Court Opinion

ID: 7881892
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:32:41.81497+00
Date Added: 2024-06-11T16:31:36.990814
License: Public Domain

KLAPHAKE, Judge
(concurring specially).
Although I agree with the result reached by the majority in this case, I disagree with its holding that Minn.Stat. § 47.204, subd. 1 (1998) supersedes Minn. Stat. § 47.20, subd. 9(g) (1998). I agree that the “tax service fees” charged in this case are “finance charges” and thus exempt from state regulations and allowed by Minn.Stat. § 47.204, subd. 1. I disagree that these types of “finances charges” can also be considered “direct fee[s] for the administration of [an] escrow account,” so as to be prohibited under Minn.Stat. § 47.20, subd. 9(g). Because these two statutes govern different types of charges and do not conflict, Minn.Stat. § 47.204, subd. 1, should not be construed to supersede Minn.Stat. § 47.20, subd. 9(g).
Minn.Stat. § 47.204, subd. 1, temporarily preempts any state law limiting “the rate or amount of interest, discount points, finance charges, or other charges” imposed by lenders on mortgages. These charges are all related to the loan itself and are included in a borrower’s annual percentage rate (APR). See 12 C.F.R. § 226.4(a) (2000) (defining “finance charge” as “cost of consumer credit as a dollar amount”); Currie v. Diamond Mortgage Corp., 859 F.2d 1538, 1542 (7th Cir.1988) (federal law exemption applies to “those [state] limitations which are included in the [APR] ”).
The “tax service fees” at issue here were one-time charges assessed at settlement to offset the cost of services provided to the lender by a private company over the life of the loan. Although the exact nature of the services provided in this case is un*781clear, the record contains a September 16, 1986 opinion by a Maryland Assistant Attorney General to that state’s bank commissioner, describing the services provided by “tax service fees” to include obtaining tax bills for each loan, correlation of tax bills with individual loan numbers and presentation to the lenders for payment, and verification of tax payments even if a loan is not subject to escrow requirements. The opinion letter further explains that these fees are charged on all first mortgage loans regardless of whether a loan requires an expense escrow account.
Thus, a tax service fee is a one-time fee levied at the beginning of a loan to minimize the administrative costs inherent in the annual coordination of real property tax levies and is assessed equally for escrow and non-escrow loans. Because these fees were included in the APR and were part of the cost of the loan, they are “finance charges” under Minn.Stat. § 47.204, subd. 1. As such, they are exempt from any limitation state law might attempt to impose. Cf. Chaires v. Chevy Chase Bank, 131 Md.App. 64, 748 A.2d 34, 46 (2000) (rejecting claim that settlement related fees, including tax service fee, were illegal under Maryland law and holding that federal law preempted state law in this area). I therefore agree that appellants’ challenge to imposition of these tax service fees must fail under Minn.Stat. § 47.204, subd. 1.
This does not mean, however, that Minn. Stat. § 47.20, subd. 9(g), is superseded, allegedly because it directly conflicts with Minn.Stat. § 47.204, subd. 1. Minn.Stat. § 47.20, subd. 9(g), prohibits lenders from charging “a direct fee for the administration of [an] escrow account.” Escrow accounts are often required by lenders and are used to accumulate funds for the payment of insurance, taxes, assessments, or other ongoing charges or expenses of this type. Unlike finance charges, escrow accounts are separate from -the underlying loan and are not computed into the APR or subject to federal disclosure requirements. See Umdenstock v. American Mortgage & Inv. Co., 495 F.2d 589, 591-92 (10th Cir.1974) (although federal law requires disclosure of finance charges and APR, escrows are specifically exempted from these requirements). Thus, fees imposed for the administration of an escrow account are not considered part of the cost of a loan.
Tax service fees are not ongoing, direct fees used to administer escrow accounts; rather, they are one-time fees in the nature of finance charges and are imposed on a loan even if it is not subject to escrow requirements. Because Minn.Stat. § 47.20, subd. 9(g), does not apply to tax service fees, this statute does not attempt to limit these fees and does not conflict with Minn. Stat. § 47.204, subd. 1.
Minnesota statutes must be interpreted to give effect to all provisions and avoid rendering any one statute meaningless. Minn.Stat. §§ 645.16, 645.17 (1998). My analysis of this case gives effect to both statutes and voids neither.
I therefore concur in the result, but would not render meaningless the Minnesota statutory provision prohibiting charges on the administration of escrow accounts. That statute, in my opinion, remains viable.