Minnesota Foreclosure Laws

Answers

How are mortgage liens treated in Minnesota?

Minnesota is generally known as a title theory state where the property title remains “in trust” until payment in full occurs for the underlying loan. The document that secures the title is usually called a mortgage and in Minnesota the mortgage serves the same purpose and generally contains the same terms as a deed of trust and serves the same function in a non-judicial foreclosure.

How are Minnesota mortgages foreclosed?

The primary method of foreclosure in Minnesota involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action but requires notice commonly called foreclosure by advertisement. When the mortgage is initially signed it will usually contain a provision called a power of sale clause which upon default allows an attorney to foreclose on the property in order to satisfy the underlying defaulted loan which is sometimes referred to as a bond. The attorney acts as a representative of the lender to effectuate the sale which typically occurs in the form of an auction. Auctions are conducted by the Sheriff. Because this is a non-judicial remedy there are very stringent notice requirements and the legal documents are required to contain the power of sale language in order to use this type of foreclosure method.

Power of Sale Notice Requirements:

1. Prior to initiating a foreclosure the attorney conducting the foreclosure must obtain and file a power of attorney indicating the foreclosure will be pending. The lender through the attorney must then publish a notice of foreclosure sale date for six (6) weeks in a newspaper of general circulation in the county in which the property is located.
2. Notice of foreclosure as described above must be served on all occupants/owners of the property being foreclosed upon at least four (4) weeks prior to the foreclosure sale. Homestead properties require eight (8) weeks notice before sale.
3. The sheriff will auction the property to the highest bidder including the lender. Sales usually occur between 8AM and sundown. The foreclosure sale may be postponed by the sheriff by posting a notice of postponement at the same location the sale was originally going to occur at.

In Minnesota, the lenders can also go to court in what is known as a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. This process is called foreclosure by action. The property is then sold as part of a publicly noticed sale by the sheriff. A complaint is filed in court along with what is known a lis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

What are the legal instruments that establish a Minnesota mortgage?

The documents are known as the mortgage or in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement.  A mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.

How long does it take to foreclose a property in Minnesota?

Depending on the timing of the various required notices, it usually takes approximately 60-90 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy.

Is there a right of redemption in Minnesota?

Minnesota has a statutory right of redemption, which would allow a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs within six (6) months after the sale. The redemption period is twelve (12) months if the amount due as of the date of the filing of the notice of foreclosure sale is less than 2/3 of the original principal amount of the loan and the property exceeds 10 acres or the property exceeds 40 acres. Mortgages executed after December 31, 1989 may have the redemption period shortened by court order to five weeks if the property has been abandoned. An affidavit of costs and expenses must be filed ten (10) days before the redemption period ends or these may not be recoverable.

Are deficiency judgments permitted in Minnesota?

Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures.  Deficiency judgments are limited to the fair market value of the property less the unpaid balance of the loan that was foreclosed.

What statutes govern Minnesota foreclosures?

The laws that govern Minnesota non-judicial foreclosures are found in Chapter 580.01 et. seq. (Mortgages; Foreclosure of Minnesota Statutes (2004).