Minnesota Foreclosure Laws
Minnesota allows both judicial or in-court foreclosures and non-judicial or extrajudicial foreclosures. As with all states where both forms of foreclosure are followed, the determining factor as to which the bank will use is whether or not the deed of trust or mortgage contains a power of sale clause. The power of sale clause is what allows a bank to skip the step of filing a lawsuit against a homeowner who is having trouble making their payments. The power of sale clause saves the bank time and money. Since it is in banks’ best interest to spend less on this process and move as quickly as possible toward the sale of the home, non-judicial foreclosure is always the banks’ first choice of process when they are able to do so.
The only reason a bank would not choose to use the nonjudicial foreclosure process is when there is no power of sale clause in the deed of trust or mortgage. When there is no clause of power of sale in court or judicial process, it is the only way open to the bank. Most deeds of trust or mortgages contain a power of sale clause, which is why most foreclosures take place out of court.
Sometimes the power of sale clause is so detailed in its instructions on how to proceed with the sale that it will state the date, terms, and location of the sale. When this is the case, these instructions should be followed. However, most power of sale clauses are not that specific, and that means most foreclosures follow the regular process.
In judicial foreclosure, once the bank has received a court order of foreclosure, the rest of the process leading to the sale of the property is done in the same way as an extrajudicial foreclosure. There are three conditions that must be met in this state before a foreclosure sale can be scheduled.
In the first place, no lawsuit to collect the mortgage can already be in process. Second, the mortgage or any assignments to new lenders must have been registered with the county. Third, a notice of sale must be given eight weeks before foreclosure if it is a home.
If all of these conditions are met, the next step is that a notice of sale must be filed in the county where the property is located. This notice of sale must contain the name of the owner, the name of the lender, the original loan amount, the current amount in default, the date the mortgage was signed, a description of the property, and the date of the scheduled sale. The time and place of the sale must also be listed on the notice of sale.
A power of attorney and a pending notice must be filed in the county in which the property is located, before a non-judicial foreclosure can proceed. The notice of sale must be advertised in a newspaper with circulation in the county where the home is located, for 6 weeks. This same notice of sale must be given to the owner/occupants of the property. This must be done at least four weeks before the scheduled sale.
The sheriff of the county in which the property is located is required to conduct the sale. The house will be sold to the person who makes the highest offer in the sale. The highest bidder will receive a certificate of sale.
The bank can look for a deficiency in the judgment of the person who lost the house in the sheriff’s sale. This means that if the bank considers that the amount of money generated by the auction is insufficient, it can try to get more money from the former owner. In Minnesota, the bank is limited in the amount of money it can request through a deficiency judgment. They can only try to get the difference between the sale price of the house and the fair market value of the house. Most banks understand that a person who has lost their home in such a sale probably has no other assets worth pursuing. Therefore, deficiency judgments are rarely sought. The bank does not want to waste time and resources following a course that will not make money.
However, if the bank believes that the former homeowner has other property or resources that have enough monetary value that a deficiency judgment will give them the money they want, they will do everything they can to get that money.
The former Minnesota owner also has some post-auction rights related to the property. In some cases, the person who loses their home due to foreclosure has up to a full year after the sale of the home to repossess ownership of the home. In most cases, six months is the term for this redemption right. The only amount of money needed to do this is the amount due on the loan plus costs and fees, taxes, insurance, and property preservation.