MN Foreclosure Process

Disclaimer: Please note that I should start off by saying that I am not an attorney and I cannot offer legal advice. This post may contain omissions or errors. That being said, here is is broad overview of the foreclosure process in the State of Minnesota.

When a person purchases real estate in MN with financing he or she (the mortgagor = the borrower) makes a promise in writing (the mortgage) to repay the lender (the mortgagee = the lender). The mortgage will include two agreements (among many many others) made between the mortgagor and the mortgagee. The first is the due on sale clause. The due on sale clause allows the lender to demand full repayment if the borrower sells the property. The due on sale clause prevents a borrower from selling his or her property and collecting the proceeds without paying off his or her loan. The second clause is the power of sale clause. If the borrower does not perform to the agreement made with the lender (stops making payments), the lender will exercise the power of sale clause which will start the foreclosure process.

In my experience in Minnesota, lenders may start the foreclosure process when a borrower is more than thirty days late on a mortgage payment. For many I have worked with, the process has started after more than one month of missed payments. Please review the terms of your mortgage to be certain.

If the lender starts the foreclosure process it will have its attorney(s) contact the county to schedule a Sheriff’s Sale. If the lender uses foreclosure by advertisement it will post an advertisement disclosing the date of the Sheriff’s Sale as well as the borrower’s name, property address, etc. The lender will give the borrower a notice of six weeks before the Sheriff Sale is to occur. At the Sheriff’s Sale the high bidder will obtain a Sheriff’s Certificate. A Sheriff’s Certificate will allow the high bidder ownership of the property if the property is not redeemed. In Minnesota, we will generally see a five week or six month redemption period (In certain cases the redemption period may be extended to twelve months). A five week redemption period will occur when the lender deems the property as abandoned (vandalism, shut off utilities, etc are evident). If the property is not abandoned, a six month redemption period will most likely occur.

During the redemption period, the borrower may redeem the property, and stay in the home or sell the property. To redeem the property the borrower will have to pay the fees instructed by the foreclosure attorney. If the borrower fails to redeem the property within the redemption period the property will become the ownership of the high bidder at the Sheriff’s Sale, and the borrower or occupant will have to vacate - by force if necessary.

So how does a Short Sale fit in to all of this?