HF 83

2nd Engrossment - 88th Legislature (2013 - 2014) Posted on 03/04/2013 03:25pm

A bill for an act
relating to housing; providing certain tenant remedies; providing single point
of contact and various notice provisions relating to mortgage foreclosures;
prohibiting mortgage foreclosure dual tracking; requiring mandatory mediation
prior to commencing a mortgage foreclosure; amending Minnesota Statutes
2012, sections 504B.151, subdivision 1; 580.021, by adding a subdivision;
580.022, subdivision 1; 580.03; 580.041, subdivisions 1b, 2; 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 504B.151, subdivision 1, is amended to
read:

Subdivision 1.

Limitation on lease and notice to tenant.

(a) Once a landlord has
received notice of a contract for deed cancellation under section 559.21 or notice of a
mortgage foreclosure sale under chapter 580 or 582, or summons and complaint under
chapter 581, the landlord may only enter into (i) a periodic residential lease agreement
with a term of not more than two months or the time remaining in the contract cancellation
period or the mortgagor's redemption period, whichever is less or (ii) a fixed term
residential tenancy not extending beyond the cancellation period or the landlord's period
of redemption until:

(1) the contract for deed has been reinstated or paid in full;

(2) the mortgage default has been cured and the mortgage reinstated;

(3) the mortgage has been satisfied;

(4) the property has been redeemed from a foreclosure sale; or

(5) a receiver has been appointed.

(b) Before entering into a lease under this section and accepting any rent or security
deposit from a tenant, the landlord must notify the prospective tenant in writing that the
landlord has received notice of a contract for deed cancellation or notice of a mortgage
foreclosure sale as appropriate, and the date on which the contract cancellation period or
the mortgagor's redemption period ends.

(c) This section does not apply to a manufactured home park as defined in section
327C.01, subdivision 5.

(d) A landlord who violates the requirements in this subdivision is liable to the lessee
for a civil penalty of $500, unless the landlord falls under the exception in subdivision 2.

Sec. 2.

Minnesota Statutes 2012, section 580.021, is amended by adding a subdivision
to read:

Subd. 5.

Single point of contact.

The party foreclosing on a mortgage must provide
to the mortgagor a single point of contact in each of the forms prescribed in sections
580.022 and 580.041. The contact information must include a contact name, address,
telephone number, and e-mail address. The party foreclosing on a mortgage must have
alternative contacts to provide all of the assistance prescribed in this section when the
single point of contact is not available to speak with a borrower for more than 48 hours.
The party foreclosing on a mortgage must provide written notice within ten days when the
single point of contact has changed. The borrower must be able to access the information
included in this section and may seek a civil penalty of $500 against the party foreclosing
on a mortgage for failure to comply with this section. The single point of contact must
be an employee of the party foreclosing on a mortgage who can provide information
concerning that borrower's situation and must:

(1) be able to access all of the documents related to that borrower's loan and provide
them to the borrower, if requested, in a timely manner;

(2) know of the borrower's prior contact with the party foreclosing on a mortgage
and track ongoing contact with the party foreclosing on a mortgage;

(3) know the deadlines applicable to the borrower and provide that information
if requested, including but not limited to:

(i) what is owed on the borrower's loan and when it is due;

(ii) if the borrower is eligible for mediation and the last date to request mediation; and

(iii) when all relevant foreclosure proceedings may commence or be completed;

(4) provide information about the current status of the loan; and

(5) provide information on the borrower's foreclosure prevention alternatives.

Sec. 3.

Minnesota Statutes 2012, section 580.022, subdivision 1, is amended to read:

Subdivision 1.

Counseling form.

The notice required under section 580.021,
subdivision 2, clause (2), must be printed on colored paper that is other than the color of
any other document provided with it and must appear substantially as follows:

