SF 1276

3rd Engrossment - 88th Legislature (2013 - 2014) Posted on 06/06/2013 03:18pm

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,
subdivision 1b; 582.25; 582.27, subdivision 1; proposing coding for new law in
Minnesota Statutes, chapter 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 foreclosure sale, 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 deleted text end new text begin foreclosure
sale new text end . 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
deleted text begin during the period of deleted text end new text begin up to the date of new 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.

new text begin [582.043] LOSS MITIGATION; MORTGAGE FORECLOSURE DUAL
TRACKING.
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) "Foreclosure sale date" means either:
new text end

new text begin (1) the date of the foreclosure sale contained in the notice that has been either served
or published as required under section 580.03, or 550.18 and 550.19; or
new text end

new text begin (2) the date to which the foreclosure sale is postponed by the borrower under section
580.07, subdivision 2, whichever is later.
new text end

new text begin (c) "Loss mitigation option" means a temporary or permanent loan modification, a
forbearance agreement, a repayment agreement, a principal reduction, capitalizing arrears,
or any other relief, intended to allow a mortgagor to retain ownership of the property.
new text end

new text begin (d) "Mortgagor" means a person who is liable on the promissory note secured by the
mortgage, except that the mortgagor does not include 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.
new text end

new text begin (e) "Servicer" means a residential mortgage servicer as defined in section 58.02,
subdivision 20.
new text end

new text begin (f) "Small servicer" means a servicer that is either:
new text end

new text begin (1) a small servicer, as defined in Code of Federal Regulations, title 12, section
1026.41, paragraph (e), clause (4); or
new text end

new text begin (2) a Housing Finance Agency, as defined in Code of Federal Regulations, title
24, section 266.5.
new text end

new text begin Until August 1, 2014, "small servicer" also means a servicer that has conducted 125 or
fewer foreclosure sales during the preceding 12 months.
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 or 581 that are secured by owner-occupied residential real
property containing no more than four dwelling units and where 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 imposes a duty on a servicer to provide any mortgagor with
any specific loan modification option.
new text end

new text begin Subd. 3. new text end

new text begin Compliance required. new text end

new text begin A servicer shall not conduct a foreclosure sale
unless the servicer has complied with subdivisions 5, 6, and 7, if applicable.
new text end

new text begin Subd. 4. 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 shall not refer a mortgage loan to an attorney for foreclosure,
record the notice of pendency or lis pendens, or conduct a foreclosure sale if a mortgagor is
performing pursuant to the terms of a loan modification or other loss mitigation agreement.
new text end

new text begin Subd. 5. new text end

new text begin Loss mitigation. new text end

new text begin A servicer must:
new text end

new text begin (1) notify a mortgagor in writing of available loss mitigation options offered by the
servicer that are applicable to the mortgagor's loan before referring the mortgage loan to
an attorney for foreclosure;
new text end

new text begin (2) after receiving a request for a loan modification or other loss mitigation option,
exercise reasonable diligence in obtaining documents and information from the mortgagor
to complete a loss mitigation application, facilitate the submission and review of loss
mitigation applications, and give the mortgagor a reasonable amount of time to provide
the required documents;
new text end

new text begin (3) upon the timely receipt of a loss mitigation application, evaluate the mortgagor
for all available loss mitigation options prior to referring a mortgage loan to an attorney
for foreclosure;
new text end

new text begin (4) after review of the loss mitigation application, timely offer the mortgagor a loan
modification if the mortgagor is eligible or, if not, timely offer the mortgagor any other
loss mitigation option for which the mortgagor is eligible; and
new text end

new text begin (5) comply with any applicable appeal period and procedures applicable to the
specific loss mitigation option.
new text end

new text begin Subd. 6. new text end

new text begin Dual tracking. new text end

new text begin (a) If the servicer has received a loss mitigation application
and the subject mortgage loan has not already been referred to an attorney for foreclosure,
a servicer shall not refer the subject mortgage loan to an attorney for foreclosure while the
mortgagor's application is pending, unless:
new text end

new text begin (1) the servicer determines that the mortgagor is not eligible for any loss mitigation
option, the servicer informs the mortgagor of the determination in writing, and the
applicable appeal period has expired without an appeal or the appeal has been properly
denied;
new text end

