HF 3612

2nd Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to real property; providing for the Minnesota Subprime Foreclosure
Deferment Act of 2008; 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
Deferment 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 Deferment
Act of 2008.
new text end

new text begin Subd. 3. new text end

new text begin Deferment payment. new text end

new text begin "Deferment 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 deferment.
new text end

new text begin Subd. 4. new text end

new text begin Deferment period. new text end

new text begin "Deferment 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 Deferment right. new text end

new text begin "Deferment 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 for which a foreclosing lender has scheduled a foreclosure sale under
chapter 580 or 581 or schedules a foreclosure sale during the deferment period 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 deferment period. A borrower does not reside at the property unless the property
has been the borrower's primary residence for six months prior to the date of the affidavit
of deferment.
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." For purposes of sections 583.33
to 583.40, "subprime loan" does not include a subprime loan originated by a state or
federally chartered bank, savings bank, credit union, or an organization majority owned by
one or more credit unions.
new text end

Sec. 3.

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

new text begin An eligible foreclosed borrower has the right to defer a foreclosure sale under
chapter 580 or 581 until the expiration of the deferment period by providing an affidavit
of deferment 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 deferment prior to or at the time of the
foreclosure sale, unless the lender has served a notice of denial in accordance with section
583.38. A lender is not required to rescind notice of a foreclosure sale if a borrower has
previously obtained a deferment under this act. Upon expiration of the deferment period
or the loss of the deferment under section 583.37, subdivision 4, a foreclosing lender may
schedule a deferred 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, if the same are actually
occupied, at least four weeks prior to the sale.
new text end

Sec. 4.

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

new text begin Subdivision 1. new text end

new text begin Affidavit of deferment. new text end

new text begin The affidavit of deferment 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 as my primary residence for six
months prior to the date of this affidavit;
new text end

new text begin (5) If permitted to reside at the subject property, I intend to reside at the subject
property until at least [end of deferment period];
new text end

new text begin (6) 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 An affidavit of deferment shall be served
by personal service, United States mail, or other reliable delivery service to the address
provided in the notice of deferment or to the address of the counsel for the mortgagee in
the notice of foreclosure.
new text end

new text begin Subd. 3. new text end

new text begin Acknowledgment by foreclosing lender. new text end

new text begin Unless the foreclosing lender
has served a notice of denial under section 583.38, the foreclosing lender shall, within
ten days of receiving the affidavit of deferment, provide to the eligible foreclosed
borrower a written acknowledgment that it has received the affidavit of deferment. 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 deferment payment amount that is due by the eligible foreclosed borrower;
new text end

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

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

new text begin (5) the address to which the borrower should send the deferment payment 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 Charges prohibited. new text end

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

Sec. 5.

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 a deferment 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 shall be the lesser of: (1) the minimum monthly payment
of principal and interest on the date the loan was originated; or (2) 65 percent of the
minimum monthly payment of principal and interest 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 deferment period or
the loss of the deferment under subdivision 4. Each notice shall state (1) the amount
of payment owed from the eligible foreclosed borrower; (2) the address to which the
borrower should send the deferment payment; and (3) the date that the payment must be
received to avoid loss of the deferment 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 deferment 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
deferment period will end on (last day of deferment period). By the end of the
deferment period, you will need to pay the entire amount that has been deferred plus
other costs allowed by law in order to avoid a foreclosure sale.
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 deferment right.
new text end

new text begin Subd. 5. new text end

new text begin Borrower residency requirement. new text end

new text begin An eligible foreclosed borrower loses
the right to deferment if the borrower ceases to reside at the mortgaged property during
the deferment period.
new text end

Sec. 6.

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 deferment is not the mortgagor under an eligible foreclosed
loan, the foreclosing lender shall provide a notice of denial of deferment to the person
submitting the affidavit of deferment. 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 deferment. The notice is effective upon mailing. 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 deferment that the person has the right to apply to the court for an order
deferring 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 deferment 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

new text begin Subd. 3. new text end

new text begin Effect of deferral right. new text end

new text begin Nothing in this act shall alter contractual rights of
the parties to the mortgage loan other than providing the right to defer the foreclosure sale.
A bona fide purchaser of an interest in real property mortgaged by an eligible foreclosed
loan takes the interest in the real property not subject to any claims of ownership by a
party based on any rights under this act. Execution by the sheriff of the sheriff's certificate
of sale is prima facie evidence of compliance with this act, provided that an eligible
foreclosed homeowner has the remedies for monetary relief under section 583.40 for a
reckless or bad faith violation of the act.
new text end

Sec. 7.

new text begin [583.39] NOTICE OF RIGHT TO DEFERMENT.
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 each borrower who has an eligible foreclosed loan a notice
of right to deferment. The notice of right to deferment shall be in the form of, and subject
to the delivery requirements specified in, section 580.041, subdivision 1b. The notice of
right to deferment must also indicate an address at which the foreclosing lender will
accept service of an affidavit of deferment under section 583.36, subdivision 2. No notice
is required for a foreclosure commenced on or before the effective date of this section.
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 Help For Homeowners in Foreclosure:
new text end

new text begin IMPORTANT: You are eligible to have the foreclosure of your home stopped
until at least (end of deferment period).
new text end

new text begin The state of Minnesota recently passed a law which lets homeowners stop a
foreclosure sale. To qualify, you must currently live at the home in foreclosure and intend
to live at the home for at least the next 12 months.
new text end

new text begin You will also need to complete and sign a special form (called an "affidavit")
and provide that affidavit to us at the following address: (insert address in the state
of Minnesota).
new text end

new text begin There are many government agencies and nonprofit organizations that can help
you complete this affidavit. For the name and telephone number of an organization near
you, contact the Minnesota Home Ownership Center at 651-659-9336 or 866-462-6466
or www.hocmn.org.
new text end

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

Sec. 8.

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's fees.
new text end

Sec. 9. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 8 are effective seven days following final enactment.
new text end