Minnesota Session Laws - 1992, Regular Session

  

                         Laws of Minnesota 1992 

                        CHAPTER 547-H.F.No. 2649 
           An act relating to real estate foreclosures; 
          establishing a voluntary foreclosure process with 
          waiver of deficiency claims and equity; proposing 
          coding for new law in Minnesota Statutes, chapter 582. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  [582.32] [VOLUNTARY FORECLOSURE; PROCEDURE.] 
    Subdivision 1.  [APPLICATION.] This section applies to 
mortgages executed on or after August 1, 1993, under which there 
has been a default and where the mortgagor and mortgagee enter 
into a written agreement for voluntary foreclosure of the 
mortgaged real estate under this section.  This section applies 
only to real estate no part of which is homestead or 
agricultural property. 
    Subd. 2.  [DEFINITIONS.] (a) As used in this section, the 
following terms have the meanings given:  
    (b) "Agreement" means the agreement for voluntary 
foreclosure described in subdivision 3.  
    (c) "Date of agreement" means the effective date of the 
agreement which shall not be sooner than the date on which the 
agreement is executed and acknowledged by both the mortgagor and 
mortgagee. 
    (d) "Junior lien" means a lien with a redeemable interest 
in the real estate under section 580.23 or 580.24 subordinate to 
the lien of the mortgage foreclosed under this section.  
    (e) "Mortgage" means a recorded mortgage on real estate no 
part of which is homestead as defined in section 510.01 or in 
agricultural use as defined in section 40A.02, subdivision 3. 
    (f) "Mortgagee" means the record holders of the mortgage, 
whether one or more. 
    (g) "Mortgagor" means the record holders, whether one or 
more, of the legal and equitable interest in the real estate 
encumbered by the mortgage. 
    (h) "Real estate" means the real property encumbered by the 
mortgage and, where applicable, fixtures, equipment, 
furnishings, and other personalty related to the real property 
and encumbered by the mortgage.  
    Subd. 3.  [PROCEDURE.] (a) Voluntary foreclosure may occur 
only in accordance with this section.  
    (b) The mortgagor and mortgagee shall enter into a written 
agreement for voluntary foreclosure under this section only 
after default under the mortgage.  The agreement shall identify 
the mortgage and the real estate by legal description, specify 
the date of the agreement and provide that:  
    (1) The mortgagor and mortgagee have agreed that the 
mortgage shall be voluntarily foreclosed with a shortened 
redemption period under this section. 
     (2) The mortgagee waives any rights to a deficiency or 
other claim for personal liability against the mortgagor arising 
from the mortgage or the debt secured by the mortgage.  This 
does not preclude an agreement between the mortgagor and 
mortgagee to a stipulated payment to the mortgagee as part of 
the voluntary foreclosure or collection from a guarantor. 
     (3) The mortgagor waives its right of reinstatement, to 
excess sale proceeds, to contest foreclosure, and to rents and 
occupancy during the period before sale and during the 
redemption period.  
    (4) The mortgagor consents to the appointment of a receiver 
for, or grants mortgagee possession of, the real estate as of 
the date of agreement, for the purposes of operating, 
maintaining, and protecting the real estate, and the making of 
any additions or betterments to the real estate.  
    (c) Within seven days after the date of agreement, the 
mortgagee must record or file the agreement with the county 
recorder or registrar of titles, as appropriate, in the county 
where the real estate is located. 
     (d) A certificate signed by the county or city assessor 
where the real estate is located, stating that the real estate 
is not in agricultural use as defined in section 40A.02, 
subdivision 3, and is not a homestead as defined in section 
510.01, as the date of agreement, must be recorded with the 
certificate of sale in the office of the county recorder or 
registrar of titles where the real estate is located, and shall 
be prima facie evidence of the facts contained in the 
certificate. 
     Subd. 4.  [REQUEST FOR NOTICE; CONTENT REQUIREMENTS.] (a) A 
person having a junior lien may file for record a request for 
notice of a mortgage foreclosure under this section with the 
county recorder or registrar of titles of the county where the 
real estate is located. 
    (b) A request for notice must specify:  (1) the name and 