new text begin (2) where a written offer is made and a written acceptance is required, the mortgagor
fails to accept the loss mitigation offer within the time frame specified in the offer or
within 14 days after the date of the offer, whichever is longer; or
new text end

new text begin (3) the mortgagor declines the loss mitigation offer in writing.
new text end

new text begin (b) If the servicer receives a loss mitigation application after the subject mortgage
loan has been referred to an attorney for foreclosure, but before a foreclosure sale has
been scheduled, a servicer shall not move for an order of foreclosure, seek a foreclosure
judgment, or conduct a foreclosure sale unless:
new text end

new text begin (1) the servicer determines that the mortgagor is not eligible for a loss mitigation
option, the servicer informs the mortgagor of this determination in writing, and the
applicable appeal period has expired without an appeal or the appeal has been properly
denied;
new text end

new text begin (2) where a written offer is made and a written acceptance is required, the mortgagor
fails to accept the loss mitigation offer within the time frame specified in the offer or
within 14 days after the date of the offer, whichever is longer; or
new text end

new text begin (3) the mortgagor declines a loss mitigation offer in writing.
new text end

new text begin (c) If the servicer receives a loss mitigation application after the foreclosure sale has
been scheduled, but before midnight of the seventh business day prior to the foreclosure
sale date, the servicer must halt the foreclosure sale and evaluate the application. If required
to halt the foreclosure sale and evaluate the application, the servicer must not move for an
order of foreclosure, seek a foreclosure judgment, or conduct a foreclosure sale unless:
new text end

new text begin (1) the servicer determines that the mortgagor is not eligible for a loss mitigation
option, the servicer informs the mortgagor of this determination in writing, and the
applicable appeal period has expired without an appeal or the appeal has been properly
denied;
new text end

new text begin (2) where a written offer is made and a written acceptance is required, the mortgagor
fails to accept the loss mitigation offer within the time frame specified in the offer or
within 14 days after the date of the offer, whichever is longer; or
new text end

new text begin (3) the mortgagor declines a loss mitigation offer in writing.
new text end

new text begin (d) A servicer shall not move for an order of foreclosure or conduct a foreclosure
sale under any of the following circumstances:
new text end

new text begin (1) the mortgagor is in compliance with the terms of a trial or permanent loan
modification, or other loss mitigation option; or
new text end

new text begin (2) a short sale has been approved by all necessary parties and proof of funds or
financing has been provided to the servicer.
new text end

new text begin Subd. 7. new text end

new text begin Relief. new text end

new text begin (a) A mortgagor has a cause of action, based on a violation of this
section, to enjoin or set aside a sale. A mortgagor who prevails in an action to set aside or
enjoin a sale, or who successfully defends a foreclosure by action, based on a violation of
this section is entitled to reasonable attorney fees and costs.
new text end

new text begin (b) A lis pendens must be recorded prior to the expiration of the mortgagor's
applicable redemption period under section 580.23 or 582.032 for an action taken under
paragraph (a). The failure to record the lis pendens creates a conclusive presumption that
the servicer has complied with this section.
new text end

Sec. 4.

Minnesota Statutes 2012, section 582.25, is amended to read:

582.25 MORTGAGES; VALIDATING FORECLOSURE SALES.

Every mortgage foreclosure sale by advertisement in this state under power of sale
contained in any mortgage duly executed and recorded in the office of the county recorder
or registered with the registrar of titles of the proper county of this state, together with
the record of such foreclosure sale, is, after expiration of the period specified in section
582.27, hereby legalized and made valid and effective to all intents and purposes, as
against any or all of the following objections:

(1) that the power of attorney, recorded or filed in the proper office provided for
by section 580.05:

(a) did not definitely describe and identify the mortgage,

(b) did not definitely describe and identify the mortgage, but instead described
another mortgage between the same parties,

(c) did not have the corporate seal affixed thereto, if executed by a corporation,

(d) had not been executed and recorded or filed prior to sale, or had been executed
prior to, but not recorded or filed until after such sale,

(e) was executed subsequent to the date of the printed notice of sale or subsequent to
the date of the first publication of such notice;

(2) that no power of attorney to foreclose such mortgage as provided in section
580.05, was ever given, or recorded, or registered;

(3) that the notice of sale:

(a) was published only three, four or five times, or that it was published six times but
not for six weeks prior to the date of sale,

