Better mortgage lending practices (new law)

A new law will help bring clarity to a 2007 law that forces mortgage lenders to make sure their borrowers can pay before they sign off on the loans.

Sponsored by Rep. Leon Lillie (DFL-North St. Paul) and Sen. Linda Scheid (DFL-Brooklyn Park), the law piggybacks on another passed last year that forbids mortgage originators from providing loans without first analyzing the borrower’s ability to pay. The new law specifies some considerations that such an analysis may take into account, including the borrower’s income, cash flow, net worth, financial obligations, property taxes, insurance, assessments on the property, employment status, credit history, debt-to-income ratio, credit scores, tax returns, pension statements and employment payment records.

Lillie said the law is supported by mortgage brokers as well as advocates for low-income Minnesotans.

Signed April 25 by Gov. Tim Pawlenty, the law takes effect Aug. 1, 2008.

HF3839/SF3154*/CH241