HF 4012

1st Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to mortgages; providing for the Minnesota Subprime Foreclosure
Extension Act; proposing coding for new law in Minnesota Statutes, chapter 583.

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

Section 1.

new text begin [583.33] CITATION.
new text end

new text begin Sections 583.33 to 583.40 shall be cited as the "Minnesota Subprime Foreclosure
Extension Act of 2008."
new text end

Sec. 2.

new text begin [583.34] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For purposes of sections 583.33 to 583.40, the terms defined
in this section have the meanings given to them.
new text end

new text begin Subd. 2. new text end

new text begin The act. new text end

new text begin "The act" means the Minnesota Subprime Foreclosure Extension
Act of 2008.
new text end

new text begin Subd. 3. new text end

new text begin Extension payment. new text end

new text begin "Extension payment" means the monthly amount
that is due to the foreclosing lender by an eligible foreclosed borrower under section
538.37 to maintain the right to extension.
new text end

new text begin Subd. 4. new text end

new text begin Extension period. new text end

new text begin "Extension period" means the period that begins on the
effective date of the act and expires one year following the effective date of the act.
new text end

new text begin Subd. 5. new text end

new text begin Extension right. new text end

new text begin "Extension right" means the relief provided to an eligible
foreclosed borrower in section 583.35.
new text end

new text begin Subd. 6. new text end

new text begin Eligible foreclosed loan. new text end

new text begin "Eligible foreclosed loan" means a residential
mortgage loan currently subject to a pending foreclosure sale under chapter 580 or 581
for which: (1) the closing of the loan occurred after January 1, 2001, and prior to August
1, 2007; and (2) either is a subprime loan, or is a loan with negative amortization for
which the required minimum payment of principal and interest increased after the date
the loan was originated.
new text end

new text begin Subd. 7. new text end

new text begin Eligible foreclosed borrower. new text end

new text begin "Eligible foreclosed borrower" means a
borrower who: (1) is a mortgagor under an eligible foreclosed loan; and (2) resides at the
mortgaged property and intends to reside at the mortgaged property at least until the end
of the extension period.
new text end

new text begin Subd. 8. new text end

new text begin Foreclosing lender. new text end

new text begin "Foreclosing lender" means the mortgagee who is
foreclosing the mortgage of an eligible foreclosed borrower.
new text end

new text begin Subd. 9. new text end

new text begin Minnesota Residential Mortgage Originator and Servicer Licensing
Act definitions. new text end

new text begin The following terms defined in section 58.02 have the same meanings for
purposes of sections 583.33 to 583.40: "residential mortgage loan"; "residential mortgage
servicer or servicer"; "residential real property" or "residential real estate"; "subprime
loan"; "negative amortization" and "fully indexed rate."
new text end

Sec. 3.

new text begin [583.35] RIGHT TO FORECLOSURE EXTENSION.
new text end

new text begin An eligible foreclosed borrower has the right to extend a foreclosure sale under
chapter 580 or 581 until the expiration of the extension period by providing an affidavit
of extension to the foreclosing lender in accordance with section 583.36. A foreclosing
lender shall rescind notice of a foreclosure sale if the eligible foreclosed borrower has
submitted to the foreclosing lender an affidavit of extension prior to or at the time of the
foreclosure sale. Upon expiration of the extension period or the loss of the extension under
section 583.37, subdivision 4, a foreclosing lender may schedule an extended foreclosure
sale by publishing the notice of foreclosure sale once in the newspaper in which the
original advertisement was published and by serving a copy of the notice of foreclosure
sale in a like manner as a summons in a civil action in the district court upon the person in
possession of the mortgaged premises at least four weeks prior to the sale.
new text end

Sec. 4.

new text begin [583.36] AFFIDAVIT OF EXTENSION.
new text end

new text begin Subdivision 1. new text end

new text begin Affidavit of extension. new text end

new text begin The affidavit of extension shall state the
name of the eligible foreclosed borrower, the address of the property in foreclosure, and
contain the following statements:
new text end

new text begin "(1) I am the borrower on a mortgage loan on residential property located at [address
of property] (hereinafter "subject property");
new text end

new text begin (2) A foreclosure sale has been scheduled on the subject property;
new text end

new text begin (3) I currently reside at the subject property;
new text end

new text begin (4) If permitted to reside at the subject property, I intend to reside at the subject
property until at least [end of extension period];
new text end

new text begin (5) I believe that the mortgage loan on the subject property is either:
new text end

new text begin (i) a subprime loan; or
new text end

new text begin (ii) a loan with negative amortization for which the required minimum payment
has increased."
new text end

new text begin The affidavit shall be signed by at least one eligible foreclosed borrower who is the
mortgagor of the residential real property being foreclosed.
new text end

