SF 1276

1st Engrossment - 88th Legislature (2013 - 2014) Posted on 03/19/2013 02:45pm

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

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.

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

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

new text begin (b) "Foreclosing party" means any entity that is foreclosing a residential mortgage
in any manner permitted by law.
new text end

new text begin (c) "Loss mitigation obligations" means each and every required action to be taken
by a residential mortgage servicer, lender, mortgagee, note owner, note holder, or any other
person or entity in connection with a residential mortgage loan to review and consider
the homeowner for a loan modification or other relief which will allow the homeowner to
retain ownership of the property.
new text end

new text begin (d) "Required action" means an action required under:
new text end

new text begin (1) any applicable statute or rule;
new text end

new text begin (2) any regulation, guidance, directive, or other publication issued by a federal
agency or government-sponsored enterprise; or
new text end

new text begin (3) any consent, settlement, or other legal agreement.
new text end

new text begin Subd. 2. new text end

new text begin Generally applicable requisites. new text end

To entitle any new text begin foreclosing new text end party to make
deleted text begin such deleted text end new text begin a new text end foreclosure new text begin described in section 580.01 new text end , 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; and

(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 Subd. 3. new text end

new text begin Requisites applicable to certain foreclosing parties. new text end

new text begin No foreclosing
party may publish or serve a notice of sale under section 580.03 until all loss mitigation
obligations relevant to the mortgage loan being foreclosed have been fully satisfied.
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 the foreclosure process deleted text end new text begin the foreclosure 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 1c, is amended to read:

Subd. 1c.

Form and delivery of notice of redemption rights.

The notice of
redemption rights 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 foreclosure advice notice 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 notice of redemption
rights must be delivered with the notice of foreclosure required by sections 580.03 and
580.04 new text begin and with each subsequent written communication regarding the foreclosure mailed
to the mortgagor by the foreclosing party up to the day the redemption period expires new text end . The
notice of redemption rights required by this section must not be published.

Sec. 4.

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 www.hud.gov new text end to get the phone number and location of the nearest certified counseling
organization."

Sec. 5.

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 section have the meaning given them.
new text end

new text begin (b) "Borrower" means the person that 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,
chapters 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 servicer that either services 5,000 or fewer mortgage
loans in a calendar year, for all of which the servicer or an affiliate is the creditor or
assignee; or is a Housing Finance Agency, as defined in Code of Federal Regulations, title
24, section 266.5.
new text end

new text begin Subd. 2. new text end

new text begin Applicability. new text end

new text begin This section applies to mortgage foreclosures on the basis
specified in section 580.041, subdivision 1a.
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 file the
notice of pendency or lis pendens for any judicial or nonjudicial foreclosure unless a
borrower's mortgage loan obligation is more than 120 days delinquent.
new text end

new text begin (b) If a borrower submits a complete loan modification request before the borrower's
mortgage loan obligation is more than 120 days delinquent or before a servicer has filed
the notice of pendency or lis pendens, 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 rejects all loan modification options offered by the servicer; or
new text end

new text begin (3) 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 filed the notice of pendency or lis pendens, 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 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. 6. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 3 are effective for foreclosures commenced on or after August 1, 2013.
Section 4 is effective the day following final enactment.
new text end

new text begin Section 5 is effective January 10, 2014, and applies to foreclosures by advertisement
in which the power of attorney is acknowledged on or after January 10, 2014, and for
foreclosures by action in which the lis pendens is dated on or after January 10, 2014,
but does not apply to mortgage loans covered by any consent, settlement, or other legal
agreement which is in effect at the time a notice of pendency could be filed, including, but
not limited to, (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 Stipulations and
Consent to the Issuance of an Amendment to 2011 Consent Order modifying:
new text end

new text begin (i) Office of Thrift Supervision Orders No. NE-11-16 and, by reference NE-11-17;
and
new text end

new text begin (ii) 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 AA-EC-11-19.
new text end