Committee advances Commerce bill to update contract-for-deed language, adopt NAIC holding-company standards

The House Commerce, Finance and Policy Committee on March 27 adopted an author’s A1 amendment to House File 2601 and voted to re‑refer the bill to the Judiciary and Civil Law Committee.

The bill, carried by Representative Hewitt, makes three principal changes requested by the Minnesota Department of Commerce: it updates contract‑for‑deed language, replaces a Fannie Mae benchmark that the department can no longer obtain to calculate statutory maximum interest rates, and adds NAIC holding‑company group capital and liquidity stress‑testing language to Minnesota statute.

"This is a simple bill brought by Commerce that . . . cleans up some of the verbiage around contract for deeds," Representative Hewitt said during the committee hearing. He described contract for deed as a financing tool that was common in the 1970s and 1980s and that has reappeared in some sales.

Sam Smith, testifying for the Minnesota Department of Commerce, said the department currently publishes a monthly maximum interest rate for certain second‑lien mortgage products using Fannie Mae’s required net yield (RNY) as the index. The department told the committee that Fannie Mae stopped posting the RNY on June 3, 2024, and that, as of August 1, 2024, the department was unable to calculate the statutory maxima tied to that benchmark. To address that, the department is proposing to replace the discontinued index with a different, widely used benchmark that several other states use.

Mr. Smith described the second major element of the bill as a technical clarification about which subdivision governs maximum interest rates for conventional loans. He described the third element as adoption of NAIC model language to require a group capital calculation and liquidity stress testing for insurance holding companies. "The NAIC . . . provides additional metrics and transparency for the Department of Commerce to assess bank risk and solvency conditions for Minnesota companies," Smith said, and noted the NAIC changes must be adopted by Minnesota by January 1, 2026, for NAIC accreditation standards.

Committee members asked whether the change would alter access to contract‑for‑deed financing. Representative Dotseth asked what maximum interest rate an investor could charge; Mr. Smith said the rates are set on a scale and that the change preserves the department’s ability to calculate that scale. When asked later about a specific statutory formulation, Mr. Smith said that under the current setup the interest cap had been expressed in the hearing as a prime offer rate plus 4.5 percentage points.

Committee chairs and staff discussed whether the bill should be referred to the Judiciary and Civil Law Committee because the NAIC language contains boilerplate on confidential data. Department staff characterized those provisions as mirroring existing state protections but recommended referral to Judiciary as a precaution. With the author’s assent, the committee adopted the A1 amendment by voice vote and then voted to re‑refer House File 2601, as amended, to the Judiciary and Civil Law Committee by voice vote.

The committee record shows the A1 amendment and the motion to re‑refer were adopted by voice vote; a roll‑call tally was not provided in committee minutes.