August 8, 2009
Nash &
Lodge, PLLP
By: Stephen J. Nash
nash@nashandlodge.com
A major
change to Minnesota foreclosure law became effective on June 15, 2009. Under the newly revised law, the foreclosure sale
can be delayed for five months. After the five month period expires, there will be a five week redemption period.
What Properties Qualify for Foreclosure
Postponement?
The
property must be one to four units and classified as homestead. You can only use the postponement one time. In other words,
if you postpone a foreclosure, cure the default but later default you will not be able to postpone the second foreclosure.
When Can the Postponement
Occur?
After the first
publication of the Sheriff's Sale and no later than 15 days before the scheduled date of the Sheriff's Sale.
How Do You Postpone the Foreclosure?
There are 4 steps to the process:
Sign and notarize a statutory affidavit
and attach a copy of the Notice of Mortgage Foreclosure.
Record the affidavit with the County Recorder or Registrar of Titles.
File a copy of the recorded or filed
affidavit (showing the recording/filing date and number) with the County Sheriff who will be conducting the Sheriff's Sale.
Serve a copy of the recorded/filed
affidavit (showing the recording/filing date and number) on the attorney conducting the foreclosure.
What is the Purpose of the Postponement?
In a foreclosure the borrower has the right to
cure the default at any time before the Sheriff's Sale. After the Sheriff's Sale the mortgage is gone and the borrower can
no longer stop the foreclosure by curing the default; instead, the borrower must pay the amount bid for the Sheriff's Certificate
plus some statutorily allow costs to stop the foreclosure. By postponing the Sheriff's Sale the borrower now has approximately
4 and one-half months extra in which they can cure the default or obtain a loan modification.
The postponement does not result in lengthening the total time to foreclose
the mortgage it just lengthens the time in which the borrower can cure the default and lessens the period of redemption.
Should a Borrower Seek the Postponement?
Each situation is different and each client has
different goals. If the client has a reasonable chance at a loan modification that will provide a lasting solution the postponement
gives them more time to obtain the loan modification. If the client believes that their income or access to funds is going
to increase in the near future allowing them to cure the default, the postponement gives them more time to obtain the funds
needed to cure the default.
Are
There Situations Where the Borrower Should Not Seek a Postponement?
Yes! If the borrower is not going to cure the default or seek a loan modification
it could work to their disadvantage to seek the postponement. One advantage of the Sheriff Sale to the borrower is that it
sets an amount that has to be paid to stop the foreclosure. We are now starting to see lenders bid the value of the property
instead of their higher loan amount. When the lender bids a lower amount, less money is needed to sell the property. If
they truly lower it to the value of the property the borrower no longer needs a short sale approval. We were involved in
a recent situation where a lender bid in $180,000 for a property at a Sheriff’s Sale, when the balance due on the mortgage
exceeded $440,000. The lender bid in what the lender thought the property was worth. As a result, our homeowner was
able to sell the property for $270,000 during the redemption period and subsequently ended up leaving the closing table with
quite a bit of money in his pocket, as opposed to being completely underwater as he originally thought himself to be.
What is the Cost of Postponing
the Foreclosure?
At
Nash & Lodge, we will do the necessary work for a flat fee of $200 plus costs if you provide us the necessary information.
If the client is not sure whether a postponement is beneficial to their situation we will include a consultation for a flat
fee of $150. The costs incurred included recording/filing fees (the cost depends on the county the property is located in),
copying costs and mailing/service costs.
Can a Borrower Postpone the Sheriff's Sale By Themselves?
Yes; however, they do so at their risk. If they do not follow the statutory
requirements it will have no effect and they most likely will not get another chance to correct their err because the time
frame in which it has to be completed will have expired.
Can a Real Estate Agent, Loan Officer or Title Company Do This for the Borrower?
I believe that this would be considered to be
legal work and anyone who attempted to provide this service would be guilty of the illegal practice of law. In addition,
it is doubtful that their E&O policy would provide coverage for this type of service. If you are considering offering
this service make sure you consult with both your attorney and your E&O carrier before you offer the service.
