Foreclosure Law

FORECLOSURE LAW

Prepared by:
Ron Elwood, Supervising Attorney
Legal Services Advocacy Project
651-842-6909
relwood@mnlsap.org

I. FORECLOSURE RELIEF
Chapter 115, Sections 1, 3, 4, and 5 (SF 1276)
Amends Minn. Stat. §§ 580.02; 582.25; and 582.27
Adds Minn. Stat. § 582.043
Various Effective Dates

A. Applicability

1. Limitations
Limits applicability of new provisions to first lien mortgages that: (1) are governed by either foreclosures by action (judicial) or foreclosures by advertisement (nonjudicial) statutes (Chapter 580 and 581); (2) are secured by one-to-four-family residential real property that is the principal residence of the owner; and (3) do not secure a loan for business, commercial, or agricultural purposes.
Adds Minn. Stat. § 582.043, subd. 2
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013

2. Exemptions for "Small Servicers"

a. Time Limited Exemption
Until August 1, 2014, exempts a servicer that has conducted 125 or fewer foreclosure sales during the preceding 12 months.
Adds Minn. Stat. § 582.043, subd. 1(f)
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013

b. Permanent Exemption
Exempts a servicer that either: (1) is a small servicer as defined in proposed rules of the Consumer Financial Protection Bureau (i.e., services 5,000 or fewer mortgage loans in which the servicer or an affiliate is the creditor or assignee; or (2) is a Housing Finance Agency as defined in federal regulations.
Adds Minn. Stat. § 582.043, subd. 1(f)
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013

B. New Key Definitions

1. "Foreclosure Sale Date"
"Foreclosure sale date" defined to mean the later of either the date: (1) contained in the notice of foreclosure that has been served or published; or (2) to which the sale has been postponed, as is provided under Minn. Stat. § 580.07, subd. 2.
Adds Minn. Stat. § 582.043, subd. 1(b)
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013

2. "Loss Mitigation Option"
Defines "loss mitigation option" to mean "a temporary or permanent loan modification, a forbearance agreement, a repayment agreement, a principal reduction, capitalizing arrears, or any other relief, intended to allow a mortgagor to retain ownership of the property."
Adds Minn. Stat. § 582.043, subd. 1(c)
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013

C. Loss Mitigation Requirements
Requires servicers to: (1) notify the homeowner in writing of available loss mitigation options offered by the servicer prior to referral to foreclosure; (2) exercise reasonable diligence to facilitate submission and review of loss mitigation applications and supporting documents; (3) provide a reasonable amount of time for submission of documents; (4) evaluate the homeowner for eligibility for a loss mitigation option prior to referral to foreclosure if the servicer has timely received a loss mitigation application; (5) timely offer the homeowner a loan modification or other loss mitigation option for which the homeowner is eligible; and (6) comply with any applicable appeal period and procedures.
Adds Minn. Stat. § 582.043, subd. 5
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013

D. Procedures to Avoid Dual Tracking
Note: "Dual Tracking" is the practice of simultaneously proceeding with a foreclosure and considering an application for a loan modification or other option to avert foreclosure.

1. Prohibitions

a. Prior to Referral to Foreclosure
Prohibits a servicer from initially referring a mortgage loan for foreclosure if the servicer has received a loss mitigation application that has not yet been acted upon.
Adds Minn. Stat. § 582.043, subd. 6(a)
Effective October 31, 2013

b. After Referral to Foreclosure but Before Sale Scheduled
Prohibits a servicer from conducting a foreclosure sale or seeking a judgment of foreclosure if the servicer has received a loss mitigation application that has not yet been acted upon.
Adds Minn. Stat. § 582.043, subd. 6(b)
Effective October 31, 2013

c. After Foreclosure Sale Scheduled but Before Sale Held
Prohibits a servicer from conducting - and requires a servicer to halt -- a foreclosure sale or seeking a judgment of foreclosure if the servicer has received a loss mitigation application by midnight of the seventh business day prior to the foreclosure sale date.
Adds Minn. Stat. § 582.043, subd. 6(c)
Effective October 31, 2013

2. Permitted Practices

Permits a servicer to proceed with the foreclosure action if the homeowner: (1) is provided written notification of the ineligibility

for a loss mitigation option and any appeal period has expired; (2) fails to accept a written loss mitigation offer where written offer is applicable and acceptance is required; or (3) declines, in writing, a loss mitigation offer.
Adds Minn. Stat. § 582.043, subd. 6(a), (b), and (c)
Effective October 31, 2013

E. New Requisite to Foreclosure by Advertisement
Adds a fifth requisite to foreclose by advertisement: compliance with new provisions concerning loss mitigation and dual tracking.
Amends Minn. Stat. § 580.02
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013

F. Enforcement

1. Right to Bring an Action
Provides a homeowner with a cause of action for violations of the loss mitigation and dual tracking provisions to halt or set aside a foreclosure sale and provides for attorney fees and costs.
Adds Minn. Stat. § 582.043, subd. 7(a)
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013

2. Qualifications on Bringing an Action

a. Time Limit to Bring Action
Requires a claim to be brought before the end of the applicable redemption period.
Amends Minn. Stat. § 582.25 (validating foreclosure sales)
Amends Minn. Stat. § 582.27, subd. 1 (curative provisions)
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013.

b. Recordation of Lis Pendens
Requires that a lis pendens must be recorded prior to the end of the redemption period in order for a claim to be brought. Establishes a conclusive presumption that the servicer has complied with the new provisions if the lis pendens is not timely recorded.
Adds Minn. Stat. § 582.043, subd. 7(b)
Effective August 1, 2013 for foreclosures with a notice of pendency under Minn. Stat. § 580.032, or a lis pendens for a foreclosure under Minn. Stat., Ch. 581, recorded on or after August 1, 2013