mailing address of the junior lien holder requesting notice; (2) 
a legal description of the real estate; (3) a description of the 
junior lien including, if applicable, the date and recording 
information of the document creating the interest; and (4) a 
request for notice of a mortgage foreclosure under this 
section.  The request must be executed and acknowledged by the 
junior lien holder.  
    (c) The recording of a request for notice by itself does 
not give the person requesting notice any interest in the real 
estate for any purpose.  A recorded request for notice does not 
constitute actual or constructive notice of any interest in the 
real estate.  
    Subd. 5.  [NOTICE TO CREDITORS.] At least 14 days before 
the date of sale, the mortgagee shall:  
     (1) serve the person in possession of the mortgaged real 
estate with notice of the voluntary foreclosure sale under this 
section in the same manner as in a foreclosure by advertisement 
as provided in section 580.03; and 
     (2) send by certified mail a notice of the voluntary 
foreclosure sale under this section to all junior lien holders 
of record upon the real estate or some part of the real estate 
who have filed or recorded a request for this notice under 
subdivision 3.  
    The mortgagee shall publish notice of the voluntary 
foreclosure sale under this section in the same manner as in a 
foreclosure by advertisement as provided in section 580.03 for 
four consecutive weeks.  
    The notice must include all information required under 
section 580.04, clauses (1) to (6), the date of the agreement, 
and shall state that each holder of a junior lien may redeem in 
the order and manner provided in subdivision 9, beginning one 
month after the foreclosure sale.  Provided, if the real estate 
is subject to a federal tax lien entitled to the preemptive 
120-day redemption period under section 7425(d)(1) of the 
Internal Revenue Code, as amended, the notice shall provide that 
the date of redemption for the first federal tax lien and all 
other liens junior thereto shall begin four months after the 
date of the foreclosure sale.  Affidavits of service, mailing, 
publication, and other affidavits or certificates permitted by 
chapter 580, must be recorded with the certificate of sale, or 
within five days after the sale, in the office of the county 
recorder or registrar of titles where the real estate is 
located.  These affidavits and certificates are prima facie 
evidence of the facts contained in them.  
    Subd. 6.  [SALE, HOW AND BY WHOM MADE.] Except as provided 
in this section, the sale shall be made in the same manner as in 
a foreclosure by advertisement as provided in chapter 580.  The 
certificate of sale must be filed or recorded within five days 
after the sale.  
    Subd. 7.  [EFFECT OF FAILURE TO MAIL NOTICE.] If a person 
foreclosing a mortgage under this section fails to mail a notice 
in accordance with subdivision 5 to a person with a properly 
recorded request for notice, the failure does not invalidate the 
foreclosure.  
     Subd. 8.  [REMEDIES.] If notice of the sale is not mailed 
in accordance with subdivision 5 to a person with a properly 
recorded request for notice, the junior lien holder requesting 
notice has a cause of action against the person foreclosing the 
mortgage for money damages for the lessor of:  (1) the equity in 
the mortgaged premises that would have been available to the 
person if the person had redeemed; or (2) the value of the 
junior lien.  The value of a junior lien is the amount due on 
and secured by the lien.  A junior lien holder has the burden of 
proving that the junior lien was valid and the junior lien 
holder had measurable damages and had the financial ability to 
redeem.  An action for damages resulting from failure to mail 
notice must be brought within two years after the date of sale. 
     Subd. 9.  [CREDITOR REDEMPTION.] A subsequent creditor 
having a junior lien upon the real estate or some part of the 
real estate may redeem in the order and manner specified in 
sections 580.24 and 580.25, but only if before the end of the 
redemption period the creditor files with the county recorder or 
registrar of titles of each county where the mortgaged real 
estate is located, a notice of intention to redeem.  If a junior 
creditor fails to redeem as provided in this subdivision, its 
lien is extinguished on the real estate.  
     Sec. 2.  [EFFECTIVE DATE.] 
     This act is effective August 1, 1993, and applies to 
mortgages entered into on or after August 1, 1993. 
    Presented to the governor April 17, 1992 
    Signed by the governor April 27, 1992, 2:02 p.m.