HF 3612

as introduced - 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.

[583.33] CITATION.

Sections 583.33 to 583.40 shall be cited as the "Minnesota Subprime Foreclosure
Deferment Act of 2008."

Sec. 2.

[583.34] DEFINITIONS.

Subdivision 1.

Scope.

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

Subd. 2.

The act.

"The act" means the Minnesota Subprime Foreclosure Deferment
Act of 2008.

Subd. 3.

Deferment payment.

"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.

Subd. 4.

Deferment period.

"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.

Subd. 5.

Deferment right.

"Deferment right" means the relief provided to an
eligible foreclosed borrower in section 583.35.

Subd. 6.

Eligible foreclosed loan.

"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.

Subd. 7.

Eligible foreclosed borrower.

"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.

Subd. 8.

Foreclosing lender.

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

Subd. 9.

Minnesota Residential Mortgage Originator and Servicer Licensing
Act definitions.

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."

Sec. 3.

[583.35] RIGHT TO FORECLOSURE DEFERMENT.

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. 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 at least four weeks prior to the sale.

Sec. 4.

[583.36] AFFIDAVIT OF DEFERMENT.

Subdivision 1.

Affidavit of deferment.

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:

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

(2) A foreclosure sale has been scheduled on the subject property;

(3) I currently reside at the subject property;

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

(5) I believe that the mortgage loan on the subject property is either:

(i) a subprime loan; or

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

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

Subd. 2.

Service on foreclosing lender.

A foreclosing lender shall accept the
affidavit of deferment 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 deferment 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 deferment, deliver it
to the foreclosing lender, and cancel the foreclosure sale.

Subd. 3.

Acknowledgment by foreclosing lender.

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

(1) that the foreclosure sale has been canceled;

(2) the deferment payment amount that is due by the eligible foreclosed borrower;

(3) the date that the first deferment payment is due;

(4) the date that each subsequent deferment payment is due; and

(5) the address to which the borrower should send the deferment 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:

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.

Subd. 4.

Criminal penalty for knowing misrepresentation.

A person who makes
a knowing material misrepresentation in an affidavit of deferment 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.

Subd. 5.

Charges prohibited.

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

Sec. 5.

[583.37] BORROWER PAYMENT REQUIREMENT.

Subdivision 1.

Borrower payment required.

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.

Subd. 2.

Amount of payment.

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.

Subd. 3.

Payment advice notice.

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; and (2) 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:

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).

Subd. 4.

Borrower failure to pay.

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.

Sec. 6.

[583.38] RESOLUTION OF DISPUTES.

Subdivision 1.

Dispute as to eligible foreclosed loan status.

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 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.

Subd. 2.

Other disputes.

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.

Sec. 7.

[583.39] NOTICE OF RIGHT TO DEFERMENT.

Subdivision 1.

Notice requirement; form and delivery of notice.

Every
foreclosing lender shall send to an eligible foreclosed borrower 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. 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 deferment period send
the notice of right to deferment to eligible foreclosed borrowers who have a foreclosure
sale scheduled within 20 days of the first day of the deferment period, and must within 14
days after the first day of the deferment period send the notice of right to deferment to all
other eligible foreclosed borrowers in foreclosure at the beginning of the deferment period.

Subd. 2.

Content.

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

"Emergency Foreclosure Deferment: Help For Homeowners in Foreclosure

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

The state of Minnesota recently passed a law which allows some borrowers to defer
a pending foreclosure sale. To qualify for this foreclosure deferment, you must
meet all of the following requirements:

* Have a "subprime" loan or a "negative amortization" loan.

* Currently reside at the mortgaged property and intend to reside at the mortgaged
property for at least the next 12 months.

* Obtained the loan between January 1, 2001, and prior to August 1, 2007.

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

The state encourages you to become informed about your options and the
requirements for obtaining foreclosure deferment. There are government agencies
and nonprofit organizations that you may contact for help completing an affidavit to
seek foreclosure deferment. 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.

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

Sec. 8.

[583.40] BAD FAITH OR RECKLESS VIOLATION.

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.

Sec. 9. EFFECTIVE DATE.

Sections 1 to 8 are effective the day following final enactment.