Foreclosure in Minnesota

How a Minnesota foreclosure works, step by step

1. Generally, the legal foreclosure process can't start until you're at least 120 days behind.
2. Before it records a notice that the foreclosure is pending, the lender must tell you in a set form that foreclosure prevention counseling is available, and that it will send your name, address and phone number to an approved counseling agency. This applies to a home with one to four units, where you live in one as your main home.
3. The lender records that notice with the county recorder or registrar of titles, before the sale notice is first published but no more than six months before.
4. The notice of sale is published for six weeks. At least four weeks before the sale, a copy is served, like a court summons, on whoever is living in the home. The notice gives the time and place of the sale and how long you'll have to redeem. If it's an owner-occupied single-family home, it also gives the date you must move out if you don't reinstate the loan or redeem the home.
5. Two more notices must come with it: a foreclosure advice notice and a notice of your redemption rights.
6. The sheriff or a deputy sells the home at a public auction to the highest bidder, in the county where it is, between 9:00 a.m. and 4:00 p.m.
7. You can then redeem, usually within six months, by paying the sale price plus interest. You can keep living in the home during this time.
8. If no one redeems, the sheriff's certificate becomes the buyer's deed when the redemption period ends. If you don't leave, the winning bidder can file an eviction case against you in court.

Counseling and your servicer's review

Under Minnesota law, your servicer must tell you in writing about the loss mitigation options it offers for your loan, meaning ways it may be able to help, before it sends the loan to an attorney for foreclosure. If you send an application after the sale is scheduled, but before midnight of the seventh business day before the sale date, the servicer must halt the sale and review it. These rules cover first mortgages on owner-occupied homes with up to four units.

Under federal rules, if your servicer gets a complete application for help more than 37 days before a sale, it must act on it within 30 days.

Minnesota Housing says to call your servicer as soon as you can. The earlier you reach out, the more options you may have. The Attorney General warns that some companies charge up-front fees for things you can do yourself, and that nonprofits may do for free.

My advice: answer the counseling agency when it calls, and keep copies of everything you send your servicer.

Catching up before the sheriff's sale

At any time before the sale, you, or anyone paying for you, can pay the amount actually in default, plus items such as interest and the costs of publication and service, to the lender, its attorney or the sheriff. The mortgage is then fully reinstated, and the foreclosure is abandoned.

If you ask for the reinstatement amount, the lender must tell you within three days, and the figure it gives you is good for seven days or until the sale, whichever comes first.

Putting off the sale, and what it costs you

If the home is your homestead and has one to four units, you can postpone the sale yourself. The sale moves back five months if your redemption period was six months, or 11 months if it was 12 months. To do it, at least 15 days before the scheduled sale, you sign a sworn affidavit and record it with the county.

The trade-off: recording the affidavit and postponing the sale cuts your redemption period after the sale to five weeks.

Time before the sale and time after it are not the same thing, so talk with a counselor or a lawyer before you choose this.

How long it takes

Foreclosure generally can't legally start until you're at least 120 days behind. Once it starts, how long you have until the sale depends on your state.

For FHA loans, HUD's time frame runs from the first legal action until the lender has clear title to the home and possession of it. In Minnesota, that's 10 months, and the first legal action is publishing the notice of sale.

By advertisement, the notice of sale runs for six weeks, and a copy must be served on whoever lives in the home at least four weeks before the sale. After the sale, the usual redemption period is six months.

These are official markers, not a forecast. Your case can move faster or slower, so don't count on extra time.

After the sale: redemption, shortfalls and extra money

To redeem, you pay the amount the home sold for, with interest from the sale date at your mortgage's rate. The period is 12 months instead of six in some cases, including when the amount claimed due in the sale notice was less than 66-2/3 percent of the original loan.

You can also sell during the redemption period. The price has to cover the winning bid, interest, fees and other claims, and anything left over is yours. The state's own notice warns that after the sale, people may offer to buy your house or ask you to sign it over for little or no money, so find out what it sold for before you sign anything.

In general, Minnesota lets a lender get a deficiency judgment if the sale brings in less than you owe. But there's no deficiency judgment after a foreclosure by advertisement with a six-month or five-week redemption period.

If the sale brings in $100 or more beyond what's owed, the sheriff holds that surplus during the redemption period, and you can ask to have it applied toward redeeming. If no one redeems, the surplus goes first to junior lienholders who claim it in time, and then to the owner of record at the time of the sale.

Rescue offers, buyers and leasebacks under Minnesota law

• Minnesota law covers anyone who offers, for pay, to stop or postpone a foreclosure sale. A notice required by Minnesota law says they can't take or ask for money until they've finished everything they promised, and can't have you sign any lien, mortgage or deed.
• The same law covers buyers in deals where you sign your home over and are promised something back that lets you stay, such as a lease, an option to buy or a contract for deed. You can cancel that kind of contract until midnight of the fifth business day after you sign it, or until 8:00 a.m. on the last day of your redemption period, if that comes first. Until your time to cancel has passed, the buyer can't take your deed.
• The buyer must check and be able to show that you can reasonably afford to get the home back. For a lease with an option to buy, that means affording the rent and the purchase within the option term. If you don't get the home back, the buyer must make sure you receive at least 82 percent of its fair market value within 150 days after you're evicted or move out.
• On a contract for deed, the seller's termination notice gives the buyer 60 days to fix the default, unless the law allows a shorter period or requires a longer one. The Attorney General warns that if a contract for deed is canceled, you lose all the money you've paid, even if it's nearly paid off.

Some of these touch how I buy. If an offer lets you stay after signing the house over, by renting it or buying it back, the reconveyance rules above apply, including the lease option payment test. The contract for deed rule touches seller financing. Before you take any offer, including mine, find out what redeeming or selling on your own could get you. And don't stop talking to your lender while you weigh it.

Free help in Minnesota

• Minnesota Housing: housing help. Find a foreclosure prevention advisor and other help with mortgage payments.
• Minnesota Attorney General: mortgage assistance scams. Scam warning signs, and where to find reputable counseling.
• Minnesota Attorney General: financing your home. The Home Buyer's Handbook chapter on loans and contracts for deed.
• Minnesota Statutes, chapter 580: foreclosure by advertisement. The full text of the state's foreclosure law.
• CFPB: find a housing counselor. Search HUD-approved counseling agencies in Minnesota.