In response to the ongoing foreclosure crisis in this country, many states, have implemented programs to assist borrowers in finding ways to avoid foreclosure. Minnesota has started a program where borrowers may obtain foreclosure prevention counseling. Read on to learn more about how Minnesota’s foreclosure prevention counseling program works and how you can benefit from the program.
(To learn about other options for dealing with foreclosure, visit Nolo's Foreclosure section.)
What is Foreclosure Prevention Counseling?
In foreclosure prevention counseling, a homeowner works with a government-approved nonprofit agency to try to prevent foreclosure. In Minnesota’s program, the counseling agencies are approved by either the Minnesota Housing Finance Agency or the United States Department of Housing and Urban Development.
These approved agencies are experts in foreclosure prevention and are experienced in helping homeowners deal with lenders. A foreclosure prevention counselor can answer questions about foreclosure, offer free advice, and help create a plan that works for your situation.
Minnesota’s Foreclosure Prevention Counseling Program
In Minnesota, foreclosures may be nonjudicial or judicial, though most are nonjudicial. This means the lender does not have to go through state court to get a foreclosure. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
Minnesota law requires that, as part of the nonjudicial and judicial foreclosure process, the lender mail notices regarding the availability of foreclosure prevention counseling to the borrower (Minn. Stat. § 580.021).
Pre-Foreclosure Notice of Availability of Foreclosure Prevention Counseling
A notice regarding the availability of foreclosure prevention counseling must first be mailed to the homeowner prior to the start of the foreclosure (Minn. Stat. § 580.021).
Contents of the Notice of Availability of Foreclosure Prevention Counseling
The notice of availability of foreclosure prevention counseling will state that:
- foreclosure prevention counseling services provided by an authorized foreclosure prevention counseling agency are available, and
- the lender will provide the homeowner's name, address, and telephone number to an approved foreclosure prevention agency.
Eligibility: Property Must Be Principal Residence of the Borrower
To be eligible for foreclosure prevention counseling under Minnesota’s program, the property must:
- be the principal residence of the borrower, and
- consist of one to four units.
Additional notice regarding the availability of foreclosure prevention counseling must be sent to the homeowner at least once every 60 days during the foreclosure process (Minn. Stat. § 580.041).
How to Participate in Foreclosure Prevention Counseling
The authorized foreclosure prevention agency will either contact you or you may contact the agency. (The contact information will be included in the notice that you receive.)
If the foreclosure prevention agency agrees to provide services to you, the agency will then provide a form to the lender. The form serves as notice to the lender that you are receiving foreclosure prevention counseling assistance.
The lender must return the form to the authorized foreclosure prevention agency within 15 days of receipt with the name and telephone number of the lender’s agent who must be a person authorized by the lender to:
- discuss with the authorized foreclosure prevention agency or the homeowner the terms of the mortgage, and
- negotiate a resolution to the homeowner’s default.
The foreclosure prevention agency will then help facilitate a workout with your lender, if possible.
Should You Participate in Foreclosure Prevention Counseling?
Minnesota’s statute does not require that the lender agree to a resolution with the homeowner to avoid foreclosure. This means you could walk away from counseling and still go through a foreclosure. However, according to a recent report by the Minnesota Home Ownership Center, more than 10,000 Minnesota homeowners received free foreclosure prevention services in 2011 and, of the cases where outcomes are known, more than half were able to avoid foreclosure.
So, even though Minnesota’s foreclosure prevention counseling program does not guarantee that a foreclosure will be avoided, it doesn't hurt to participate in the program. The lender may be more likely to agree to a nonforeclosure solution when approached though this program or you might qualify for a loss mitigation option that you hadn’t previously considered.
You can access the Minnesota statutes that describe the requirements of the foreclosure prevention counseling program at www.revisor.mn.gov/statutes or go to www.hocmn.org/en/index.cfm and click on “Foreclosure Prevention” for more information on foreclosure prevention counseling services in Minnesota.