In Minnesota, there are two ways to foreclose a residential mortgage: foreclosure by action (judicial foreclosure) under Minn. Stat. ch. 580 and foreclosure by advertisement (nonjudicial foreclosure or power of sale) under Minn. Stat. ch. 581. This article will discuss only nonjudicial foreclosure—though the advice is applicable to judicial foreclosure as well.
1. Have an eagle eye for typos and other errors in documents for foreclosure process.
This is the most important tip in the foreclosure industry. Foreclosure by advertisement is governed by Minn. Stat. ch. 580 and requires strict compliance with any statute in Chapter 580. This means any single misspelling or error in the process makes the whole process defective and renders a foreclosure sale void. Moreover, the nonjudicial foreclosure process described in Chapter 580 is extensive and requires the publication in a local newspaper and the recording of various notices with detailed instructions. The following are basic requirements—not exhaustive by any means—for the foreclosure by advertisement process after the requisites under Minn. Stat. § 580.02 are met:
a. Lenders (or attorneys on behalf of the lenders) must send a notice of default and the Foreclosure Prevention Counseling sheet pursuant to Minn. Stat. §580.021. Lenders also should send borrowers a Fair Debt Collection Practices Act letter, although foreclosing attorneys have not been legally considered “debt collectors” in Minnesota.
b. A firm or attorney must obtain a power of attorney from its client to foreclose a mortgage on behalf of the client. (Minn. Stat. § 580.05)
c. After the power of attorney is executed, the firm must record a notice of the pendency of a proceeding to foreclose a mortgage at the county where the mortgaged premise is located. (Minn. Stat. §580.032 subd. 3.)
d. The notice of foreclosure sale must be completed in the form required by Minn. Stat. §580.04 and delivered in compliance with Minn. Stat. §580.03 to the occupant of the mortgaged premise and to a qualified newspaper company in the county where the mortgaged premise is located for six-week publication. If applicable, the notice must be sent to third parties as well, such as taxing authorities and those who filed request for notice with redemption rights.
e. Along with the notice of foreclosure sale, the homestead designation (Minn. Stat. §582.041), the Help for Homeowners in Foreclosure (Minn. Stat. § 580.041), the foreclosure advice notice to tenant (Minn. Stat. § 580.042), and the notice of redemption rights (Minn. Stat. §580.041) must be mailed to the person in possession of the mortgaged premise.
f. In addition, the firm must prepare and record the certificate of sale (Minn. Stat. §580.12), affidavit of costs of the foreclosure (Minn. Stat. § 580.17), and the affidavit of military searches (the Servicemembers Civil Relief Act).
g. After the foreclosure sale, the purchaser of the sheriff’s certificate of sale must wait six or 12 months to own the title to the property (called the redemption period). (Minn. Stat. §580.23) If the property is vacant, the six-month redemption period may be reduced to five weeks.
Foreclosing attorneys therefore should make a comprehensive checklist to determine whether all the necessary documents were prepared correctly and executed in the right order.
The above-mentioned documents must state specific information and/or be written in a certain form. Some of the requirements are technical and require close attention. For example, the notice of redemption rights “must be in 14-point boldface type and must be printed on colored paper that is other than the color of the notice of foreclosure...,” and “the title of the notice [of redemption rights] must be in 20-pont boldface type,” and the “the notice must be on its own page.” If you chose 13-point instead of 14-point in the notice of redemption rights after the foreclosure sale was conducted, the foreclosure sale is void even though the notice is still completely readable. Foreclosing attorneys therefore should make a comprehensive checklist to determine whether all the necessary documents were prepared correctly and executed in the right order. Is the chain of titles clean? Did you make sure each digit of the tax ID parcel number, a MERS mortgage identification number, and record numbers of the mortgage and its assignments was typed correctly? Seeking typo and error in the documents must be your treasure hunt game.
2. Be Diligent in Tracking Borrower’s Status.
Throughout the foreclosure process, foreclosing attorneys must be conscious of borrower’s status matters that might affect the process. When a borrower files for bankruptcy, for example, an automatic stay will be issued, which means that every foreclosure activity must stop. A borrower who joins the military is protected from foreclosure and eviction under the Servicemembers Civil Relief Act. (The consequences of a violation of this Act are severe.) Borrowers have the option of loss mitigation, the process of their loan servicers helping them to avoid a foreclosure. Thus, because borrowers can file for bankruptcy, join the military, or apply for loss mitigation at any time, including a minute before sheriff’s sale, foreclosing attorneys must repeatedly check their status.
3. Build a Team and Develop a Team Mentality.
Now you may realize how overwhelming it is to foreclose. Thankfully, an attorney at a foreclosure firm does not bear the cross alone. Rather, attorneys, title examiners, legal assistants, and paralegals all play a part on the assembly line of foreclosure process. At the St. Paul office of my firm, people share a timeline of each stage of the foreclosure process, interact with each other to hand over the “baton” (the case folder) to the next person, and proofread documents prepared by others multiple times. It is important to know who to talk to within the firm if something is wrong or missing in the foreclosure process because everyone in the firm is assigned a unique role. Long-term, successful practice of mortgage foreclosure thus depends on developing a team mindset.
This article was updated November 17, 2023.
Sung Woo Hong
shong@trottlaw.com
Sung Woo Hong is an attorney at Trott Law. He represents mortgage servicers, banks, credit unions, and investor groups in real estate finance legal work, including foreclosure, eviction, and litigation. Sung Woo received his JD from the University of Minnesota Law School.