Minnesota Residential Mortgage Originator and Servicer Licensing Act

Effective January 1, 2003, Section 58.137 was added to the Minnesota Residential Mortgage Originator and Servicer Licensing Act (the "Act"). To view a copy of the Act, click here.  

Coverage: The Act applies to "residential mortgage loans," defined to mean generally any loan made primarily for personal, family, or household use and secured primarily by a mortgage on one- to four-family residential real property. Thus, the Act applies to all closed- and open-end loans, regardless of lien position, loan type, loan purpose, and property types; however, FHA, VA, multifamily, and commercial loans are excluded.

Prohibitions: The Act provides as follows:

"A residential mortgage originator making or modifying a residential mortgage loan to a borrower located in this state must not include in the principal amount of any residential mortgage loan all or any portion of any lender fee in an aggregate amount exceeding five percent of the loan amount."

The Act, therefore, prohibits the financing of lender fees exceeding 5% of the loan amount.

Definitions:

1. Residential Mortgage Originator: defined generally as any mortgage lender or mortgage broker, but excludes, among others, banks, savings banks, savings associations, credit unions, as well as their subsidiaries, provided the subsidiary is subject to supervision by either a federal regulatory agency or the Minnesota Department of Commerce.
2. Lender Fee: defined as "interest, points, finance charges, fees, and other charges payable by the borrower to any residential mortgage originator or to any assignee of any residential mortgage originator. Lender fee does not include government recording fees, mortgage registration taxes, pass-throughs, or other amounts that are paid by any person to any person or entity that is not a residential mortgage originator. Lender fee also does not include tax or hazard insurance escrow amounts.
3. Loan amount: defined as: (1) for a line of credit, the maximum principal amount of the line of credit; and (2) for any other residential mortgage loan, the principal amount of the residential mortgage loan excluding all interest, points, finance charges, fees, and other charges.

Note: The Act does not provide for an APR-related high cost test in Minnesota.

The "Lender Fee"1 Test:

1. The calculation of "lender fees financed" is as follows:

+	Total Lender Compensation - the total amount of all charges (including interim interest), whether or not they are prepaid finance charges, if paid by the borrower to the lender ("L"), excluding tax and hazard insurance impound amounts
+	Total Broker Compensation - the total amount of all charges, whether or not they are prepaid finance charges, if paid by the borrower to a mortgage broker ("B"), excluding tax and hazard insurance impound amounts
+	Total Assignee Compensation - the total amount of all charges, whether or not they are prepaid finance charges, if paid by the borrower to an investor ("I"), excluding tax and hazard insurance impound amounts
-	Lender Fees Not Financed - deduct all P.O.C. amounts to the extent included in any of the above categories
+/-	Originator Requested Adjustments - the total amount of all customer requested overrides

2. The calculation of "loan amount" is as follows:

	Original Principal Balance/Credit Line Available
-	Total Interest/Points/Charges/Fees - includes the total amount of ALL costs in connection with the transaction (including interim interest) if paid by the borrower, regardless of to whom they are paid, whether or not they are finance charges, and whether or not they are financed or P.O.C; this includes total Lender, Broker, and Assignee compensation from above, plus all other charges and fees paid to others (e.g., service providers, affiliates, etc.)
+/-	Originator Requested Adjustments - the total amount of all customer requested overrides

1  For purposes of our analysis and determination, we assume that: (i) in any given transaction, only the lender and the broker are licensed residential mortgage originators, and that all other parties to the transaction, including without limitation, affiliates and third-party service providers, are not licensed residential mortgage originators; and (ii) any fee indicated as paid to investor ("I") is paid to the assignee of a residential mortgage originator.