HF 1377

2nd Engrossment - 88th Legislature (2013 - 2014) Posted on 03/21/2013 04:12pm

A bill for an act
relating to real estate; requiring loss mitigation by mortgage lenders and
servicers; prohibiting mortgage foreclosure dual tracking; amending Minnesota
Statutes 2012, sections 580.02; 580.041, subdivisions 1b, 2a; 580.15; proposing
coding for new law in Minnesota Statutes, chapters 580; 582.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2012, section 580.02, is amended to read:

580.02 REQUISITES FOR FORECLOSURE.

To entitle any party to make such foreclosure, it is requisite:

(1) that some default in a condition of such mortgage has occurred, by which the
power to sell has become operative;

(2) that no action or proceeding has been instituted at law to recover the debt then
remaining secured by such mortgage, or any part thereof, or, if the action or proceeding
has been instituted, that the same has been discontinued, or that an execution upon the
judgment rendered therein has been returned unsatisfied, in whole or in part;

(3) that the mortgage has been recorded and, if it has been assigned, that all
assignments thereof have been recorded; provided, that, if the mortgage is upon registered
land, it shall be sufficient if the mortgage and all assignments thereof have been duly
registered; deleted text begin and
deleted text end

(4) before the notice of pendency as required under section 580.032 is recorded, the
party has complied with section 580.021 new text begin ; and
new text end

new text begin (5) before the notice of pendency required under section 580.032 is recorded, the
party has complied with section 582.043, if applicable new text end .

Sec. 2.

Minnesota Statutes 2012, section 580.041, subdivision 1b, is amended to read:

Subd. 1b.

Form and delivery of foreclosure advice notice.

The foreclosure advice
notice required by this section must be in 14-point boldface type and must be printed on
colored paper that is other than the color of the notice of foreclosure required by sections
580.03 and 580.04 and the notice of redemption rights required by this section, and that
does not obscure or overshadow the content of the notice. The title of the notice must
be in 20-point boldface type. The notice must be on its own page. The foreclosure
advice notice required by this section must be delivered with the notice of foreclosure
required by sections 580.03 and 580.04. The foreclosure advice notice required by this
section also must be delivered with each subsequent written communication regarding the
foreclosure mailed to the mortgagor by the foreclosing party up to the day of deleted text begin redemption.
A foreclosing mortgagee will be deemed to have complied with this section if it sends
the foreclosure advice notice required by this section at least once every 60 days during
the period of deleted text end the foreclosure deleted text begin process deleted text end new text begin sale new text end . The foreclosure advice notice required by
this section must not be published.

Sec. 3.

Minnesota Statutes 2012, section 580.041, subdivision 2a, is amended to read:

Subd. 2a.

Content of notice of redemption rights.

The notice of redemption rights
required by this section must appear substantially as follows:

"What Happens After the Foreclosure Sale

After the sheriff's sale, you have the right to "redeem." Redeem means that you pay the
amount bid for your house at the sheriff's sale, plus interest and costs, to keep your house.
You can keep living in your home for a period of time after the foreclosure sale. This is
called a "redemption period." The redemption period is [insert number of months] months
after the sheriff's sale.

At the end of the redemption period, if you do not redeem or sell, you will have to
leave your home. If you do not leave, the person or company that bid on your home at the
sheriff's sale has the right to file an eviction against you in court.

Be Careful of Foreclosure Scams

Be careful! After the foreclosure sale, people may approach you to buy your house
or ask you to transfer your house to them for little or no money.

Before you give up the rights to your house or sign any documents (including a
deed), be sure you know how much the house sold for at the sheriff's sale and decide if
you can save the house by paying the amount of the bid, plus interest and costs.

How to Find Out How Much Your House Sold For at the Foreclosure Sale

The amount you need to pay to redeem your house may be less than the amount you
owed on the mortgage before the sale. You can learn what this amount is (and who the
winning bidder at the sale was) by attending the sheriff's sale or by contacting the sheriff's
office after the sale.

You Can Also Sell Your House

During the redemption period, if you sell your home, you must sell it for enough
to pay off the winning bidder from the sheriff's sale and pay interest, fees, and other
claims against the property. If there is any money left from the sale of the house after all
these debts are paid, you can keep the money. You can also enter into a "short sale." A
short sale is an agreement in which the lender agrees to accept less than the full amount
you owe on the mortgage.

