In early 2021, President Joe Biden signed the American Rescue Plan Act into law. This law created a Homeowner Assistance Fund, a federal program, to give around $10 billion to the states to help households that are behind on their mortgages and other housing expenses due to COVID-19.
Eligible homeowners in Minnesota who’ve experienced a financial hardship because of COVID-19 can get a portion of the approximately $128 million allocated to the state—up to $35,000 per household—by applying to the HomeHelpMN program. This program uses federal money to help homeowners pay overdue mortgage payments and other home costs.
You can use money from the HomeHelpMN program to pay past-due:
Overdue housing-related expenses, like property taxes, homeowners’ insurance, lot rent, and homeowners’ association fees, are eligible for financial assistance even if you don’t have a mortgage so long as you own the home.
To qualify for relief from this program, you must have suffered a financial hardship (a material reduction in income or an increase in living expenses) after January 21, 2020, because of COVID-19.
You also have to meet these guidelines.
Assistance is in the form of a grant that you don’t have to repay. Payments from the program go directly to the loan servicer or other approved entity, not to homeowners.
The application period for the HomeHelpMN program runs from May 17, 2022 through June 17, 2022 at 5:00 p.m. CST. Apply at HomeHelpMN.org or by contacting the call center at 800-388-3226.
You'll have to provide specific documents with your application, like mortgage statements, proof of homeownership, proof of income (such as pay stubs or tax returns), and a government-issued ID (like a driver's license).
Funds are limited, and demand is expected to be high. So, if you think you might qualify, you should start collecting your documents and apply as soon as possible after the application window opens.
Be wary if you get an unsolicited offer by phone, mail, email, or text message offering mortgage relief or foreclosure rescue services. Scammers are increasingly targeting homeowners who’ve been affected by COVID-19. Homeowner Assistance Fund programs are free. If anyone asks you to pay a fee to get housing counseling or to receive foreclosure prevention services from this program, it’s a scam.
Call 800-388-3226 or access the HomeHelpMN live chat to find out more about the program. You can also sign up for updates. And be sure to review the HomeHelpMN FAQs and Resources page.
You may also get help by going to HUD's website or calling 800-569-4287 to contact a housing counselor. A HUD-approved housing counselor will assist you at no cost.
]]>Also, most people who take out a loan to buy a residential property in Minnesota sign a promissory note and a mortgage. These documents usually give homeowners certain contractual rights after a home loan default.
So, don't get caught off guard if you're a homeowner behind in mortgage payments. Learn about foreclosure laws in Minnesota and how the Minnesota foreclosure process works, from missing your first payment to a foreclosure sale.
In a Minnesota foreclosure, you’ll most likely get the right to:
Once you understand the Minnesota foreclosure process and your rights, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale happens as "preforeclosure," too.)
During the preforeclosure period, the servicer can charge you various fees. Also, in most cases, federal law requires the servicer to let you know how to avoid foreclosure, and most mortgage contracts require the servicer to send you a breach letter.
Minnesota’s Homeowner Bill of Rights prohibits specific actions, like dual tracking, and requires servicers to assist borrowers in the loss mitigation process. This state law is similar to federal mortgage servicing laws, with some minor differences.
The servicer must notify the borrower in writing of available loss mitigation options that the servicer offer before referring the mortgage loan to an attorney for foreclosure. (Minn. Stat. § 582.043).
After the borrower requests a loan modification or other loss mitigation option, the loan servicer must:
Once the borrower submits a complete loss mitigation application, the foreclosure is stalled while the loan servicer reviews the application and makes a decision. (Minn. Stat. § 582.043).
Even if the lender denies the loss mitigation, the servicer still can’t foreclose until:
If the servicer receives a borrower’s loss mitigation application before midnight on the seventh business day before the foreclosure sale date, the foreclosure stops while the servicer evaluates the application. This provision is stricter than federal law, which requires the borrower to submit the application more than 37 days before the sale to get protections against foreclosure. (Minn. Stat. § 582.043).
