Minnesota Amends Reverse Mortgage Servicing Requirements

Minnesota Governor Tim Walz recently signed into law House File 333 (HF 333), which amends the state’s reverse mortgage loan statute to, among other things, require reverse mortgage loan servicers to send copies of certain borrower communications to a third-party designee and an independent counseling agency when authorized by the borrower.

Under Minnesota law, reverse mortgage borrowers are currently required to receive counseling from an independent housing counseling agency before a lender can accept a final and complete application or assess any fees for a reverse mortgage loan.  HF 333, in part, expands the topics that must be covered during the reverse mortgage counseling session to include an explanation of the borrower’s right to name a third party designee to receive communications regarding delinquencies, defaults, and unfulfilled obligations that may result in foreclosure.  The counseling agency will also be required to provide the prospective borrower with an authorization form allowing the borrower to grant authorization to a third-party designee and to the counseling agency to receive such communications.  Borrowers will also be advised to submit the completed authorization form to their lenders.

HF 333 provides that reverse mortgage loan servicers must send copies of unanswered written communications and all subsequent written communications regarding delinquencies, defaults, and unfulfilled obligations that may result in foreclosure to the third-party designee if so authorized by the borrower.  Compliance with this requirement may be established by recording with the county recorder or registrar of titles an affidavit affirming compliance.  Under HF 333, borrowers have a cause of action in the event that a servicer fails to comply with the aforementioned third party designee communication requirements.

Additionally, if authorized by the borrower, the reverse mortgage loan servicer must also send the independent counseling agency the same communications that the servicer is required to send the borrower’s third party designee.  The changes made by HF 33 will go into effect and apply to reverse mortgages originated on or after August 1, 2021.