Get More Information and Advice

For more information and advice, contact an attorney or a mortgage
foreclosure prevention counselor. You can find a mortgage foreclosure
prevention counselor by contacting the Minnesota Home Ownership Center
at 651-659-9336 or 866-462-6466 or www.hocmn.org or contact the United
States Department of Housing and Urban Development at 1-800-569-4287 or
deleted text begin www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search=MN#searchArea
deleted text end new text begin http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?&webListAction=search&searchstate=MN
new text end to get the phone number and location of the nearest certified counseling organization."

Sec. 4.

new text begin [580.043] MORTGAGE FORECLOSURE DUAL TRACKING
PROHIBITED.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
new text end

new text begin (b) "Borrower" means the person who is liable on the promissory note secured by
the mortgage, except that borrower does not include:
new text end

new text begin (1) a person who has surrendered the mortgaged property, as evidenced by either a
letter or other written notice confirming the surrender or by delivery of the keys to the
property to the servicer or authorized agent; or
new text end

new text begin (2) a person who has filed a bankruptcy case under United States Code, title 11,
chapter 7, 11, 12, or 13, if the bankruptcy court has not entered an order closing or
dismissing the bankruptcy case or granting relief from a stay of foreclosure.
new text end

new text begin (c) "Complete loan modification request" means an application in connection with
which a servicer has received all the information that the servicer requires from a borrower
in evaluating applications for the loan modification options available to the borrower.
A servicer shall exercise reasonable diligence in obtaining documents and information
to complete a loan modification request.
new text end

new text begin (d) "Dual tracking" means a servicer beginning or continuing a mortgage foreclosure
under this chapter after the servicer has received a request by the borrower for a loan
modification and has not accepted or rejected that request.
new text end

new text begin (e) "Loan modification request" means a written request from a borrower to the
borrower's servicer for a modification of the borrower's mortgage loan in order to prevent
an anticipated foreclosure or to suspend or terminate a foreclosure that is pending.
new text end

new text begin (f) "Servicer" means an entity that is responsible for interacting with the borrower,
including managing the loan account on a daily basis, such as collecting and crediting
periodic loan payments, managing an escrow account, or enforcing the promissory note
and mortgage, either as the current owner of the promissory note or as the current owner's
authorized agent.
new text end

new text begin (g) "Small servicer" means a small servicer, as that term is defined in Code of
Federal Regulations, title 12, section 1026.41, paragraph (e).
new text end

new text begin Subd. 2. new text end

new text begin Applicability. new text end

new text begin This section applies only to first lien mortgages subject to
foreclosure under chapters 580 and 581 that are secured by owner-occupied residential
real property containing no more than four dwelling units and the subject mortgage does
not secure a loan for business, commercial, or agricultural purposes. For purposes of
this subdivision, "owner-occupied" means that the property is the principal residence
of the owner.
new text end

new text begin Nothing in this section shall be construed to supersede or change a servicer's loss
mitigation obligations, as that term is defined in section 582.043. In the event of a conflict
between this section and section 582.043, the requirements of section 582.043 shall prevail.
new text end

new text begin Subd. 3. new text end

new text begin Prohibition; dual tracking; continuation or commencement of
foreclosure after receipt of loan modification request. new text end

new text begin (a) A servicer shall not record or
file the notice of pendency required under section 580.032 or a lis pendens under chapter
581 unless the subject mortgage loan is more than 120 days delinquent.
new text end

new text begin (b) If a borrower submits a complete loan modification request before the mortgage
loan is more than 120 days delinquent or before the notice of pendency or lis pendens has
been filed or recorded, a servicer must not file the notice of pendency or lis pendens unless:
new text end

new text begin (1) the servicer has sent the borrower a notice that the borrower is not eligible for
any loan modification option;
new text end

new text begin (2) the borrower does not accept the loan modification offer within 14 days after
the date of the offer;
new text end

new text begin (3) the borrower rejects the loan modification option offered by the servicer; or
new text end

new text begin (4) the borrower fails to perform under a loan modification agreement.
new text end

new text begin Subd. 4. new text end

new text begin Prohibition on foreclosure sale. new text end

new text begin If a borrower submits a complete loan
modification request after a servicer has recorded or filed the notice of pendency required
under section 580.032 or a lis pendens under chapter 581, but more than 37 days before a
foreclosure sale, a servicer must not move for foreclosure judgment or order of sale, or
conduct a foreclosure sale, unless:
new text end

new text begin (1) the servicer has sent the borrower a notice that the borrower is not eligible for
any loan modification option;
new text end