The protections under the Minnesota Homeowner Bill of Rights generally apply to first mortgage loans for properties that are:
Smaller servicers are exempt from the law, but they can’t pursue a foreclosure if a borrower is in compliance with the terms of a loan modification or other loss mitigation agreement. (Minn. Stat. § 582.043).
Under federal law, the servicer usually can’t officially begin a foreclosure until you're more than 120 days past due on payments, subject to a couple of exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners ample opportunity to submit a loss mitigation application to the servicer.
If you default on your mortgage payments in Minnesota, the lender may foreclose using a judicial or nonjudicial method.
A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. The lender will automatically win the case if you don’t respond with a written answer.
But if you choose to defend the foreclosure lawsuit, the court will review the evidence and determine the winner. If the lender wins, the judge will enter a judgment and order your home sold.
If the lender chooses a nonjudicial foreclosure, it must complete the out-of-court procedures described in the state statutes. After completing the required steps, the lender can sell the home at a foreclosure sale.
Most lenders opt for the nonjudicial process because it’s quicker and cheaper than litigating the matter in court.
Again, most residential foreclosures in Minnesota are nonjudicial.
In most cases, the lender has to mail the borrower a notice of default before officially starting a foreclosure. The notice must provide the borrower with 30 days to cure the default. (Minn. Stat. § 47.20).
Typically, along with the notice of default, Minnesota law requires the lender to provide notice that foreclosure prevention counseling services are available and that the homeowner's contact information will be sent to an approved foreclosure prevention agency. This law applies to properties consisting of one- to four-family dwelling units, one of which the owner occupies as the owner's principal place of residency. (Minn. Stat. § 580.021, § 580.022).
The lender begins the foreclosure by filing a notice of the pendency with the county recorder’s office. (Minn. Stat. § 580.032). After filing the notice of pendency, a notice of sale is published in a newspaper for six weeks before the sale. The lender must also serve a notice of sale to you (the home’s occupant) four weeks before the sale. (Minn. Stat. § 580.03).
Another notice, a redemption rights notice, contains information about the homeowner’s right to redeem the property (see below) and other rights after the sale. (Minn. Stat. § 580.041). In addition, the lender also must provide an advice notice, which includes information about how the borrower can get help avoiding foreclosure. (Minn. Stat. § 580.041).
Under Minnesota law, if the property is classified as a homestead, is occupied by the owner as a homestead, and contains one to four dwelling units, the borrower or homeowner can choose to postpone the foreclosure sale. But the trade-off is a reduced redemption period (see below) of five weeks. (Minn. Rev. Stat. § 580.07).
To get a postponement, you have to complete a series of steps, including:
You must do all this after the notice of foreclosure sale is published, but at least 15 days before the scheduled sale date specified in that notice. Depending on the circumstances, the postponement will be for five or 11 months. (Minn. Rev. Stat. § 580.07).
At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less.
Sometimes, depending on state law, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower. Other times, state law prohibits a deficiency judgment (see below).
If the lender is the highest bidder, the property becomes “Real Estate Owned” (REO). But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what’s needed to pay off all the liens on your property—you're entitled to that surplus money.
After the redemption period ends, the new owner may file an eviction lawsuit against you (the former owner). (Minn. Stat. § 504B.285).
A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property before or after the sale, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.
Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.
Minnesota law permits a borrower to reinstate a defaulted loan at any time before the sale. (Minn. Stat. § 580.30).
One way to stop a foreclosure is by “redeeming” the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale.
Some states also provide foreclosed borrowers a redemption period after the foreclosure sale, during which they can buy back the home. In Minnesota, most homeowners have six months to redeem the home after the foreclosure. (Minn. Stat. § 580.23).
But for some kinds of properties, like some kinds of agricultural properties, or if the amount owed on the mortgage is less than 66-2/3 percent of the original principal amount, for example, the redemption period is one year. (Minn. Stat. § 580.23). If the borrower abandons the home or postpones the sale, a court can reduce the redemption period to five weeks. (Minn. Rev. Stat. § 582.032, § 580.07).
If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy.
Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction, which prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.
In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out about the options available to you, speak with a local bankruptcy attorney.
The federal Servicemembers Civil Relief Act (SCRA) provides legal protections to military personnel who are in danger of foreclosure. Minnesota law extends protections under the federal SCRA to servicemembers called to state active service or federally funded state active service. (Minn. Stat. § 190.055).
In a foreclosure, the borrower’s total mortgage debt sometimes exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a “deficiency.” For example, say the total debt owed is $400,000, but the home sells for $350,000 at the foreclosure sale. The deficiency is $50,000.
In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount from the borrower.
In Minnesota, the lender can’t obtain a deficiency judgment against the borrower if the mortgage is foreclosed nonjudicially and the redemption period is six months or five weeks (applicable to abandoned properties). (Minn. Stat. § 582.30).
A foreclosure could result in serious consequences, like lower credit scores or tax consequences.
For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure.
Learn about last-minute strategies to stop foreclosure.
Find out if foreclosures are on the rise.
If you have questions about Minnesota's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney. Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.
In some states, if a foreclosure sale results in a deficiency, the lender may get a "deficiency judgment" against the borrower for the deficiency amount. But Minnesota law usually prevents the lender from pursuing a deficiency judgment against a foreclosed homeowner.
If you default on your mortgage loan, the lender can go through a specific legal process called "foreclosure" to sell your home to repay the outstanding debt. After the lender fulfills all of the legal requirements for foreclosure, the final step in a judicial or nonjudicial foreclosure is the foreclosure sale, where the home is sold to a new owner at a public auction.
The foreclosing lender submits the first bid at the sale, which is a “credit bid.” With a credit bid, the lender gets a credit in the amount of the borrower's debt. The lender can bid up to the total amount of the debt, including foreclosure fees and costs, or it might bid less. Most of the time, the lender makes the highest bid at the sale and becomes the new owner of the property because no one else bids. If the lender buys the property at the sale and gets title to the home, the property is considered "real estate owned" (REO).
Lenders regularly bid less than the total amount of a borrower’s mortgage debt at foreclosure sales.
When the lender gains ownership of a property through the foreclosure process, and if state law allows it, the lender can seek a personal judgment against the borrower to recover the deficiency, if there is one. This kind of money judgment is called a “deficiency judgment.” In some states, the lender may ask for a deficiency judgment as part of a judicial foreclosure process. In other states, the lender has to file a separate lawsuit against the borrower after the foreclosure to get a deficiency judgment.
But if the sale price is equal to, or more than, the mortgage debt amount, you’re off the hook because no deficiency exists—even if the lender can’t resell the property for the same amount after the foreclosure sale. In fact, if the sale results in excess proceeds, you might be entitled to that extra money following the foreclosure auction. But, if any junior liens were on the home, like a second mortgage or HELOC, or if a creditor recorded a judgment lien against the property, those parties get the funds to satisfy the amount they’re owed. Then, any proceeds left over after paying off these liens belong to the foreclosed homeowner.
State law sometimes imposes limits on deficiency judgments. Some states restrict deficiency judgment amounts, such as by requiring that the borrower get credit for the home’s fair market value if the foreclosure sale price is less. That is, the property’s fair market value is substituted for the foreclosure sale price when calculating the deficiency amount.
Other states limit set time limits for how long lenders get to seek a deficiency judgment against a borrower, typically ranging from three months to one year after the foreclosure sale. (To find out the time limit in your state, talk to a foreclosure lawyer.) Also, various states require specific procedural requirements to get a deficiency judgment, while some states don’t allow deficiency judgments in certain circumstances, like after nonjudicial foreclosures.
Generally, once a lender gets a deficiency judgment, it may collect this amount (in the example above, $50,000) from the borrower using regular collection methods, like garnishing wages or levying a bank account.
Even if your lender gets a deficiency judgment, you can probably eliminate your liability for a deficiency judgment, like many other dischargeable debts, in a Chapter 7 or Chapter 13 bankruptcy.