new text begin Subd. 2. new text end

new text begin Service on foreclosing lender. new text end

new text begin A foreclosing lender shall accept the
affidavit of extension if delivered through any reasonable means to the mortgagee or
counsel for the mortgagee identified in the notice of foreclosure. Reasonable means of
delivery include, but are not limited to, delivery in person to any agent or employee of
the mortgagee or counsel for the mortgagee, or delivery by United States mail or other
reliable delivery service to the address of the mortgagee or counsel for the mortgagee in
the notice of foreclosure, in the notice of right to extension required by section 583.39,
or at the address of the registered agent with the secretary of state. Notwithstanding the
above, a sheriff conducting a foreclosure sale shall accept an affidavit of extension, deliver
it to the foreclosing lender, and cancel the foreclosure sale.
new text end

new text begin Subd. 3. new text end

new text begin Acknowledgment by foreclosing lender. new text end

new text begin The foreclosing lender shall
promptly provide to the eligible foreclosed borrower a written acknowledgment that it has
received the affidavit of extension. The acknowledgment shall state the following:
new text end

new text begin (1) that the foreclosure sale has been canceled;
new text end

new text begin (2) the extension payment amount that is due by the eligible foreclosed borrower;
new text end

new text begin (3) the date that the first extension payment is due;
new text end

new text begin (4) the date that each subsequent extension payment is due; and
new text end

new text begin (5) the address to which the borrower should send the extension or the payment
delivery methods that are acceptable to the foreclosing lender. The acknowledgment shall
be on a single sheet of paper, shall use plain language, and no other documents shall be
included with the acknowledgment. The bottom of the acknowledgment shall include the
following disclosure in bold, 14-point type:
new text end

new text begin The cancellation of the foreclosure sale on your property is the result of a law passed
by the Minnesota Legislature in 2008. You must make the monthly payment in full
by the due dates listed in this letter. If you do not make the payments on time, we
will have the right to schedule a foreclosure sale on your property.
new text end

new text begin Subd. 4. new text end

new text begin Criminal penalty for knowing misrepresentation. new text end

new text begin A person who makes
a knowing material misrepresentation in an affidavit of extension is guilty of a crime
and may be sentenced to imprisonment for not more than two years or the payment of
a fine of not more than $2,000, or both.
new text end

new text begin Subd. 5. new text end

new text begin Charges prohibited. new text end

new text begin A foreclosing lender shall not charge an eligible
foreclosed borrower any amount other than the extension payment for exercising the
extension right.
new text end

Sec. 5.

new text begin [583.365] GOOD FAITH NEGOTIATIONS.
new text end

new text begin In the event the homeowner files the affidavit described in section 583.36 to extend
the foreclosure, the holder of the mortgagee's interest may bring an action in court to
proceed with the foreclosure if it can prove, by clear and convincing evidence, that it has
proceeded with good faith negotiations and the holder of the mortgagor's interest has
not acted in good faith.
new text end

new text begin The mortgagee's interest must show that it has, at the very least, offered terms similar
to the terms that would be given to bankruptcy filers under the "cramdown" provisions of
the bankruptcy act. The mortgagee's interest must also show it negotiated and offered at
least as good terms as for a HUD mortgage at the income level of the mortgagor's interest.
In all cases, a foreclosing lender must pay reasonable attorney fees.
new text end

Sec. 6.

new text begin [583.37] BORROWER PAYMENT REQUIREMENT.
new text end

new text begin Subdivision 1. new text end

new text begin Borrower payment required. new text end

new text begin An eligible foreclosed borrower
who has an extension right shall make monthly payments to the foreclosing lender. The
payment shall be made no later than the 15th day of each month. The first payment is not
due until the 15th day of the month that is a minimum of 30 days after the date that the
foreclosing lender sends the acknowledgment required by section 583.36, subdivision 3.
new text end

new text begin Subd. 2. new text end

new text begin Amount of payment. new text end

new text begin For an eligible foreclosed borrower with a subprime
loan, the amount of payment would be the lesser of: (1) the minimum monthly payment
on the date the loan was originated; or (2) 65 percent of the minimum monthly payment at
the time the borrower defaulted prior to foreclosure. For an eligible foreclosed borrower
with a negative amortization loan that is not also a subprime loan, the amount of payment
would be the minimum monthly payment on the date the loan was originated.
new text end

new text begin Subd. 3. new text end

new text begin Payment advice notice. new text end

new text begin The foreclosing lender shall provide to the
eligible foreclosed borrower monthly written payment advice notices. The notice shall be
sent by the first day of each month until the expiration of the extension period or the loss
of the extension under subdivision 4. Each notice shall state (1) the amount of payment
owed from the eligible foreclosed borrower; and (2) the date that the payment must be
received to avoid loss of the extension right under subdivision 4. The payment advice
notice shall be on a single sheet of paper, shall use plain language, and no other documents
shall be included with the notice. The bottom of the notice shall include the following
disclosure in bold, 14-point type:
new text end

new text begin The extension of the foreclosure sale on your property is the result of a law passed
by the Minnesota Legislature in 2008. You must continue to make the monthly
payment in full by the 15th day of each month. If you do not make the payments on
time, we will have the right to schedule a foreclosure sale on your property. The
extension period will end on (last day of extension period).
new text end

new text begin Subd. 4. new text end

new text begin Borrower failure to pay. new text end

new text begin An eligible foreclosed borrower who fails to
make payments in the amount required and by the date required under this section shall
lose the extension right.
new text end

