's income and financial resources
4.6to establish the borrower's reasonable ability to repay the residential mortgage loan;
4.7however, such other criteria must be verified through reasonably reliable methods and
4.8documentation. A statement by the borrower to the residential mortgage originator or
4.9exempt person of the borrower's income and resources is not sufficient to establish the
4.10existence of the income or resources when verifying the reasonable ability to pay.
4.11    (24) engage in "churning." As used in this section, "churning" means knowingly or
4.12intentionally making, providing, or arranging for a residential mortgage loan when the
4.13new residential mortgage loan does not provide a reasonable, tangible net benefit to the
4.14borrower considering all of the circumstances including the terms of both the new and
4.15refinanced loans, the cost of the new loan, and the borrower's circumstances;
4.16    (25) the first time a residential mortgage originator orally informs a borrower of the
4.17anticipated or actual periodic payment amount for a first-lien residential mortgage loan
4.18which does not include an amount for payment of property taxes and hazard insurance,
4.19the residential mortgage originator must inform the borrower that an additional amount
4.20will be due for taxes and insurance and, if known, disclose to the borrower the amount of
4.21the anticipated or actual periodic payments for property taxes and hazard insurance. This
4.22same oral disclosure must be made each time the residential mortgage originator orally
4.23informs the borrower of a different anticipated or actual periodic payment amount change
4.24from the amount previously disclosed. A residential mortgage originator need not make
4.25this disclosure concerning a refinancing loan if the residential mortgage originator knows
4.26that the borrower's existing loan that is anticipated to be refinanced does not have an
4.27escrow account; or
4.28    (26) make, provide, or arrange for a residential mortgage loan, other than a reverse
4.29mortgage pursuant to United States Code, title 15, chapter 41, if the borrower's compliance
4.30with any repayment option offered pursuant to the terms of the loan will result in negative
4.31amortization during any six-month period.
4.32    (b) Paragraph (a), clauses (22) through (26), do not apply to a state or federally
4.33chartered bank, savings bank, or credit union, or to a person making, providing, or
4.34arranging a residential mortgage loan originated or purchased by a state agency or a tribal
4.35or local unit of government. This paragraph supersedes any inconsistent provision of
4.36this chapter."
5.1Page 23, delete section 6 and insert:

5.2    "Sec. 6. Minnesota Statutes 2006, section 58.137, subdivision 1, is amended to read:
5.3    Subdivision 1. Financed interest, points, finance charges, fees, and other
5.4charges. A residential mortgage originator making or modifying a residential mortgage
5.5loan to a borrower located in this state must not include in the principal amount of any
5.6residential mortgage loan all or any portion of any lender fee in an aggregate amount
5.7exceeding five percent of the loan amount. This subdivision shall not apply to residential
5.8mortgage loans which are insured or guaranteed by the secretary of housing and urban
5.9development or the administrator of veterans affairs or the administrator of the Farmers
5.10Home Administration or any successor.
5.11    "Lender fee" means interest, points, finance charges, fees, and other charges payable
5.12in connection with the residential mortgage loan: (1) by the borrower to any residential
5.13mortgage originator or to any assignee of any residential mortgage originator; or (2) by the
5.14lender to a mortgage broker. Lender fee does not include: (1) recording fees, mortgage
5.15registration taxes, passthroughs, or other amounts that are paid by any person to any
5.16government entity, or filing office,; or other third party that is not a residential mortgage
5.17originator or an assignee of a residential mortgage originator. Lender fee also does not
5.18include (2) any amount that is set aside to pay taxes or insurance on any property securing
5.19the residential mortgage loan.
5.20    "Loan amount" means: (1) for a line of credit, the maximum principal amount of
5.21the line of credit; and (2) for any other residential mortgage loan, the principal amount
5.22of the residential mortgage loan excluding all interest, points, finance charges, fees, and
5.23other charges. A residential mortgage originator shall not charge, receive, or collect any
5.24excess financed interest, points, finance charges, fees, or other charges described in this
5.25subdivision, or any interest, points, finance charges, fees, or other charges with respect
5.26to this excess."
5.27Page 26, delete section 8 and insert:

