b'Minnesota NiceThe Times and Crimes Real Estate Transactions:of Consumer Fraud: Taxes, Recording,FCRA Best Practices and Documentation for Identity Theft ClaimsJohn M. Schmid Aylix K. Jensen Furnishers Duties Under the Fair Credit|John.Schmid@lawmoss.com required for contracts for deed (discussed at 7 in this article)612-877-5434|Aylix.Jensen@lawmoss.com612-877-5254 above the same threshold, though contracts for deed are notReporting Act LawMoss.com/people-john-m-schmid LawMoss.com/people-aylix-k-jensenthemselves subject to deed tax; rather, the deed given onceAylix is a member of our Financial Services team. She defendsTo satisfy its duty to investigate, the furnisher must demonstrate it John is a member of our Real Estate team. He primarily representsthe contract is completed is subject to the tax. Lastly, somefollowed the FCRAs protocol, which includes: lenders that originate and service loans secured by real estate,marketplace lenders, collection agencies, creditors, and other including apartments, multifamily projects, and commercial andtypes of conveyances, including between related entities or inbusinesses in consumer litigation.1) Conducting an investigation; industrial properties. connection with mergers of business entities, are exempt fromIdentity Theft is on the Rise2) Reviewing the relevant information provided by the CRA;deed tax and eCRV altogether, and instead are only assessed the minimum deed tax amount. Identity theft is at an all-time high. Opportunities for cybercriminals3) Reporting the results of the investigation to the CRA;Caroline A. Simonsonto steal or misuse personal financial information are becoming 612-877-5383|Caroline.Simonson@lawmoss.com 2) Mortgage Registry Tax: Minnesota also imposes a tax on themore prevalent with increased access to personal information4) If information is found to be incorrect, the furnisher must LawMoss.com/people-caroline-a-simonsonecording of most mortgages encumbering real property inreport the results to all CRAs that the initial information was r online and the pervasive use of artificial intelligence, such Caroline is a member of our Real Estate team. She primarilythe state, called the mortgage registry tax (MRT). Paymentas ChatGPT.reported to; andrepresents lenders who originate loans for multifamily housingof MRT is a borrower cost and a condition to recording and,5) If the information is incorrect, the furnisher must modify, projects around the country, which loans are then sold to Freddiesignificantly, must be fully paid in order to fully enforce aAs one may expect, there is a direct correlation between the risedelete, or permanently block the reporting of the information.Mac or Fannie Mae.mortgage. MRT is currently .0023 (.0024 in Hennepin andin identify theft and increased consumer credit reporting disputes Like each other state in the nation, Minnesota has its ownRamsey Counties) of the debt or portion of a debt that issubmitted to credit reporting agencies. Commonly, furnishers ofThe FCRA does not define investigation, nor does it outline quirks when it comes to real estate transactions. True to oursecured by such mortgage. If the mortgage secures a revolvingcredit information (furnishers) receive thousands of creditwhat steps a furnisher must take to investigate a dispute received Minnesota nice nature, our real estate team often assistsline of credit, MRT is payable on the maximum amount of thereporting disputes per month, but only a small percentage arisesfrom a CRA. Rather, federal appellate courts have held that out-of-state sellers, purchasers, lenders, and attorneys navigateline of credit, even if the full amount is never advanced. Nofrom legitimate claims of identity theft. It is often challenginga reasonable investigation is required to determine whether these state-specific requirements, to ensure each deal goes asMRT is payable for a mortgage amendment or extension thatfor a furnisher to sift through these disputes and identify whichdisputed information can be verified. What constitutes a smoothly as possible. Below are some of the most commonalters a mortgage without securing a new debt or increasingdisputes are made in good faith.reasonable investigation for purposes of the FCRA depends on Minnesota-specific issues we see in our practice: the amount of the existing debt. If the amount of an existingthe nature of the dispute, the actions taken, and, if the subject of debt is increased, additional MRT is payable only on theThe Fair Credit Reporting Actlitigation, the court in which the lawsuit is pending. 1) Deed Tax: Minnesota imposes a tax on the recording of deedsamount which exceeds the then-outstanding principal balance.In 1970, Congress enacted the Fair Credit Reporting Act (the and certain other instruments that convey title to real property inPurchasing, amending, and restating an existing mortgageFCRA). The FCRAs primary purpose is to ensure fair and accurateFor these reasons, it can be challenging to craft a blanket policythe state. Payment of deed tax is a seller cost and a condition toloan may result in substantial MRT savings to the borrower;credit reporting and to protect consumer privacy. Credit reportingregarding best practices for investigating disputes. Any such recording, and must either be stated on the deed or instrument orhowever, it will also increase legal and other transactionagencies (CRAs), which are governed and regulated by thepolicy must account for differing court decisions from across the an exemption must be stated. Deed tax where the purchase price,costs, and so a cost-benefit perspective should be consideredFCRA, are entities that collect consumer credit data from furnisherscountry. What is reasonable for one appellate court may not be minus the amount of liens that survive the conveyance, exceedsbefore deciding whether to amend-and-restate in Minnesota.and use that information to prepare a consumer credit report.reasonable for another court. $3,000 is currently calculated at .0033 of the net amount (.0034MRT is not payable with respect to any indeterminate futureInvestigating Claims of Identity Theft in in Hennepin and Ramsey Counties). If such net amount is $3,000advances that may be secured by the mortgage; however, ifConsumers who disagree with the information provided in their credit report may submit a dispute to the CRA that issuedCompliance with the FCRA or less, a minimum deed tax of $1.65 ($1.70 in Hennepin andsuch amounts are later set forth in a recorded instrument, MRT Ramsey Counties) is imposed instead. Minnesota also requires anwill be due on such amounts at that time. If the mortgagedthe report. The CRA is then legally obligated to forward theA survey of relevant court decisions suggests that a more electronic certificate of real estate value (eCRV) to be e-filedproperty is partially in Minnesota and partially out-of-state,dispute to the furnisher. This is referred to as an automatedthorough investigation may be required if a consumers dispute with the state department of revenue for any conveyancesMRT is only due on the amount of debt as stated in thecredit dispute verification or ACDV. The receipt of an ACDV by aincludes a claim of identity theft, particularly when the dispute above the minimum deed tax threshold. An eCRV is alsomortgage to be secured by the Minnesota property. Lastly,furnisher triggers the furnishers statutory obligation to conductincludes an identity theft affidavit or a copy of a police report. an investigation with respect to the disputed information. This function of the FCRA serves as an important tool to assist victims 2 "Minnesota Nice" Continued on Page 8 "The Times and Crimes" Continued on Page 5# of identity theft.3'