Minnesota adopts new laws addressing mortgage abuses

With the help of the Minnesota legislature, Attorney General Lori Swanson made good on her promise to address concerns over predatory lending. The legislature passed two bills designed to help home-buyers get a fair deal on their mortgages. Gov. Tim Pawlenty signed the first bill April 20 and was set to sign the second bill as this issue goes to press.

Predatory lending has been a Swanson hot button since she was elected last fall. In meetings with the banking industry in early February, she pledged to address the issue. (See the March 1-14 NorttfWestem Financial Review.)

House File 1004 requires mortgage originators to verify a borrower's "reasonable ability" to make scheduled payments, including real estate taxes, insurance and other assessments. Mortgage originators will be required under the new law, which becomes effective August 1, to verify a borrower's income; and financial resources with tax returns, payrolls receipts, bank records and other documents.

The legislation also outlaws "churning,'' which lawmakers defined as offering credit which provides no "reasonable, tangible net benefit" to the borrower.