Minnesota Legislative Update

Minnesota Legislative Update

The Minnesota legislature recently amended its foreclosure laws, effective August 1, 2013.

 

 

MINNESOTA SENATE FILE 1276

 

Effective August 1, 2013, for foreclosures with a notice of pendency or a lis pendens for a foreclosure recorded on or after August 1, 2013, in addition to the prior prerequisites for foreclosure, before the foreclosure sale, the foreclosing party must comply with the loss mitigation provisions and dual tracking provisions described below.

 

 

Effective August 1, 2013, the foreclosure advice notice must be delivered with each subsequent written communication regarding the foreclosure mailed to the borrower by the foreclosing party up to the day of foreclosure sale (previously day of redemption).  A foreclosing lender will be deemed to have complied if it sends the foreclosure advice notice at least once every 60 days up to the date of the foreclosure sale (previously once every 60 days during the period of the foreclosure process).

 

The following loss mitigation provisions are effective August 1, 2013, for foreclosures with a notice of pendency or a lis pendens for a foreclosure recorded on or after August 1, 2013:

 

“Foreclosure sale” means either:

  • The date of the foreclosure sale contained in the notice that has been either served or published; or
  • The date to which the foreclosure sale is postponed by the borrower because the property is the borrower’s homestead, whichever is later.

 

“Loss mitigation option” means 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 borrower to retain ownership of the property.

 

 

“Borrower” means a person who is liable on the promissory note secured by the mortgage, except that the borrower does not include a person who has surrendered the mortgaged property, as evidenced by either a letter or other written notice confirming the surrender or by delivery of the keys to the property to the servicer or authorized agent.

 

 

“Servicer” means a person who engages in the activity of servicing a residential mortgage loan.

 

 

“Small servicer” means a servicer that is either:

·        Servicing 5,000 or fewer mortgage loans, for all of which the servicer (or an affiliate) is the lender or assignee; or

·        A housing finance agency.

 

Until August 1, 2014, “small servicer” also means a servicer that has conducted 125 or fewer foreclosure sales during the preceding 12 months.

 

 

The following provisions apply only to first lien mortgages that are subject to foreclosure by advertisement or foreclosure by action that are secured by owner-occupied residential real property containing no more than 4 dwelling units and where the subject mortgage does not secure a loan for business, commercial, or agricultural purposes.  “Owner-occupied” means the property is principal residence of the owner.

 

 

The provisions do not impose a duty on the servicer to provide any borrower with any specific loan modification option.

 

 

A servicer must not conduct a foreclosure sale unless the servicer complies with the below provisions, if applicable.  A small servicer need not comply with the below provisions.  However, a small servicer must not refer a mortgage loan to an attorney for foreclosure, record the notice of pendency or lis pendens, or conduct a foreclosure sale if the borrower is performing pursuant to the terms of a loan modification or other loss mitigation agreement.

 

 

A servicer must:

  • Notify a borrower in writing of the available loss mitigation options offered by the servicer to the borrower’s loan before referring the mortgage loan to an attorney for foreclosure;
  • After receiving a request for a loan modification or other loss mitigation option, exercise reasonable diligence in obtaining documents and information from the borrower to complete a loss mitigation application, facilitate the submission and review of loss mitigation applications, and give the borrower a reasonable amount of time to provide the required documents;
  • Upon the timely receipt of a loss mitigation application, evaluate the borrower for all available loss mitigation options prior to referring a mortgage loan to an attorney for foreclosure;
  • After review of the loss mitigation application, timely offer the borrower a loan modification if the borrower is eligible or, if not, timely offer the borrower any other loss mitigation option for which the borrower is eligible; and
  • Comply with any applicable appeal period and procedures applicable to the specific loss mitigation option.

 

The following provisions addressing dual tracking are effective October 1, 2013:

 

 

If the servicer has received a loss mitigation application and the subject mortgage loan has not already been referred to an attorney for foreclosure, a servicer must not refer the subject mortgage loan to an attorney for foreclosure while the borrower’s application is pending, unless:

  • The servicer determines that the borrower is not eligible for any loss mitigation option, the servicer informs the borrower of the determination in writing, and the applicable appeal period has expired without an appeal or the appeal has been properly denied;
  • Where a written offer is made and a written acceptance is required, the borrower fails to accept the loss mitigation offer within the time frame specified in the offer or within 14 days after the date of the offer, whichever is longer; or
  • The borrower declines the loss mitigation offer in writing.

 

If the servicer receives a loss mitigation application after the subject mortgage loan has been referred to an attorney for foreclosure, but before a foreclosure sale has been scheduled, a servicer must not move for an order of foreclosure, seek a foreclosure judgment, or conduct a foreclosure sale unless:

  • The servicer determines that the borrower is not eligible for a loss mitigation option, the servicer informs the borrower of this determination in writing, and the applicable appeal period has expired without an appeal or the appeal has been properly denied;
  • Where a written offer is made and a written acceptance is required, the borrower fails to accept the loss mitigation offer within the time frame specified in the offer or within 14 days after the date of the offer, whichever is longer; or
  • The borrower declines the loss mitigation offer in writing.

 

If the servicer receives a loss mitigation application after the foreclosure has been scheduled, but before midnight of the 7th business day prior to the foreclosure sale date, the servicer must stop the foreclosure sale and evaluate the application.  If required to stop the foreclosure sale and evaluate the application, the servicer must not move for an order of foreclosure, seek a foreclosure judgment, or conduct a foreclosure sale unless:

  • The servicer determines that the borrower is not eligible for a loss mitigation option, the servicer informs the borrower of this determination in writing, and the applicable appeal period has expired without an appeal or the appeal has been properly denied;
  • Where a written offer is made and a written acceptance is required, the borrower fails to accept the loss mitigation offer within the time frame specified in the offer or within 14 days after the date of the offer, whichever is longer; or
  • The borrower declines the loss mitigation offer in writing.

 

A servicer must not move for an order of foreclosure or conduct a foreclosure sale under any of the following circumstances:

  • The borrower is in compliance with the terms of a trial or a permanent loan modification, or other loss mitigation option; or
  • A short sale has been approved by all necessary parties and proof of funds or financing has been provided to the servicer.

 

The following provisions addressing relief available to a borrower are effective August 1, 2013, for foreclosures with a notice of pendency or a lis pendens for a foreclosure recorded on or after August 1, 2013:

 

 

A borrower has a cause of action, based on a violation of the above provisions, to enjoin or set aside a sale.  A borrower who prevails in such an action, or who successfully defends a foreclosure by action, based on a violation of the above provisions is entitled to reasonable attorney fees and costs.

 

 

A lis pendens must be recorded prior to the expiration of the borrower’s applicable redemption period for an action to enjoin or set aside a sale.  The failure to record the lis pendens creates a conclusive presumption that the servicer has complied with the above requirements.

 

 

The following provision is effective August 1, 2013, for foreclosures with a notice of pendency or a lis pendens for a foreclosure recorded on or after August 1, 2013:

 

 

Every mortgage foreclosure sale by advertisement in Minnesota under power of sale contained in any mortgage duly executed and recorded in the office of the county recorder or registered with the registrar of titles of the proper county of Minnesota, together with the record of such foreclosure sale, is, after expiration of the period to cure, hereby legalized and made valid and effective to all intents and purposes, as against any objection that the servicer did not comply with the above loss mitigation and dual tracking provisions.  Such foreclosure sale is valid upon expiration of the borrower’s applicable redemption period.