Even if your lender has the right under state law to go after you for a deficiency judgment, it might decide not to do so—especially if you don’t have many assets to satisfy the judgment. The lender might decide it isn’t worth the expense and effort of getting a deficiency judgment.
Still, you should know whether your lender can potentially pursue you for a deficiency after a foreclosure. Also, even if the lender decides not to sue you for a deficiency judgment, it could later sell the debt to a debt buyer who might file a lawsuit against you for the deficiency later on.
Most foreclosures in Minnesota are nonjudicial, which means the lender doesn’t have to go through state court to foreclose. The lender could alternatively choose to foreclose through the state court system, called a "judicial foreclosure." However, in states where a nonjudicial process is available, lenders almost always choose this route rather than pursuing a judicial foreclosure because an out-of-court foreclosure is relatively quick and inexpensive.
A deficiency judgment isn’t allowed in Minnesota if a mortgage is foreclosed nonjudicially and has:
If a lender forecloses judicially, then a deficiency judgment is possible. But because most homeowners in Minnesota are foreclosed nonjudicially and get a six-month or five-week redemption period because of home abandonment, a deficiency judgment usually isn’t an issue.
Generally, when a senior lienholder forecloses, any junior liens—like second mortgages and HELOCs, among others—are also foreclosed, and those junior lienholders lose their security interest in the real estate. In this situation, junior lienholders are sometimes called "sold-out junior lienholders." But that doesn't mean you're off the hook for the money you still owe to junior lienholders.
Suppose a junior lienholder is sold out in this manner, and the foreclosure sale proceeds weren't sufficient to pay what you owe to that junior lienholder. In that case, the junior lienholder can sue you personally on the loan’s promissory note. So, if the equity in your home doesn’t cover second and third mortgages, for example, you might face lawsuits from those lenders to collect the balance of those loans.
If you have questions about Minnesota’s foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.
It's also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options. You can use the Consumer Financial Protection Bureau's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the Homeownership Preservation Foundation (HOPE) Hotline, which is open 24 hours a day, seven days a week, at 888-995-HOPE (4673).
]]>The trade-off for getting a delay is that you'll have to agree to a shorter redemption period. But giving up some time to redeem the property after the sale might be a small price to pay if a delay buys you enough time to work out an alternative to foreclosure or figure out a long-term solution to the problem that caused you to fall behind on your payments.
To qualify for a foreclosure sale postponement, you and your property must meet the following criteria.
Exactly how long of a delay you’ll get depends on your original redemption period. You’ll get either:
The new sale date will be the first day that is not a Saturday, Sunday, or legal holiday that is five or 11 months after the original sale date.
Delaying the sale might give you enough time to bring the loan current and stop the foreclosure. You could also use the time to (hopefully) get a loss mitigation option, like a mortgage modification.
If you postpone the foreclosure sale, the compromise is that your redemption period is reduced automatically to five weeks.
To postpone the foreclosure sale, you must do the following.
You get only a small window of time to delay the sale. You must complete all of the above steps between:
You can postpone the sale just once, regardless of whether you reinstate the loan before the postponed foreclosure sale. (Minn. Rev. Stat. § 580.07).
Whether delaying the foreclosure sale is a good idea depends on your ultimate goal.
Ultimately, if you think you can catch up on your past-due payments, but you need a little more time to do so, getting a postponement is probably a good idea. It's also probably a good idea if you need to some time to finalize a loan modification.
In Minnesota, you have the right to live in the home during the redemption period. (Minn. Stat. Ann. § 580.041). So, if you’re trying to buy some extra time in your home, postponing the sale won’t really help you because the redemption period is shortened to five weeks. You'll gain time due to the sale postponement, but lose most of the redemption period—and you’ll be in the same boat as if you didn't get the delay.
If you have any questions about whether you should postpone the foreclosure sale, consult with a foreclosure lawyer. Also, keep in mind that you might have other options for delaying a foreclosure, like fighting the foreclosure in court or filing for bankruptcy. To learn whether filing for bankruptcy is right for you, consider talking to a bankruptcy attorney.
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