new text begin (2) the borrower does not accept the loan modification offer within 14 days after
the date of the offer;
new text end

new text begin (3) the borrower rejects the loan modification option offered by the servicer; or
new text end

new text begin (4) the borrower fails to perform under a loan modification agreement.
new text end

new text begin Subd. 5. new text end

new text begin Appeal process. new text end

new text begin If a servicer receives a complete loan modification
request 90 days or more before a foreclosure sale, a servicer shall permit a borrower to
appeal the servicer's determination to deny a borrower's loan modification request for
any trial or permanent loan modification program available to the borrower. A servicer
shall permit a borrower to make an appeal within 14 days after the servicer provides the
determination regarding a loan modification option to the borrower.
new text end

new text begin Subd. 6. new text end

new text begin Independent evaluation; determination. new text end

new text begin (a) An appeal must be reviewed
by different personnel than those responsible for evaluating the borrower's complete loan
modification application.
new text end

new text begin (b) Within 30 days of a borrower making an appeal, the servicer shall provide a
notice to the borrower stating the servicer's determination of whether the servicer will
offer the borrower a loan modification option based upon the appeal. A servicer may
require that a borrower accept or reject an offer of a loan modification option after an
appeal no earlier than 14 days after the servicer provides the notice to a borrower. A
servicer's determination under this paragraph is not subject to any further appeal.
new text end

new text begin Subd. 7. new text end

new text begin Duplicative requests. new text end

new text begin A servicer is only required to comply with
the requirements of this section for a single complete loan modification request for a
borrower's mortgage loan account.
new text end

new text begin Subd. 8. new text end

new text begin Small servicer requirements. new text end

new text begin A small servicer is not subject to this
section, except that a small servicer must not file the notice of pendency or lis pendens
unless a borrower's mortgage loan obligation is more than 120 days delinquent. A small
servicer must not file the notice of pendency or lis pendens and must not conduct a
foreclosure sale if a borrower is performing pursuant to the terms of an agreement on a
loan modification option.
new text end

new text begin Subd. 9. new text end

new text begin Affidavit. new text end

new text begin new text end new text begin Any person may establish compliance with or inapplicability of
this section by recording, with the county recorder or registrar of titles, an affidavit by
a person having knowledge of the facts, stating that any notices required by this section
have been delivered in compliance with this section. The affidavit and a certified copy
of a recorded affidavit is prima facie evidence of the facts stated in the affidavit. The
affidavit may be recorded regarding any foreclosure sale and may be recorded separately
or as part of the record of a foreclosure.
new text end

Sec. 5.

Minnesota Statutes 2012, section 580.15, is amended to read:

580.15 PERPETUATING EVIDENCE OF SALE.

Any party desiring to perpetuate the evidence of any sale made in pursuance of
this chapter may procure:

(1) an affidavit of the publication of the notice of sale and of any notice of
postponement to be made by the printer of the newspaper in which the same was inserted
or by some person in the printer's employ knowing the facts;

(2) an affidavit or return of service of such notice upon the occupant of the mortgaged
premises to be made by the officer or person making such service or, in case the premises
were vacant or unoccupied at the time the service must be made, an affidavit or return
showing that fact, to be made by the officer or person attempting to make such service;

(3) an affidavit by the person foreclosing the mortgage, or that person's attorney, or
someone knowing the facts, setting forth the facts relating to the military service status of
the owner of the mortgaged premises at the time of sale;

(4) an affidavit by the person foreclosing the mortgage, or that person's attorney,
or someone having knowledge of the facts, setting forth the fact of service of notice of
sale upon the secretary of the Treasury of the United States or the secretary's delegate in
accordance with the provisions of Section 7425 of the Internal Revenue Code of 1954
as amended by Section 109 of the Federal Tax Lien Act of 1966, and also setting forth
the fact of service of notice of sale upon the commissioner of revenue of the state of
Minnesota in accordance with the provisions of section 270C.63, subdivision 11. Any
such affidavit recorded prior to May 16, 1967 shall be effective as prima facie evidence of
the facts therein contained as though recorded subsequent to May 16, 1967;

(5) an affidavit by the person foreclosing the mortgage, or that person's attorney, or
someone having knowledge of the facts, setting forth the names of the persons to whom a
notice of sale was mailed as provided by section 580.032; and

(6) one or more affidavits by the person foreclosing the mortgage, or that person's
attorney or a person having knowledge of the facts, stating:

(i) whether section 580.021, 580.04, 580.041, 580.042, 582.039, 582.041, or
582.042 applies to the foreclosure proceedings; and

(ii) if any or all of those sections apply, that all notices required under those sections
have been provided new text begin ; and
new text end

new text begin (7) one or more affidavits by the person foreclosing the mortgage, the person's
attorney, or a person having knowledge of the facts, stating:
new text end

new text begin (i) whether section 582.043 applies to the foreclosure proceedings; and
new text end

new text begin (ii) if section 582.043 applies, that all requirements of that section have been fully
satisfied new text end .

