Thanks to a 2014 federal law, Minnesota homeowners usually get some time to breathe before facing a foreclosure after falling behind on mortgage payments. A lender must, in most cases, put the foreclosure on hold for 120 days so that the borrower has sufficient opportunity to get current or work out another alternative, like a mortgage modification.
If you haven’t worked out a solution after the preforeclosure period ends, the bank can foreclose by suing you in court (a judicial foreclosure) or by following a series of legal steps outside of the court system (a nonjudicial foreclosure). Most banks opt to use the nonjudicial process because it’s quicker and costs less than litigating a lawsuit.
In this article, you’ll get details about nonjudicial foreclosures in Minnesota. You’ll also learn about special protections for homeowners under state law, like the option to postpone the sale.
Again, the most common type of foreclosure process in Minnesota is nonjudicial. So, this article focuses on that process.
In Minnesota, a foreclosing bank must give the defaulting borrower the following preforeclosure notices.
Notice of the default. In most cases, the bank must mail the borrower a written notice of any default before officially starting a foreclosure. The notice must provide the borrower with 30 days to cure the default. (Minn. Stat. § 47.20).
Notice about foreclosure prevention counseling. Usually, along with the notice of default, the bank must also provide notice that foreclosure prevention counseling services are available and that the homeowner's contact information will be sent to an approved foreclosure prevention agency. (Minn. Stat. §§ 580.021, 580.022).
Under federal law, in most cases, a loan servicer can't officially start a foreclosure until the borrower is over 120 days' delinquent. (12 C.F.R. § 1024.41). This 120-day period is a good time to submit an application to your servicer asking for an alternative to foreclosure. You might be able to keep your home by entering into a repayment plan or getting a loan modification, for example. Or you might be able to give up the home without going through a foreclosure in a short sale or deed in lieu of foreclosure.
Federal mortgage servicing laws also impose other requirements on servicers. For example, the servicer has to try to contact you to discuss loss mitigation (foreclosure avoidance) options no later than 36 days after you miss a payment and again within 36 days after each missed payment—even if the servicer previously contacted you.
To start the nonjudicial foreclosure process officially, the bank must first file a notice of the pendency of the foreclosure with the county recorder’s office. (Minn. Stat. § 580.032). After filing the notice of pendency, it must publish a notice of sale for six weeks before the sale. The foreclosing bank must also serve a notice of sale to the occupant of the home four weeks prior to the sale. (Minn. Stat. § 580.03).
Along with the notice of sale, the bank must provide a foreclosure advice notice, which provides information about how to get help to prevent a foreclosure, as well as a notice of redemption rights (see below) and information about what happens after the foreclosure sale. The foreclosure advice notice must also be provided with each subsequent written communication mailed to the borrower. A foreclosing bank is deemed to have complied with these requirements if it sends the foreclosure advice notice at least once every 60 days up to the date of the foreclosure sale. (Minn. Stat. § 580.041).
Under Minnesota law, the borrower or homeowner can choose to postpone the foreclosure sale if the property:
To get a postponement, you have to complete a series of steps. After the notice of foreclosure sale is published, but at least 15 days prior to the scheduled sale date specified in that notice, you have to execute and record a sworn affidavit, as well as file a copy with the sheriff who's conducting the sale and deliver a copy to the bank’s attorney. The copies must show the recording date and the county recorder’s office in which the affidavit was recorded. (Minn. Rev. Stat. § 580.07).
Depending on the situation, the postponement will last for five months or 11 months. The trade-off is a reduced redemption period (see below) of five weeks. (Minn. Rev. Stat. § 580.07). For more information on postponing the sale, consult with a lawyer.
“Reinstating” is when you catch up on the missed payments, plus fees and costs, to stop a foreclosure. In Minnesota, the borrower has the right to reinstate at any time prior to the sale. (Minn. Stat. § 580.30).
In some states, including Minnesota, the foreclosed homeowner may redeem the home within a certain period of time after the foreclosure. Most borrowers in Minnesota get six months to redeem the home following a foreclosure. (Minn. Stat. Ann. § 580.23). But in some particular situations, the redemption period will be:
As discussed above, you’ll get a notice of redemption rights telling you about your right to redeem the property and other rights after the sale. (Minn. Stat. Ann. § 580.041).
When the borrower's total mortgage debt exceeds the foreclosure sale price, the difference is called a "deficiency." Some states allow the lender to seek a personal judgment, called a "deficiency judgment," against the borrower for this amount, while other states prohibit deficiency judgments with what are called anti-deficiency laws.
In Minnesota, the foreclosing bank can’t get a deficiency judgment against the borrower if the mortgage is foreclosed nonjudicially and the redemption period is six months or five weeks (applicable to abandoned properties). (Minn. Stat. § 582.30). (Learn more in Nolo’s article Deficiency Judgments After Foreclosure in Minnesota.)
After the redemption period ends, the new owner may file an eviction lawsuit against the former owners. (Minn. Stat. § 504B.285).
If you have questions about the foreclosure process in Minnesota or want to learn about potential defenses to a foreclosure, consider talking to a lawyer. It’s also a good idea to make an appointment to speak to a HUD-approved housing counselor, especially if you want to learn about different loss mitigation options.