Committee sends HF1865 to general register to let QM-qualified loans exceed Minnesota's 1% fee cap

March 12, 2024 — The Minnesota House Commerce Finance and Policy Committee recommended House File 1865, as amended, to the general register after brief testimony and the author's amendment passed. Representative Nolan Allen moved the bill and offered an A1 amendment, which members approved before advancing the legislation.

Why it matters: Supporters say the measure would give homeowners more options to access built equity without taking higher-rate purchase mortgages. Representative Allen told the committee that rising interest rates since 2020 have left many property owners reluctant to move and instead seeking subordinate liens or home-equity loans to finance expansions or renovations. "The bill before us, HF 18 65, which makes it easier for consumers to access the equity they have built in their homes," Allen said.

What the bill does: HF1865 would create an explicit exception to Minnesota's statutory 1% single service charge cap for subordinate- or secondary-lien mortgage products when the loan meets the federal qualified mortgage (QM) standards. Michael Stidham, director of regulatory affairs for Rocket Mortgage, said the change would align state law with federal QM protections and with the regulatory approach in more than 40 other states. "Under current Minnesota law there are a few restrictions placed on conventional loans," Stidham told the committee, and the proposed amendment would "expressly exempt loans that meet the federal qualified mortgage standards" from the cap.

Support and rationale: Stidham and the bill author argued that the 1% cap, adopted before federal QM standards existed, restricts lenders' ability to offer low-balance subordinate liens because fixed origination costs make small loans uneconomical under the cap. Stidham said borrowers unable to get subordinate-lien financing may turn to higher-cost alternatives such as personal loans or credit cards. He also noted support from the Minnesota Mortgage Association.

Procedure and next steps: Representative Allen renewed his motion that HF1865, as amended, be recommended to the general register; members signified their approval by voice vote and the bill was advanced. No roll-call tally was recorded in committee minutes. The bill will proceed to the general register for further House consideration.