Sec. 7.

new text begin [583.38] RESOLUTION OF DISPUTES.
new text end

new text begin Subdivision 1. new text end

new text begin Dispute as to eligible foreclosed loan status. new text end

new text begin If the foreclosing
lender determines after a reasonable investigation and in good faith that the person
submitting an affidavit of extension is not the mortgagor under an eligible foreclosed
loan, the foreclosing lender shall provide a notice of denial of extension to the person
submitting the affidavit of extension. The foreclosing lender must send a notice of denial
by certified mail through the United States mail within five business days of receiving the
affidavit of extension. The notice of denial shall be on a single sheet of paper and no other
documents shall be included with the notice. Such notice must include an explanation, in
plain language, of the reasons that the loan is not an eligible foreclosed loan. Such notice
must also inform the person who executed the affidavit of extension that the person has the
right to apply to the court for an order extending the foreclosure sale.
new text end

new text begin Subd. 2. new text end

new text begin Other disputes. new text end

new text begin For any other dispute about the extension right or other
rights or requirements under the act, a person can apply to the district court in the county
where the property is located for an order establishing the rights of the parties to the
dispute.
new text end

Sec. 8.

new text begin [583.39] NOTICE OF RIGHT TO EXTENSION.
new text end

new text begin Subdivision 1. new text end

new text begin Notice requirement; form and delivery of notice. new text end

new text begin Every
foreclosing lender shall send to an eligible foreclosed borrower a notice of right to
extension. The notice of right to extension shall be in the form of, and subject to the
delivery requirements specified in, section 580.041, subdivision 1b. The notice of right
to extension must also indicate an address at which the foreclosing lender will accept
service of an affidavit of extension under section 583.36, subdivision 2. The terms of
section 580.041, subdivisions 3 and 4, apply to this section. Notwithstanding the above, a
foreclosing lender must within three days after the first day of the extension period send
the notice of right to extension to eligible foreclosed borrowers who have a foreclosure
sale scheduled within 20 days of the first day of the extension period, and must within 14
days after the first day of the extension period send the notice of right to extension to all
other eligible foreclosed borrowers in foreclosure at the beginning of the extension period.
new text end

new text begin Subd. 2. new text end

new text begin Content. new text end

new text begin The notice required by this section must appear substantially
as follows:
new text end

new text begin "Emergency Foreclosure Extension: Help For Homeowners in Foreclosure
new text end

new text begin You may be eligible to have the foreclosure sale of your home canceled until at
least (end of extension period).
new text end

new text begin The state of Minnesota recently passed a law which allows some borrowers to
extend a pending foreclosure sale. To qualify for this foreclosure extension, you
must meet all of the following requirements:
new text end

new text begin - Have a "subprime" loan or a "negative amortization" loan.
new text end

new text begin - Currently reside at the mortgaged property and intend to reside at the mortgaged
property for at least the next 12 months.
new text end

new text begin - Obtained the loan between January 1, 2001, and prior to August 1, 2007.
new text end

new text begin If you meet those qualifications and you choose to seek foreclosure extension, you
will need to complete and sign an affidavit that you are eligible for extension and
provide that affidavit to us at the following address: (insert address in the state
of Minnesota).
new text end

new text begin The state encourages you to become informed about your options and the
requirements for obtaining foreclosure extension. There are government agencies
and nonprofit organizations that you may contact for help completing an affidavit to
seek foreclosure extension. For the name and telephone number of an organization
near you please call the Minnesota Housing Finance Agency (MHFA) at (insert
telephone number/Web site). The state does not guarantee the advice of these
agencies.
new text end

new text begin Do not delay dealing with the foreclosure because your options for foreclosure
extension end with the foreclosure sale."
new text end

Sec. 9.

new text begin [583.40] BAD FAITH OR RECKLESS VIOLATION.
new text end

new text begin A foreclosing lender who acts in bad faith or recklessly in violation of sections
583.35 to 583.39 shall be liable to a person injured by the violation for actual damages,
statutory damages of up to $25,000, punitive damages in an amount determined by the
court, costs, and reasonable attorney fees.
new text end

Sec. 10. new text begin FORECLOSURE AFTER EXTENSION.
new text end

new text begin If a period of extension has been granted under this act and that period has ended for
any reason, the lender may commence a new foreclosure. The new foreclosure may begin
publication of the notice of foreclosure four weeks prior to the scheduled sale and shall
publish for two weeks, the last publication being at least one week prior to the sale. The
redemption period after the sale is six weeks.
new text end

Sec. 11. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 10 are effective the day following final enactment.
new text end