Such affidavits and returns shall be recorded by the county recorder and they and the
records thereof, and certified copies of such records, shall be prima facie evidence of the
facts therein contained.

The affidavit provided for in clause (3) hereof may be made and recorded for the
purpose of complying with the provisions of the Servicemembers Civil Relief Act, and may
be made and recorded at any time subsequent to the date of the mortgage foreclosure sale.

Sec. 6.

new text begin [582.043] REQUISITE APPLICABLE TO CERTAIN FORECLOSURES.
new text end

new text begin Subdivision 1. new text end

new text begin Applicability. new text end

new text begin This section applies to foreclosures under chapters
580 and 581 of first lien mortgages that are secured by owner-occupied residential real
property containing no more than four dwelling units and the subject mortgage does not
secure a loan for business, commercial, or agricultural purposes. For purposes of this
section, "owner-occupied" means that the property is the principal residence of the owner.
new text end

new text begin This section does not apply to a small servicer, as that term is defined in Code of
Federal Regulations, title 12, section 1026.41, paragraph (e).
new text end

new text begin Subd. 2. new text end

new text begin Requisite. new text end

new text begin (a) No party foreclosing a mortgage may record or file the
notice of pendency required under section 580.032 or serve or file a summons and
complaint under chapter 581 until all loss mitigation obligations relevant to the mortgage
loan being foreclosed have been fully satisfied.
new text end

new text begin (b) For the purposes of this section, "loss mitigation obligations" means actions
required to be taken by a residential mortgage servicer, lender, mortgagee, note owner,
note holder, or any other person in connection with a residential mortgage loan to review
and consider the homeowner for a loan modification or other relief intended to allow the
homeowner to retain ownership of the property under:
new text end

new text begin (1) state or federal law;
new text end

new text begin (2) rules or regulations promulgated by the Consumer Financial Protection Bureau;
new text end

new text begin (3) rules or regulations applicable to loans owned or guaranteed by the United States
government, including rules and regulations issued by:
new text end

new text begin (i) the Department of Housing and Urban Development and the Federal Housing
Administration for FHA loans and Indian home loan guarantee loans;
new text end

new text begin (ii) the Department of Veterans Affairs for VA loans; and
new text end

new text begin (iii) the Department of Agriculture for Rural Housing Service loans;
new text end

new text begin (4) the Home Affordable Modification Program for loans owned or guaranteed
by the United States government;
new text end

new text begin (5) any applicable consent, settlement, or other legal agreement, including:
new text end

new text begin (i) consent judgments entered in the case entitled United States of America et al. v.
Bank of America Corporation et al., filed April 4, 2012, in the United States District Court
for the District of Columbia, in a civil action number 120361; and
new text end

new text begin (ii) stipulations and Consent to the Issuance of an Amendment to 2011 Consent Order
modifying Office of Thrift Supervision Orders No. NE-11-16 and, by reference NE-11-17;
and Office of Comptroller of the Currency Consent Orders AA-EC-11-12; AA-EE-11-13;
AA-EC-11-14; AA-EC-11-15; AA-EC-11-16; AA-EC-11-17; AA-EC-11-18; and 4.2
AA-EC-11-19; or
new text end

new text begin (6) the Making Home Affordable Program applicable to loans owned or guaranteed
by Fannie Mae or Freddie Mac or loans serviced by an entity that is participating in the
Making Home Affordable Program.
new text end

new text begin Subd. 3. new text end

new text begin Effective date; expiration. new text end

new text begin This section applies to foreclosures
commenced on or after August 1, 2013, and before January 1, 2018. This section expires
January 1, 2018.
new text end

Sec. 7. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1, 5, and 6 are effective for foreclosures commenced on or after August 1,
2013, and before January 1, 2018, and expire on January 1, 2018.
new text end

new text begin Section 2 is effective for foreclosures commenced on or after August 1, 2013.
new text end

new text begin Section 3 is effective the day following final enactment.
new text end

new text begin Section 4 is effective January 10, 2014.
new text end