"PREFORECLOSURE NOTICE

Foreclosure Prevention Counseling and Mediation

Why You Are Getting This Notice

YOU HAVE DEFAULTED ON A MORTGAGE OF THE HOMESTEAD
PROPERTY DESCRIBED AS [Legal Description and Property Address]. THE HOLDER
OF THE MORTGAGE, [Name of Holder of Mortgage] INTENDS TO FORECLOSE ON
THIS PROPERTY. YOU HAVE THE RIGHT TO PARTICIPATE IN A MEDIATION
HEARING WITH A NEUTRAL MEDIATOR, A REPRESENTATIVE OF [Name of
Servicer], AND TO BRING AN ATTORNEY, HOUSING COUNSELOR, OR OTHER
TRAINED ADVOCATE TO DETERMINE IF AN ALTERNATIVE TO FORECLOSURE
CAN BE FOUND. YOU WILL RECEIVE NOTICE OF A MEDIATION HEARING
THAT WILL TAKE PLACE WITHIN 20 DAYS OF THE NOTICE. YOU MUST
RESPOND WITHIN TEN DAYS OF THE SCHEDULED MEDIATION IF YOU
INTEND TO PARTICIPATE. IF YOU DO NOT RESPOND, THE MEDIATION
HEARING WILL BE CANCELED.

We do not want you to lose your home and your equity. Government-approved
nonprofit agencies are available to, if possible, help you prevent foreclosure.

We have given your contact information to an authorized foreclosure prevention
counseling agency to contact you to help you prevent foreclosure.

Who Are These Foreclosure Prevention Counseling Agencies

They are nonprofit agencies who are experts in housing and foreclosure prevention
counseling and assistance. They are experienced in dealing with lenders and homeowners
who are behind on mortgage payments and can help you understand your options and
work with you to address your delinquency. They are approved by either the Minnesota
Housing Finance Agency or the United States Department of Housing and Urban
Development. They are not connected with us in any way.

Which Agency Will Contact You

[insert name, address, and telephone number of agency]

You can also contact them directly."

Sec. 4.

Minnesota Statutes 2012, section 580.03, is amended to read:

580.03 NOTICE OF SALE; SERVICE ON OCCUPANT.

Six weeks' published notice shall be given that such mortgage will be foreclosed by
sale of the mortgaged premises or some part thereof, and at least four weeks before the
appointed time of sale a copy of such notice shall be served in 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. If there be a building on such premises used
by a church or religious corporation, for its usual meetings, service upon any officer or
trustee of such corporation shall be a sufficient service upon it. The notices required
by sections 580.041 and 580.042 must be served simultaneously with the notice of
foreclosure required by this section.

The notice required under this section may not be served upon the person in
possession of the mortgaged property until 15 days after the mortgage servicer has sent
the borrower a statement that if the borrower is a service member, or a dependent of a
service member, the borrower may be entitled to certain protections under the federal
Servicemembers Civil Relief Act, United States Code, Appendix 50, section 501,
regarding the service member's interest rate and the risk of foreclosure, and counseling for
covered service members that is available at agencies such as Military OneSource and
Armed Forces Legal Assistance. This notice shall be sent via certified United States mail.
The borrower is entitled to a $500 civil penalty from the mortgage servicer in a civil cause
of action for failure to comply with the notice requirements in this section.

EFFECTIVE DATE.

This section is effective August 1, 2013, and applies to
foreclosures commenced on or after that date.

Sec. 5.

Minnesota Statutes 2012, section 580.041, subdivision 1b, is amended to read:

Subd. 1b.

Form and delivery of foreclosure advice notice.

(a) 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 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. The foreclosure advice notice required by this
section must not be published.

(b) The foreclosure advice notice must provide the homeowner with a single point of
contact with the party foreclosing on a mortgage as defined in section 580.021, subdivision
5. A borrower shall have a civil cause of action, including a $500 civil penalty against
the party foreclosing on a mortgage who fails to provide a single point of contact to the
borrower in the foreclosure notice.

EFFECTIVE DATE.

This section is effective August 1, 2013, and applies to
foreclosures commenced on or after that date.

Sec. 6.

Minnesota Statutes 2012, section 580.041, subdivision 2, is amended to read:

Subd. 2.

Content of foreclosure advice notice.

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

"Help For Homeowners in Foreclosure

	The attorney preparing this foreclosure is: .
		(Attorney name, address, phone)
	It is being prepared for:
	.
	(lender name, loss mitigationname of employee of party foreclosing on a mortgage that serves as a single point of contact for homeowner to contact, phone number for that employee of servicer or lender)

AS OF [insert date], this lender says that you owe $[insert dollar amount] to bring
your mortgage up to date (or "reinstate" your mortgage). You must pay this amount,
plus interest and other costs, to keep your house from going through a sheriff's sale.
The sheriff's sale is scheduled for [insert date] at [insert time] at [insert place].