(b) properly described the property to be sold in one or more of the publications
thereof but failed to do so in the other publications thereof, the correct description having
been contained in the copy of said notice served on the occupant of the premises,

(c) correctly stated the date of the month and hour and place of sale but named a day
of the week which did not fall on the date given for such sale, or failed to state or state
correctly the year of such sale,

(d) correctly described the real estate but omitted the county and state in which
said real estate is located,

(e) correctly described the land by government subdivision, township and range,
but described it as being in a county other than that in which said mortgage foreclosure
proceedings were pending, and other than that in which said government subdivision
was actually located,

(f) did not state the amount due or failed to state the correct amount due or claimed
to be due,

(g) incorrectly stated the municipal status of the place where the sale was to occur,

(h) in one or more of the publications thereof, or in the notice served on the occupant
or occupants designated either a place or a time of sale other than that stated in the
certificate of sale,

(i) failed to state the names of one or more of the assignees of the mortgage and
described the subscriber thereof as mortgagee instead of assignee,

(j) failed to state or incorrectly stated the name of the mortgagor, the mortgagee,
or assignee of mortgagee,

(k) was not served upon persons whose possession of the mortgaged premises was
otherwise than by their personal presence thereon, if a return or affidavit was recorded
or filed as a part of the foreclosure record that at a date at least four weeks prior to the
sale the mortgaged premises were vacant and unoccupied,

(l) was not served upon all of the parties in possession of the mortgaged premises,
provided it was served upon one or more of such parties,

(m) was not served upon the persons in possession of the mortgaged premises, if, at
least two weeks before the sale was actually made, a copy of the notice was served upon
the owner in the manner provided by law for service upon the occupants, or the owner
received actual notice of the proposed sale,

(n) gave the correct description at length, and an incorrect description by
abbreviation or figures set off by the parentheses, or vice versa,

(o) was served personally upon the occupants of the premises as such, but said
service was less than four weeks prior to the appointed time of sale,

(p) did not state the original principal amount secured, or failed to state the correct
original principal amount secured;

(4) that distinct and separate parcels of land were sold together as one parcel and to
one bidder for one bid for the whole as one parcel;

(5) that no authenticated copy of the order appointing, or letters issued to a foreign
representative of the estate of the mortgagee or assignee, was properly filed or recorded,
provided such order or letters have been filed or recorded in the proper office prior to one
year after the last day of the redemption period of the mortgagor, the mortgagor's personal
representatives or assigns;

(6) that a holder of a mortgage was a representative appointed by a court of competent
jurisdiction in another state or county in which before the foreclosure sale an authenticated
copy of the representative's letters or other record of authority were filed for record in the
office of the county recorder of the proper county but no certificate was filed and recorded
therewith showing that said letters or other record of authority were still in force;

(7)(a) that said mortgage was assigned by a decree of a court exercising probate
jurisdiction in which decree the mortgage was not specifically or sufficiently described,

(b) that the mortgage foreclosed had been assigned by the final decree of
the court exercising probate jurisdiction to the heirs, devisees, or legatees of the
deceased mortgagee, or the mortgagee's assigns, and subsequent thereto and before the
representative of the estate had been discharged by order of the court, the representative
had assigned the mortgage to one of the heirs, devisees, or legatees named in such final
decree, and such assignment placed on record and the foreclosure proceedings conducted
in the name of such assignee and without any assignment of the mortgage from the heirs,
devisees, or legatees named in such final decree, and the mortgaged premises bid in at the
sale by such assignee, and the sheriff's certificate of sale, with accompanying affidavits
recorded in the office of the county recorder of the proper county,

(c) that a mortgage owned by joint tenants or tenants in common was foreclosed
by only one tenant;

(8) that the sheriff's certificate of sale or the accompanying affidavits and return of
service were not executed, filed or recorded within 20 days after the date of sale, but have
been executed and filed or recorded prior to the last day of the redemption period of the
mortgagor, the mortgagor's personal representatives or assigns;

(9) that the year, or the month, or the day, or the hour of the sale is omitted or
incorrectly or insufficiently stated in the notice of sale or the sheriff's certificate of sale;

(10)(a) that prior to the foreclosure no registration tax was paid on the mortgage,
provided such tax had been paid prior to one year after the last day of the redemption
period of the mortgagor, the mortgagor's personal representatives or assigns,

(b) that an insufficient registration tax has been paid on the mortgage;

