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Financial Services Law Insights and Observations

Minnesota Law Amends Requirements for Reverse Mortgages, Foreclosure Notices

State Issues

On May 19, Minnesota Governor Tim Pawlenty signed SF 2430, a bill that amends reverse mortgage loan and foreclosure notice requirements. Regarding reverse mortgage loans, the law:

  • Provides for a seven-day “cooling off” period subsequent to a borrower’s written acceptance of a reverse mortgage. During the period, a borrower cannot be required to proceed with or close the reverse mortgage. The law requires lenders to provide notice of this period to borrowers, and the period cannot be waived;
  • Provides that a lender that fails to make required loan advances and fails to cure an actual default after notice forfeits any right to repayment for reverse mortgages that are not federally insured. Once forfeiture has occurred, the mortgage may then be declared null and void by a court;
  • Prohibits making the purchase of insurance, annuities, or related products a condition of obtaining, or obligation of, a reverse mortgage loan, as well as prohibits lenders from receiving compensation for providing referrals for these services; and
  • Requires lenders to provide at least 3 independent housing counseling agencies to the applicant. Lenders must receive and maintain (for the duration of the mortgage) certification from the applicant that the applicant received the required counseling.

Regarding foreclosure notice requirements, the bill provides borrowers new “redemption rights” and requires a “results of sale” notice. In addition to prescribing the content of the notices, the bill provides a private right of action to recover damages and attorneys’ fees and costs for violations of the “notice of results of foreclosure sale” requirements. The notice requirements become effective August 1, 2010 and apply to notices delivered on or after that date.