Mortgage foreclosure is a complex process. People may contact you with advice and
offers to help "save" your home.

Remember: It is important that you learn as much as you can about foreclosure and
your situation. Find out about all your options before you make any agreements with
anyone about the foreclosure of your home.

Getting Help

As soon as possible, you should contact your lender at the above number to talk
about things you might be able to do to prevent foreclosure. You should also
consider contacting the foreclosure prevention counselor in your area. A foreclosure
prevention counselor can answer your questions, offer free advice, and help you
create a plan which makes sense for your situation.

Contact 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 www.hud.gov to get the phone number and
location of the nearest certified counseling organization. Call today. The longer you
wait, the fewer options you may have for a desirable result."

Changing the Date of the Sheriff's Sale

You may be able to postpone the sheriff's sale on your home. If you live in your home
and it has four units or less, you can postpone the sheriff's sale for five months from
the original date of sale if you have a six-month redemption period, or eleven months
from the original date of sale if you have a twelve-month redemption period. If you
postpone the sheriff's sale, your redemption period will be reduced to five weeks.
You must do all of the following things 15 days before the scheduled sheriff's sale:

(1) execute a sworn affidavit of postponement;

(2) record the affidavit in the county recorder or registrar of titles where the
mortgage is recorded;

(3) file a copy with the sheriff; and

(4) provide a copy of the recorded affidavit showing the date it was recorded to the
attorney foreclosing on the mortgage."

EFFECTIVE DATE.

This section is effective August 1, 2013, and applies to
foreclosures commenced on or after that date.

Sec. 7.

[580.043] MORTGAGE FORECLOSURE DUAL TRACKING
PROHIBITED.

Subdivision 1.

Definitions.

(a) For purposes of this section, the terms defined
in this section have the meanings given.

(b) "Borrower" means the individual or entity that is liable on the promissory note
secured by the mortgage, except that the term does not include:

(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 mortgage servicer or authorized agent; or

(2) a person who has filed a bankruptcy case under United States Code, title 11,
chapter 7, 11, 12, or 13, and the bankruptcy court has not entered an order closing or
dismissing the bankruptcy case or granting relief from a stay of foreclosure.

(c) "Complete loan modification request" means a loan modification request that
contains a completed application form, documents verifying a borrower's income and
assets, an explanation of the borrower's hardship, and documents verifying the borrower's
tax information or a signed release for the Internal Revenue Service.

(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, forbearance, payment deferral, alternate repayment plan, or deed in lieu of
foreclosure and has not accepted or rejected that request.

(e) "Loan modification request" means a written request from a borrower to the
borrower's mortgage 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 in
progress.

(f) "Mortgage 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.

Subd. 2.

Applicability.

This section applies to mortgage foreclosures on the basis
specified in section 580.041, subdivision 1a.

Subd. 3.

Prohibition; dual tracking; continuation or commencement of
foreclosure after receipt of loan modification request.

(a) Upon receipt by a mortgage
servicer of a request for a loan modification, forbearance, payment deferral, alternate
repayment plan, or deed in lieu of foreclosure from a borrower regarding a mortgage loan
for which the mortgage servicer is responsible, the mortgage servicer shall not begin a
foreclosure for 90 days or, if a foreclosure of the mortgage loan is in progress, must stop
the foreclosure process for 90 days or until the mortgage servicer and borrower have
agreed upon and entered into a signed agreement, whichever comes first. The mortgage
servicer shall not start or continue a foreclosure, even after the 90 days have passed,
unless: (1) the mortgage servicer has provided notice to the borrower that the borrower's
request has been rejected, including an explanation for why the request was rejected; or (2)
the borrower has received a copy of a loan modification, forbearance, payment deferral,
alternate repayment plan, or deed in lieu of a foreclosure agreement signed by the servicer.

(b) A mortgage servicer need not consider a loan modification request if the loan
modification request is not a complete loan modification request as defined in subdivision
1, paragraph (e).

Subd. 4.

Civil cause of action; dual tracking.

A borrower who is the victim of
dual tracking by the borrower's mortgage servicer has a civil cause of action against the
mortgage servicer for any damages incurred by the borrower as a result of the dual tracking
plus the borrower's reasonable attorney fees and costs. The mortgage servicer is prohibited
from adding monetary judgments and awards under this section to a borrower's mortgage.