(11) that the date of the mortgage or any assignment thereof or the date, the
month, the day, hour, book, and page, or document number of the record or filing of the
mortgage or any assignment thereof, in the office of the county recorder or registrar of
titles is omitted or incorrectly or insufficiently stated in the notice of sale or in any of the
foreclosure papers, affidavits or instruments;

(12) that the notice of mortgage foreclosure sale or sheriff's certificate of sale
designated the place of sale as the office of a county official located in the court house of
the county when such office was not located in such court house;

(13) that no notice of the pendency of the proceedings to enforce or foreclose
the mortgage as provided in section 508.57, was filed with the registrar of titles or no
memorial thereof was entered on the register at the time of or prior to the commencement
of such proceedings; or that when required by section 508.57, the notice of mortgage
foreclosure sale failed to state the fact of registration;

(14) that the power of attorney to foreclose or the notice of sale was signed by the
person who was the representative of an estate, but failed to state or correctly state the
person's representative capacity;

(15) that the complete description of the property foreclosed was not set forth in
the sheriff's certificate of sale, if said certificate correctly refers to the mortgage by book
and page numbers or document number and date of filing and the premises are accurately
described in the printed notice of sale annexed to said foreclosure sale record containing
said sheriff's certificate of sale;

(16) that the date of recording of the mortgage was improperly stated in the sheriff's
certificate of mortgage foreclosure sale, the mortgage being otherwise properly described
in said sheriff's certificate of mortgage foreclosure sale and said certificate of mortgage
foreclosure sale further referring to the printed notice of mortgage foreclosure sale
attached to said sheriff's certificate of mortgage foreclosure sale in which printed notice
the mortgage and its recording was properly described;

(17) that prior to the first publication of the notice of sale in foreclosure of a
mortgage by advertisement, an action or proceeding had been instituted for the foreclosure
of said mortgage or the recovery of the debt secured thereby and such action or proceeding
had not been discontinued;

(18) that at the time and place of sale the sheriff considered and accepted a bid
submitted prior to the date of the sale by the owner of the mortgage and sold the mortgaged
premises for the amount of such bid, no other bid having been submitted, and no one
representing the owner of the mortgage being present at the time and place of sale;

(19) that such sale was postponed by the sheriff to a date or time subsequent to the
one specified in the notice of sale but there was no publication or posting of a notice of
such postponement;

(20) that there was not recorded with letters or other record of authority issued to a
representative appointed by a court of competent jurisdiction in another state or county, a
certificate that said letters or other record of authority were still in force and effect;

(21) that the sheriff's affidavit of sale correctly stated in words the sum for which
said premises were bid in and purchased by the mortgagee, but incorrectly stated the same
in figures immediately following the correct amount in words;

(22) that the notice of pendency of the foreclosure as required by section 580.032
was not filed for record before the first date of publication of the foreclosure notice, but
was filed before the date of sale new text begin ; and
new text end

new text begin (23) that the servicer did not comply with the requirements of section 582.043 new text end .

Sec. 5.

Minnesota Statutes 2012, section 582.27, subdivision 1, is amended to read:

Subdivision 1.

Section 582.25.

Upon expiration of the periods specified in this
section, the provisions of section 582.25 apply to a mortgage foreclosure sale subject
to this section:

(A) as to all of the provisions of section 582.25, except deleted text begin clause (2) deleted text end new text begin clauses (2) and
(23) new text end , one year after the last day of the redemption period of the mortgagor, the mortgagor's
personal representatives or assigns;

(B) as to clause (2), ten years after the date of the foreclosure sale.

new text begin (C) as to clause (23), the expiration of the mortgagor's applicable redemption period
as specified in sections 580.23 or 582.032.
new text end

Sec. 6. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1, 4, and 5, are effective August 1, 2013, for foreclosures with a notice of
pendency under Minnesota Statutes, section 580.032, or a lis pendens for a foreclosure
under Minnesota Statutes, chapter 581, recorded on or after August 1, 2013.
new text end

new text begin Section 2 is effective August 1, 2013.
new text end

new text begin Section 3 is effective August 1, 2013, for foreclosures with a notice of pendency
under Minnesota Statutes, section 580.032, or a lis pendens for a foreclosure under
Minnesota Statutes, chapter 581, recorded on or after August 1, 2013, except that
subdivision 6 is effective October 31, 2013.
new text end