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; deleted text begin or
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(22) violate section 82.49, relating to table fundingdeleted text begin .deleted text end new text begin ;new text end

new text begin (23) make, provide, or arrange for a residential mortgage loan without verifying
the borrower's reasonable ability to pay the principal and interest on the loan, and pay
real estate taxes and home insurance. For loans in which the interest rate may vary, the
reasonable ability to pay must be determined based on the maximum monthly payment
that could be due during the first seven years of the loan term, which amount must be
calculated with reference to the maximum interest rate allowable under the loan assuming
no default by the borrower and assuming a fully indexed rate and a repayment schedule
which achieves full amortization over the life of the loan. For all residential mortgage
loans, the borrower's income and financial resources must be verified by tax returns,
payroll receipts, bank records, or other similarly reliable documents. A statement by
the borrower to the residential mortgage originator or exempt person of the borrower's
income and resources is not sufficient to establish the existence of the income or resources
when verifying the reasonable ability to pay;
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new text begin (24) engage in "churning." As used in this section, "churning" means to make,
provide, or arrange for a residential mortgage loan to a borrower that refinances an existing
residential mortgage loan when the new loan does not benefit the borrower considering all
of the circumstances, including the terms of both the new and refinanced loans, the cost
of the new loan, the effect of the loan on current and future equity in the home, and the
borrower's other financial and life circumstances.
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new text begin A court must presume that churning has occurred if: (i) the refinanced loan was
originated within 24 months preceding the date the new loan was originated; (ii) the
interest rate on the new loan exceeds the interest rate of the refinanced loan; and (iii) the
refinanced loan is not in foreclosure or in imminent risk of being in foreclosure. For
purposes of determining whether the interest rate of the new loan exceeds the interest rate
of the refinanced loan under the provision: (A) in the case of a new loan or a refinanced
loan in which the interest rate may vary, the interest rate is determined based on the
maximum interest rate allowable under the loan that could be charged during the next five
years from the date of origination of the new loan and assuming no default or further
default by the borrower; and (B) in the case of multiple new loans or multiple refinanced
loans, the interest rate is determined by combining the loan balances and required
payments. In order to rebut this presumption of churning, the residential mortgage
originator or exempt person making the loan must demonstrate by clear and convincing
evidence that the borrower received a substantial and definite benefit from the new loan;
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new text begin (25) make, provide, or arrange for a residential mortgage loan, other than a reverse
mortgage pursuant to United States Code, title 15, chapter 41, if the borrower's compliance
with any repayment option offered pursuant to the terms of the loan will result in negative
amortization during any six-month period;
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new text begin (26) make, provide, or arrange for a residential mortgage loan all or a portion of
the proceeds of which are used to fully or partially pay off a "special mortgage" unless
the borrower has obtained a written certification from a counselor with a third-party
nonprofit or governmental organization approved by the United States Department of
Housing and Urban Development or the commissioner that the borrower has received
counseling on the advisability of the loan transaction. The commissioner shall maintain a
list of approved counseling programs. For purposes of this section, "special mortgage"
means a residential mortgage loan originated, subsidized, or guaranteed by or through
a state, tribal, or local government, or nonprofit organization, that bears one or more of
the following nonstandard payment terms which substantially benefit the borrower: (i)
payments vary with income; (ii) payments of principal or interest are not required or
can be deferred under specified conditions; (iii) principal or interest is forgivable under
specified conditions; or (iv) where no interest or an annual interest rate of two percent or
less is charged in connection with the loan; or
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new text begin (27) whenever the residential mortgage originator informs a borrower, orally or in
writing, of the anticipated or actual periodic payment amount for a first-lien residential
mortgage loan, the residential mortgage originator must inform the borrower that an
additional amount will be due for taxes and insurance and, if known, disclose to the
borrower the amount of the anticipated or actual periodic escrow payments. A residential
mortgage originator need not make this disclosure concerning a refinancing loan if the
residential mortgage originator knows that the borrower's existing loan that is anticipated
to be refinanced does not have an escrow account. Compliance with federal laws requiring
disclosure of a periodic payment amount constitutes compliance with this paragraph but
only for purposes of the particular disclosure required under federal law.
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