Subd. 5.

Injunctive relief.

A borrower may bring an action for injunctive relief to
stop a foreclosure based on a material violation of this section. The injunction shall remain
in place until the court determines that the mortgage service has corrected and remedied
the violation or violations giving rise to the action for injunctive relief.

Subd. 6.

Redemption period.

The relief available in this section is available to a
borrower during the redemption period under section 580.23. The failure of the mortgage
servicer to comply with subdivision 3 shall annul a sheriff sale under this chapter.

EFFECTIVE DATE.

This section is effective August 1, 2013, and applies to
foreclosures commenced on or after that date.

Sec. 8.

[580.0431] MANDATORY MEDIATION.

Subdivision 1.

Mandatory mediation.

This section applies to foreclosures of
mortgages under chapters 580 and 581 on property consisting of one to four dwelling
units, one of which the owner occupies as the owner's principal place of residency. Prior
to beginning a mortgage foreclosure and before notice of the pendency under section
580.032, subdivision 3, or the lis pendens for a foreclosure under chapter 581 is recorded,
a party foreclosing a mortgage must participate in mandatory mediation and provide to the
mortgagor information contained in a form prescribed in section 580.022, subdivision 1.
The party foreclosing on a mortgage must provide all the relevant contact information for
the party foreclosing on a mortgage and any representative of the party foreclosing on a
mortgage who will attend the mediation and the contact information for the borrower to the
Office of Administrative Hearings. The borrower must contact the Office of Administrative
Hearings to confirm participation in the mediation within ten days of the scheduled
mediation. The party foreclosing on a mortgage shall add a $40 fee to the borrower's loan
once the borrower and party foreclosing on a mortgage have participated in mediation.

Subd. 2.

Counseling.

Prior to attending the mandatory mediation, the borrower
must contact the foreclosure prevention counseling agency described in section 580.041,
subdivisions 2 and 2a, to learn about the foreclosure prevention services available to them.

Subd. 3.

Representation.

(a) The borrower may have representation at the
mediation conference. The representation may be an attorney, advocate, or other
individual trained in housing counseling.

(b) The party foreclosing on a mortgage must send a representative with the
authority to negotiate a resolution.

Subd. 4.

Office of Administrative Hearings.

(a) The Office of Administrative
Hearings shall provide mediation to parties foreclosing on a mortgage and borrowers as
required in this section. The Office of Administrative Hearings shall within ten business
days of receiving a request for mediation assign a mediator which may be a judge, an
attorney, or other staff trained in mediation. The Office of Administrative Hearings must
provide the following information to the borrower, the party foreclosing on a mortgage,
and any subordinate mortgage lienholder within 20 days of receipt of the request:

(1) what documents must be provided prior to mediation to the Office of
Administrative Hearings;

(2) when the mediation will take place;

(3) where the mediation will take place;

(4) who may attend the mediation; and

(5) any rights and responsibilities of the parties to the mediation.

(b) The Office of Administrative Hearings is immune from civil liability for actions
within the scope of its position under this chapter. The mediators assigned do not have a
duty to advise the parties of their legal rights. Nothing in this chapter is a limitation
to the immunity that otherwise extends to the Office of Administrative Hearings that
otherwise exists under the law.

(c) The mediation must occur no later than 45 days after receiving contact
from the party foreclosing on a mortgage requesting the mediation with the Office of
Administrative Hearings.

(d) The data regarding the finances and mortgages for these mediations that is
created, collected, and maintained by the Office of Administrative Hearings is private data
on individuals as defined by section 13.02, subdivision 12.

(e) A mediation agreement signed by both parties may be submitted to any court
having jurisdiction over the parties and shall be enforced by any court having jurisdiction
over the parties.

(f) The party foreclosing on a mortgage shall submit a mediation fee of $160 to the
Office of Administrative Hearings at or before the initial mediation meeting.

Subd. 5.

Disposition of fees.

Mediation fees collected by the Office of
Administrative Hearings under this section must be deposited in the administrative
hearings account in the state treasury and are appropriated to the office for the purposes
of this section.

Subd. 6.

Good faith required.

