Minnesota Foreclosure Timeline How Does it work

(My Original Blog Post: http://ping.fm/haVjH)
 

Know anyone in foreclosure right now in Minnesota? here is a minnesota timeline I found the other day...

Here is a diagram: http://ping.fm/kPXOj

Let’s first go over the original loan that the buyer (borrower) at the time received when they initially purchased the property at the closing table.During the initial loan process, the 2 items the buyer signed at the actual closing with the title company were:

1: The Promissory Note: This document does outline the terms of the agreement made between the buyer and the lending bank. By signing this document, The borrower promises to repay the bank the debt. Promissory notes will almost always include a default provision that would enable the bank to charge the buyer for any late payments along the way.

2: The Mortgage: After the promissory note is signed, the borrower then gives the bank a mortgage and he/she(buyer) becomes the mortgagor and the bank becomes the mortgagee. This mortgage document will contain the following provisions:

• Acceleration Clause upon default: this provision would give the lender the right to seize the property if the borrower were not to honor the terms of the promissory note. This right, that the borrower has, would end as soon as the borrower cures the default by catching up on any delinquent amount in the arrears, if the buyer refinances, or if the buyer sells the property and pays off the loan.
  


• Due On Sale Clause: this provision would give the bank the right to call the loan due upon the transfer or (conveyance) in the property. The lender does have the right to do this per the provision in writing, but doesn’t always enforce it.
  


• Mortgage Covenants: these covenants known as rules or (promises) force the borrower to do certain things such as: make sure the property is insured and keep the property in good repair, pay property taxes, essentially it’s in there to protect the lender.

What then is considered default status?

The mortgagor is required to make the agreed upon payments on a monthly basis; however, a typical real estate mortgage would include terms requiring the mortgagor (borrower) to do more than just make the agreed upon payments. Such as, the mortgagor is required to maintain property insurance on the property, pay all real estate taxes that become due, and maintain the property for the benefit of the mortgagor and the mortgagee (lender) which was just stated above. In addition, the mortgage may include a provision that would prohibit the sale of all or of any portion of the property without the prior written consent of the mortgagee. These provision, as mentioned above, would be the due on sale clause. If the mortgagor would fail to abide by any of the terms in the mortgage, he or she (by definition) is in default status. Most real estate mortgages would have a “Power of Sale Clause” that would give the mortgagee the ability to legally take possession of the property.

Under Minnesota law, there are two methods of foreclosing a real estate mortgage:

Foreclosure by Advertisement (Non Judicial) (most common method)

To initiate a foreclosure by advertisement in Minnesota, the creditor(lender) would need to prepare what is referred to as a “Notice of Mortgage Foreclosure Sale”. This notice must specify in writing, the name of the mortgagor, the mortgagee, as well as the original principal amount that is secured by the mortgage, the date the mortgage was originated, the amount the lender claims to be due on the mortgage including taxes paid by the mortgagee, when and where the mortgage was recorded, a description of the mortgaged property, the time and place the sale will take place, and the time that will be allowed by Minnesota law for redemption by the mortgagor. When this notice has been prepared by the creditor, it must be published in a “qualified” newspaper in the same county in which the foreclosing property is located for a period of at least six weeks prior to the sheriff sale. After the foreclosure notice has been prepared and the publication (advertisement) has now begun. The debtor may have the right to reinstate the mortgage. This right the borrower(debtor) has to reinstate is. to be guaranteed by actual Minnesota law even though the creditor/lender may have already accelerated the balance due under the mortgage prior to the initiation of foreclosure proceedings. For the borrower to reinstate the mortgage, the borrower must pay to the mortgagee the amount of the default at the time the mortgage foreclosure proceedings were first initiated plus all accrued costs of foreclosure up to the date of reinstatement, this would include half of any attorney’s fees allowed by law or $150, whichever is greater. If the borrower were to reinstates the mortgage that they are behind on, the foreclosure proceeding would stop at that point, but to reinstate the mortgage, the required back payments in arrears must be paid prior to the sheriff’s sale taking place. I wouldn’t recommend waiting until the last minute on this.

2) Foreclosure by Action (Judicial) (Very rare method in Minnesota)

To initiate a foreclosure by action in Minnesota, a summons and complaint would need to be served according to the “Minnesota Rules of Civil Procedure”. The complaint would name as it’s defendants, all current owners of the property, any other lien holders, and those with any right to possession of all or even a portion of the premises. If no party were to defend the action, then the mortgagee may obtain from the court that it be deemed a valid mortgage. If any of the defendants object, a trial may be necessary to establish the right of the mortgagee to whom will foreclose. Once the court has made its decision, the sheriff would then publish a notice of sale for a six-week period of time.

If the debtor (borrower) is a resident of the county in which the mortgaged property is located, a copy of this judgment of the court and in addition the sheriff’s notice of sale must be served to the the one in debt (borrower). After serving the notice of sale on this debtor, the sheriff must post the notice of sale for the six weeks. At the sheriff sale, the sheriff may sell the property only to cash bidders, except for the mortgagee, which can bid (pledge) its total mortgage and debt. Following this sheriff sale, the sheriff would report the sale to the court, which would then confirm the sale.

Once the court has confirmed this sale, at that point the statutory period of redemption for the debtor would then begin. The time periods for redemption of a foreclosure in Minnesota are the same as for foreclosure by Advertisement. Under either method of foreclosure in Minnesota, any junior lien holders may redeem at the foreclosure sale if the mortgagor fails to redeem. These junior lien holders may redeem if, before the expiration of the mortgagor’s redemption period, they have filed for record, a “notice of intention to redeem”.

The junior lien holders are each given a period of five days within which to redeem the property, and this is based on the priority of their claims or liens on the property (the recorded order) in most all cases, against the property. If the amount that is realized at the sale turns out to be less than the amount due on the underlying debt, the creditor may then be able to obtain a deficiency judgment against the mortgagor, but if the statutory redemption period is six months (very standard) a deficiency judgment can be obtained against the mortgagor “only” if foreclosure was by action. No deficiency judgment can be obtained against a mortgagor, if the “redemption period is six months”, and “foreclosure was by advertisement”. If the redemption period is twelve months, a deficiency judgment could be sought after the borrower.

The Redemption Period:
The redemption period is the time immediately following the Sheriff Sale. During the redemption period the mortgage on the home is no longer valid and the lender will not accept anything, but full payment of the loan. This leaves the homeowner with two options at this point: either sell the property or refinance the property. The mortgagor must redeem within six months of the date of the sale unless one or more of the following did apply, in which case the redemption period can be up to twelve months:

-The mortgage was executed prior to July 1, 1967. • The amount claimed due and owing as of the date of the notice of foreclosure sale is less than 66-2/3 percent of the original principal amount secured by the mortgage. • The mortgage was executed prior to July 1, 1987, and the mortgaged property, as of the date of the execution of the mortgage, exceeded ten acres in size.

-The mortgage was executed prior to August 1, 1994, and the mortgaged property, as of the date of the execution of the mortgage, exceeded ten acres but did not exceed 40 acres in size and was in agricultural use as defined by Minnesota statute. • The mortgaged property, as of the date of the execution of the mortgage, exceeded 40 acres in size. • The mortgage was executed on or after August 1, 1994, and the mortgaged property, as of the date of the execution of the mortgage, exceeded ten acres but did not exceed 40 acres in size and was in agricultural use, as defined by Minnesota statute.