User:Ipresolutions

Overview of The Foreclosure Process in Minnesota Mortgages

                         www.ipresolutions.com

Before explaining the way the foreclosure process works for the state of Minnesota it is important to understand the basics of how homeowners get their homes financed through banks. When a buyer finds a home he/she would like to purchase, the bank or lending institution will require the borrower to sign many documents; the two main documents are:

1) The promissory note

This document outlines the terms of the agreement made between John and the bank. By signing this document, The Borrower promises to repay the bank the debt incurred. Promissory Notes include default provisions that enable the bank to penalize John for late payments.

2) The Mortgage

Once the note is signed, the borrower will then give the bank a mortgage and he becomes the mortgagor and the bank becomes the mortgagee. This document contains the following provisions:

Acceleration on default: this provision gives the lender the right to seize the property if the borrower does not honor the terms of the Promissory Note. This right ends as soon as the borrower cures the default by catching up the delinquent amount or arrears, refinances or sells the property.

Due On sale clause: this provision gives the bank the right to call the loan due upon the transfer (conveyance) of the property.

Mortgage Covenants: these covenants (promises) forces the borrower to do certain things such as pay property taxes, make property is insured and keep the property in good repair. What Constitutes Default?

The mortgagor is required to make the agreed upon payments on a monthly basis; however, a typical real estate mortgage includes terms requiring the mortgagor (purchaser) to do more than make the agreed upon payments. For example, the mortgagor is required to maintain insurance on the premises, pay all real estate taxes, and maintain the premises for the benefit of both the mortgagor and the mortgagee (lender). In addition, mortgages may include a provision prohibiting the sale of all or any portion of the premises without the prior written consent of the mortgagee. Such provision, as mentioned above, is the due on sale clause. If the mortgagor fails to abide by any of the terms in the mortgage, he or she is in default.

Mortgage Foreclosure in Minnesota

Most real estate mortgages have a power of sale clause that 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:

1) Foreclosure by advertisement (Most of the cases).

To initiate foreclosure by advertisement, the creditor must prepare a notice of mortgage foreclosure sale. Such a notice must specify the name of the mortgagor and the mortgagee, the original principal amount secured by the mortgage, the date of the mortgage, when and where it was recorded, the amount claimed to be due under the mortgage including taxes paid by the mortgagee, a description of the mortgaged premises, the time and place of sale, and the time allowed by law for redemption by the mortgagor. Once the notice has been prepared by the creditor, it must be published in a qualified newspaper in the county where the mortgaged property is located for a period of six weeks prior to the sale. After the foreclosure notice has been prepared and publication has begun, the debtor may reinstate the mortgage. This right to reinstate is guaranteed by Minnesota law even though the creditor may have accelerated the balance due under the mortgage prior to the initiation of foreclosure proceedings. To reinstate the mortgage, the debtor must pay to the mortgagee the amount constituting the default at the time the mortgage foreclosure proceedings were initiated and all costs of foreclosure to the date of reinstatement, including half of any attorney’s fees allowed by law or $150, whichever is greater. If the debtor reinstates the mortgage, the foreclosure proceeding is annulled. To reinstate the mortgage, however, the required payment must be made prior to the sheriff’s sale, which is provided for by foreclosure proceedings.

2) Foreclosure by action.

To initiate a foreclosure by action, a summons and complaint must be served according to the Minnesota Rules of Civil Procedure. The complaint will name as defendants all present owners of the property, other lien holders, and those with a right to possession of all or a portion of the premises. If no party defends the action, the mortgagee may obtain a determination from the court that it has a valid mortgage. If, however, any of the defendants objects, a trial may be necessary to establish the right of the mortgagee to foreclose. Once the court has made its decision, the sheriff will publish a notice of sale for a six-week period. In addition, if the debtor is a resident of the county in which the mortgaged premises are located, a copy of the judgment of the court and the sheriff’s notice of sale must be served upon the debtor. Finally, after serving the notice of sale on the debtor, the sheriff must post the notice of sale for six weeks. At the sale, the sheriff may sell the property to cash bidders only, except for the mortgagee, which can bid its total debt. Following the sale, the sheriff reports the sale to the court, which will then confirm the sale. Once the court has confirmed the sale, the statutory period of redemption for the debtor begins. The time periods for redemption are the same as for foreclosure by advertisement. Under either method of foreclosure, junior lien holders may redeem from the foreclosure sale if the mortgagor fails to do so. Such 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, based on the priority of their claims or liens, against the property. If the amount realized at the sale is less than the amount due on the underlying debt, the creditor may be able to obtain a deficiency judgment against the mortgagor. If the statutory redemption period is six months, however, such a deficiency judgment can be obtained against the mortgagor only if foreclosure was by action. No deficiency judgment can be obtained against the mortgagor if the redemption period is six months and foreclosure was by advertisement. If the redemption period is twelve months, however, a deficiency judgment can be sought. Finally, even if the redemption period is six months, a deficiency judgment can be sought against any guarantors of the promissory note.

The Redemption period:

The redemption period is the time that is 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: either sell or refinance. The mortgagor must redeem within six months of the date of the sale unless one or more of the following applies, in which case the redemption period is 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. If you have any more questions about the foreclosure process call us NOW! 952-884-6111

Disclaimer: The information on this page is for information and educational purposes ONLY and cannot be deemed legal advice. Please consult your attorney for any legal advise regarding your foreclosure.