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Senate panel considers raising state cap on certain second‑mortgage fees to match federal QM standard
Summary
Senate File 2296, presented by Senator Howell, would exempt subordinate-lien loans that meet federal Qualified Mortgage (QM) standards from Minnesota’s 1% single-service charge cap, effectively aligning eligible loans with the federal 3% QM pricing allowance for some loans; the committee laid the bill over for further consideration.
Senator Howell offered an author’s A1 amendment to Senate File 2296 and described the proposal as a way to make low‑balance, subordinate‑lien financing more available for homeowners who prefer to keep low‑rate first mortgages.
Under current Minnesota law, a single service charge on conventional subordinate loans is capped at 1% of the loan amount. The proposed change would exempt loans that meet the federal Qualified Mortgage (QM) standards from the state 1% cap, aligning Minnesota law with federal QM pricing treatment and with practice in more than 40 other states, according to testimony from Michael Stidham of Rocket Mortgage.
Stidham and other industry witnesses said the 1% cap makes it difficult to originate low‑balance subordinate liens because lenders’ fixed costs are high relative to small loan sizes. The amendment aims to preserve consumer protections associated with QM underwriting while giving lenders additional flexibility to offer subordinate-lien products at scale.
Senators did not take a final committee roll call on the bill; the committee laid Senate File 2296 over for further consideration.
