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HF2601 (Legislative Session 94 (2025-2026))

Maximum interest rate for certain loans and contracts for deed modified.

Related bill: SF2794

AI Generated Summary

Purpose of the Bill

This Minnesota legislative bill aims to modify the maximum interest rates that can be applied to certain loans and contracts for deeds. The bill seeks to establish clearer guidelines for determining lawful interest rates on these financial products.

Main Provisions

  • Conventional and Cooperative Apartment Loans:

    • Sets a new method for calculating the maximum interest rate based on the average prime offer rate defined by federal regulations, plus an additional four percentage points.
    • If the set index is unavailable, a substitute index may be used upon commissioner order.

  • Contracts for Deeds:

    • The maximum interest rate for contracts of deed (a type of real estate transaction) with terms of ten years or less cannot exceed three percentage points over the prescribed interest rate or 15.75% per year, whichever is lower.

  • Commitments for Contracts or Loans:

    • Interest rates promised in advance (either by loan commitments or contracts for deeds) remain valid and enforceable even if the lawful interest rate changes after the commitment is made.

  • Refinancing:

    • Refinancing existing loans or contracts for deeds is considered creating a new loan, thus requiring the interest to comply with maximum rates at the time of refinancing.

  • High-Value Contracts:

    • Contracts involving amounts of $100,000 or more are exempt from certain limitations on interest rates and additional charges.

Significant Changes to Existing Law

  • Updates the reference index for calculating maximum interest rates, using federal guidelines instead of previous state-specific computations.
  • Provides exceptions for high-value contracts, lifting previous restrictions on interest rates and associated fees for loans of $100,000 or more.
  • Changes how new loans and contracts for deeds are treated in connection to interest rate commitments previously made.

Relevant Terms

interest rate, conventional loan, cooperative apartment loan, contract for deed, refinancing, Federal National Mortgage Association, average prime offer rate, Consumer Financial Protection Bureau, commitment, forward commitment, high-value contracts, interest rate cap, index substitution

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
March 19, 2025HouseFloorActionIntroduction and first reading, referred toCommerce Finance and Policy
March 31, 2025HouseFloorActionCommittee report, to adopt as amended and re-refer toJudiciary Finance and Civil Law

Citations

 
[
  {
    "analysis": {
      "added": [
        "Clarifies the conditions under which specified different consecutive periodic interest rates can be applied to the unpaid principal balance."
      ],
      "removed": [],
      "summary": "This bill modifies the maximum interest rate for conventional or cooperative apartment loans and contracts for deed under section 47.20 subdivision 4a.",
      "modified": [
        "Updates the maximum interest rate based on current market indices."
      ]
    },
    "citation": "47.20 subdivision 4a"
  },
  {
    "analysis": {
      "added": [
        "Exempts certain contracts from other statutory provisions when a written contract is in place."
      ],
      "removed": [],
      "summary": "This bill mentions contracts of $100,000 or more, subject to section 334.01 subdivision 2.",
      "modified": [
        "Specifies that section 47.20 subdivision 4a applies to these contracts."
      ]
    },
    "citation": "334.01 subdivision 2"
  }
]

Sponsors