(a) The parties must engage in mediation in good
faith. Not participating in good faith includes:

(1) failure to attend and participate in mediation sessions without cause;

(2) failure to provide full information regarding the financial obligations of the
parties and other creditors including: a promissory note, contracts for debt, statement of
interest rates on the debts, delinquent payments, unpaid principal balance, a list of all
collateral securing debts, a creditor's estimate of the value of the collateral, and debt
restructuring programs available from the creditor;

(3) failure of the party foreclosing on a mortgage to designate a representative to
participate in the mediation with authority to make binding commitments;

(4) lack of a written statement of debt restructuring alternatives and a statement of
reasons why alternatives are unacceptable to one of the parties; and

(5) other similar behavior that evidences lack of good faith by a party.

A failure to agree to reduce, restructure, refinance, or forgive debt is not, in itself, evidence
of lack of good faith by the creditor.

(b) If the mediator determines that either party is not participating in good faith the
mediator must file an affidavit indicating the reasons for the finding with the attorney
general and with parties to the mediation.

Subd. 7.

Party foreclosing on a mortgage; bad faith; court supervision.

If the
mediator finds the party foreclosing on a mortgage has not participated in mediation in
good faith, the debtor may require court-supervised mandatory mediation by filing the
affidavit with the district court of the county of the debtor's residence with a request for
court supervision of mediation and serving a copy of the request on the creditor. Upon
request, the court shall require both parties to mediate under the supervision of the court in
good faith for a period of not more than 180 days. All mortgage foreclosure proceedings
must be suspended during this period. The court may issue orders necessary to effect good
faith mediation. Following the mediation period, if the court finds the party foreclosing
on a mortgage has not participated in mediation in good faith, the court shall by order
suspend the mortgage foreclosure proceeding for an additional period of 180 days. A party
foreclosing on a mortgage found by the mediator not to have participated in good faith
shall pay the attorney fees and costs of the debtor requesting court supervision, in addition
to further suspension of the mortgage foreclosure proceeding.

Subd. 8.

Debtor's lack of good faith.

A party foreclosing on a mortgage may
immediately proceed with the mortgage foreclosure proceedings upon receipt of a
mediator's affidavit of a debtor's lack of good faith.

Subd. 9.

Review of good faith finding.

(a) Upon petition by a debtor or the
party foreclosing on a mortgage, a court may review a mediator's affidavit of lack of
good faith or a mediator's failure to file an affidavit of lack of good faith. The review is
limited to whether the mediator committed an abuse of discretion in filing or failing to
file an affidavit of lack of good faith. The petition must be reviewed by the court within
ten days after the petition is filed.

(b) If the court finds that the mediator committed an abuse of discretion in filing, or
failing to file, an affidavit of lack of good faith, the court may:

(1) reinstate mediation and the stay of mortgage foreclosure proceeding;

(2) order court supervised mediation; or

(3) allow the party foreclosing on a mortgage to proceed immediately with a
mortgage foreclosure proceeding.

Subd. 10.

Creditor not attending mediation meeting.

(a) A party foreclosing on
a mortgage that is notified of the initial mediation meeting is subject to and bound by a
mediation agreement if the party foreclosing on a mortgage does not attend mediation
meetings, unless the party foreclosing on a mortgage files a claim form. In lieu of
attending a mediation meeting, a creditor may file a claim form with the mediator before
the scheduled meeting. By filing a claim form, the party foreclosing on a mortgage
agrees to be bound by a mediation agreement reached at the mediation meeting unless an
objection is filed within ten days. The mediator must notify the party foreclosing on a
mortgage who has filed claim forms of the terms of any agreement.

(b) A party foreclosing on a mortgage who has filed a claim form may serve a
written objection to the terms of the mediation agreement on the mediator and the debtor
within ten days of receiving notice of the mediation agreement. If a party foreclosing on
a mortgage files an objection to the terms of a mediation agreement, the mediator shall
meet with the debtor and party foreclosing on a mortgage within ten days of receiving
the objection. If an objection is served, the mediator shall schedule a mediation meeting
during the ten-day period following receipt of the objection.

Subd. 11.

Inconsistent laws.

The provisions of this section have precedence over
any inconsistent or conflicting laws and statutes, including chapters 336, 580, and 581.

EFFECTIVE DATE.

This section is effective August 1, 2013, and applies to
foreclosures commenced on or after that date.