Minnesota was the second state in the country (after California) to enact a Homeowner Bill of Rights designed to protect struggling homeowners. The law prohibits certain actions, like dual tracking, and requires loan servicers (the company you make your mortgage payment to) to assist homeowners in the loss mitigation process. Read on to learn about the protections for homeowners and how the Homeowner Bill of Rights can help you if you are facing foreclosure in Minnesota. (For more articles on Minnesota foreclosure law and assistance for Minnesota homeowners facing foreclosure, visit our Minnesota Foreclosure Law Center.)
During the mortgage crisis, thousands of Minnesota homeowners lost their homes to foreclosure. In many cases, lenders did not provide those homeowners with significant opportunities to obtain loss mitigation options (such as loan modifications) to avoid foreclosure and also engaged in extensive mortgage servicing misconduct. To address this issue, Minnesota Governor Mark Dayton signed the Homeowner Bill of Rights into law on May 24, 2013. (Learn more about loan modifications and the different types of loss mitigation options in our Alternatives to Foreclosure area.)
There are five key protections in the Homeowner Bill of Rights:
A loan servicer must notify the homeowner in writing of all available loss mitigation options before referring the mortgage loan to an attorney for foreclosure. (A loan servicer is the company that collects monthly mortgage payments from borrowers on behalf of the owner of the loan, as well as tracks account balances, manages the escrow account, handles loss mitigation applications, and pursues foreclosure in the case of defaulted loans.)
After the homeowner requests a loan modification or other loss mitigation option, the loan servicer must:
After reviewing a loss mitigation application, the servicer must:
Minnesota’s Homeowner Bill of Rights bans the dual tracking of foreclosures. (Dual tracking is when the lender proceeds with the foreclosure while a loss mitigation application is pending). This means loan servicers must make a decision to grant or deny a first-lien loss mitigation application before starting or continuing the foreclosure process.
What does this mean for homeowners? Once the homeowner submits a complete loss mitigation application, the foreclosure is stalled while the loan servicer reviews the application and makes a decision. Even if the lender denies the loss mitigation, it still cannot foreclose until any applicable appeals period has expired.
A homeowner can submit a loss mitigation application up to midnight on the seventh business day before the foreclosure sale and halt the foreclosure while the servicer evaluates the application. This provision is stricter than new federal regulations, which will require the homeowner to submit the application 37 days prior to the sale. (Learn more about the new federal regulations in our article New Federal Rules Protecting Homeowners With Mortgages.)
Additionally, a servicer cannot proceed with foreclosure if:
Homeowners may sue the servicer for violations of the Minnesota Homeowner Bill of Rights. Potential relief includes:
The protections afforded to homeowners by the Homeowner Bill of Rights generally apply to first mortgage loans for properties that are:
The law does not apply to mortgages that secure a loan for business, commercial, or agricultural purposes.
Smaller mortgage servicers are exempt from the law, however they cannot pursue a foreclosure if a homeowner is in compliance with the terms of a loan modification or other loss mitigation agreement.
You can find the laws discussed in this article in Chapter 582 of the Minnesota Statutes.