MN Enacts New Mortgage Lending and Servicing Consumer Protections
Minnesota enacted omnibus legislation which adds various consumer protections to its laws governing mortgage lending and servicing.
The law clarifies that certain statutes regarding lending by “financial institutions” also apply to residential mortgage originators and servicers licensed under state law. Additionally, the law creates new requirements governing mortgage servicing that go beyond those already provided for under applicable federal laws such as RESPA and TILA. These include:
- Requiring that when servicing for a loan with a pending loan modification is transferred, the new servicer must continue to process the loan modification request and honor any trial or permanent modifications;
- Additional requirements regarding the prompt crediting of payments and providing notification to borrowers when funds are placed in a suspense account;
- Adopting written policies and procedures governing the oversight of third-party service providers (including subservicers and entities which handle foreclosures);
- Providing notices to borrowers about escrow reserve obligations and changes to escrow payment amounts;
- Additional procedural and recordkeeping requirements for responding to borrower requests for information, including regarding loss mitigation;
- Establishing procedures for responding to and resolving borrower complaints and similar inquiries;
- Prohibiting unfair, deceptive, or abusive practices (including misrepresenting or omitting material information) in connection with mortgage servicing;
- Requiring that a servicer act in good faith and deal fairly with borrowers; and
- Additional recordkeeping obligations regarding communications and information sent to and from borrowers (including email communications, telephone recordings, and incomplete documentation).
These provisions of the law take effect on August 1, 2026.
