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Foreclosure process in Minnesota (MN)

Topic: Foreclosure

Minnesota allows for both judicial or in court and non judicial or out of court foreclosures. As with all states where both forms of foreclosure are followed, the determining factor as to which one 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 over the step of filing a lawsuit against the homeowner who is having difficulty in making his payments. The power of sale clause saves the bank both time and money. Since it is in the banks best interest to spend less on this process and move as quickly to the sale of the home as possible, non-judicial foreclosure is always the banks first choice of process when they can do it. The only reason that a bank would not choose to use the non-judicial foreclosure process is when there is no power of sale clause in the deed of trust or mortgage. When no power of sale clause exists in court or judicial process is the only avenue open to the bank. Most deeds of trust or mortgages do contain a power of sale clause, so most foreclosures are done out of court. Sometimes the power of sale clause is so detailed in its instructions as to how the sale is to proceed that it will state the date and terms and place where the sale is to take place. When this is the case, these instructions must be followed. Most power of sale clauses are not so specific however, and that means that most foreclosures follow the regular process.

In Judicial foreclosure, once the bank has received a court order to foreclose the rest of the process leading up to the sale of the property is done the same way as an out of court foreclosure. There are three conditions that must be met in this state before a foreclosure sale can be scheduled. First of all, no lawsuit to collect on the mortgage can already be in process. Secondly, the mortgage or any assignments to new lenders must have been recorded with the county. Thirdly, a notice of sale must be given eight weeks prior to the foreclosure if it is a homestead. If all of these conditions will be met, then the next step is that a notice of sale must be recorded in the county where the property is located.

This notice of sale must contain the homeowner's name, the lender's name, the original loan amount, the current amount of the default, the date the mortgage was entered into, a description of the property and the date of the scheduled sale. The time and place of the sale must be in the notice of sale as well. A power of attorney and a notice of pendency must be filed with the county in which the property is located, before a non judicial foreclosure can proceed. The notice of sale must be advertised in a paper with circulation in the county where the home is located, for 6 weeks. This same notice of sale must be served upon the homeowner/occupants of the property. This must be done no less than four weeks before the scheduled sale. The sheriff of the county in which the property is located is required to conduct the sale. The home will be sold to the person who is placing the highest bid at the sale. This highest bidder will receive a certificate of sale.

The bank may seek a deficiency judgment from the person who lost the home to the sheriff's sale. This means that if the bank feels that if the amount of money generated by the auction is insufficient they can try to get more money from the former homeowner. In Minnesota the bank is limited in how much money they can seek through a deficiency judgment. They can only attempt to obtain the difference between what the house sold for and what fair market value for the home is. Most banks understand that a person who has lost their home to such a sale, most likely has no other assets worth going after. So deficiency judgments are rarely sought. The bank does not want to waste time and resources pursuing a course that will not generate any money. However, if the bank believes that the former homeowner does have other property or resources that have enough monetary value to make pursuing a deficiency judgment likely to yield them the money they want, they will do all they can to get that money.

The former homeowner in Minnesota has some post auction rights connected to the property as well. In some instances the person who loses their home to a foreclosure sale has up to one full year following the sale of the home to regain ownership of the house. In most cases six months is the time frame for this right of redemption. The only required amount of money necessary to do this is the past due amount of the loan plus costs and fees, taxes, insurance and property preservation.


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