5.28    "Sec. 8. Minnesota Statutes 2006, section 58.15, is amended to read:
5.2958.15 DISCLOSURE REQUIREMENTS FOR CERTAIN RESIDENTIAL
5.30MORTGAGE ORIGINATORS.
5.31    Subdivision 1. Nonagency disclosure. If a residential mortgage originator or
5.32exempt person other than a mortgage broker does not contract or offer to contract to act
5.33as an agent of a borrower, or accept an advance fee, it must, within three business days
5.34of accepting an application for a residential mortgage loan, provide the borrower with a
5.35written disclosure as provided in subdivision 2.
6.1    Subd. 2. Form and content requirements. The disclosure must be a separate
6.2document, 8-1/2 inches by 11 inches, must be signed by the borrower and must contain the
6.3following statement in 14-point boldface print:
6.4 Originator IS NOT ACTING AS YOUR AGENT IN CONNECTION WITH
6.5OBTAINING A RESIDENTIAL MORTGAGE LOAN. WHILE WE SEEK TO
6.6ASSIST YOU IN MEETING YOUR FINANCIAL NEEDS, WE CANNOT
6.7GUARANTEE THE LOWEST OR BEST TERMS AVAILABLE IN THE
6.8MARKET.
6.9    Subd. 3. Electronic application disclosure requirement. In case of an electronic
6.10residential mortgage application, the disclosure requirements of this section may be
6.11satisfied by providing the disclosure statement as a separate screen if the disclosure must
6.12be acknowledged by the borrower before an application is accepted.
6.13    Subd. 4. Exemption from disclosure requirement. If the Department of
6.14Housing and Urban Development adopts and implements a disclosure requirement for
6.15persons offering mortgage origination services that the commissioner determines to be
6.16substantially similar to the disclosure required in subdivision 2, licensees and exempt
6.17persons complying compliance with the HUD disclosure shall be considered sufficient to
6.18have complied with satisfy the requirements of subdivisions 1 and subdivision 2."
6.19Page 27, delete section 9 and insert:

6.20    "Sec. 9. Minnesota Statutes 2006, section 58.16, subdivision 1, is amended to read:
6.21    Subdivision 1. Compliance. Residential mortgage originators who solicit or receive
6.22an advance fee in exchange for assisting a borrower located in this state in obtaining a
6.23loan secured by a lien on residential real estate, or who offer to act as an agent of the
6.24borrower located in this state in obtaining a loan secured by a lien on residential real estate
6.25shall be considered to have created a fiduciary relationship with the borrower and shall
6.26comply with the requirements of subdivisions 2 to 7. This section does not apply to
6.27mortgage brokers who do not solicit or receive an advance fee."
6.28Page 27, after line 21 insert:

6.29    "Sec. 11. [58.161] MORTGAGE BROKER DUTIES OF AGENCY.
6.30    Subdivision 1. Generally. A mortgage broker shall be considered to have created an
6.31agency relationship with the borrower in all cases and shall comply with the following
6.32duties:
6.33    (1) mortgage brokers shall act in the borrower's best interest and in the utmost good
6.34faith toward borrowers, and shall not compromise a borrower's right or interest in favor of
6.35another's right or interest, including a right or interest of the mortgage broker. A mortgage
7.1broker shall not accept, give, or charge any undisclosed compensation or realize any
7.2undisclosed remuneration, either through direct or indirect means that inures to the benefit
7.3of the mortgage broker or as an expenditure made for the borrower;
7.4    (2) mortgage brokers will carry out all lawful instructions given by borrowers;
7.5    (3) mortgage brokers will disclose to borrowers all material facts of which the
7.6mortgage broker has knowledge which might reasonably affect the borrower's rights,
7.7interests, and/or ability to receive the borrower's intended benefit from the residential
7.8mortgage loan, but not facts which are reasonably susceptible to the knowledge of the
7.9borrower;
7.10    (4) mortgage brokers will use reasonable care in performing duties; and
7.11    (5) mortgage brokers will account to a borrower for all the borrower's money and
7.12property received as agent.
7.13    Subd. 2. Scope. (a) The duty of agency between mortgage broker and borrower
7.14applies when the mortgage broker is acting in the capacity of mortgage broker as described
7.15in section 58.02, subdivision 14 or 23.
7.16    (b) Nothing in this section prohibits a mortgage broker from contracting for or
7.17collecting a fee for services rendered and which had been disclosed to the borrower in
7.18advance of the provision of such services.
7.19    (c) Nothing in this section requires a mortgage broker to obtain a loan containing
7.20terms or conditions not available to the mortgage broker in the mortgage broker's usual
7.21course of business, or to obtain a loan for the borrower from a mortgage lender with whom
7.22the mortgage broker does not have a business relationship."
7.23Renumber the sections in sequence and correct the internal references
7.24Amend the title accordingly