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Learning Center | Minnesota Foreclosure Laws

Questions
How are mortgage liens treated in Minnesota?
How are Minnesota mortgages foreclosed?
What are the legal instruments that establish a Minnesota mortgage?
How long does it take to foreclose a property in Minnesota?
Is there a right of redemption in Minnesota?
Are deficiency judgments permitted in Minnesota?
What statutes govern Minnesota foreclosures?

Answers

How are mortgage liens treated in Minnesota?

Minnesota is generally known as atitle 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 anon-judicial foreclosure.

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How are Minnesota mortgages foreclosed?

The primary method of foreclosure in Minnesota involves what is known asnon-judicial foreclosure. This type of foreclosure does not involve court action but requires notice commonly calledforeclosure by advertisement. When themortgage is initially signed it will usually contain a provision called apower 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 abond. Theattorney 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 thepower of sale language in order to use this type of foreclosure method.


Power of Sale Notice Requirements:

  1. Prior to initiating a foreclosure theattorney conducting the foreclosure must obtain and file a power ofattorney indicating the foreclosure will be pending. The lender through theattorney must then publish anotice 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. Thesheriff 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, thelenders can also go to court in what is known as ajudicial 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 alis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

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What are the legal instruments that establish a Minnesota mortgage?

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

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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 uncontestednon-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files forbankruptcy.

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Is there a right of redemption in Minnesota?

Minnesota has astatutory 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. Theredemption 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 theredemption 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 theredemption period ends or these may not be recoverable.

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Are deficiency judgments permitted in Minnesota?

Yes. Adeficiency 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 thefair market value of the property less the unpaid balance of the loan that was foreclosed.

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What statutes govern Minnesota foreclosures?

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

http://www.revisor.leg.state.mn.us/stats/580/

Judicial foreclosures are found in Minnesota Statutes (2004) Chapter 581.01 et. seq. (Foreclosure by Action).

http://www.revisor.leg.state.mn.us/stats/581/


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