Minnesota bill HF1941/SF2779— No Foreclosure Mediation in Minnesota This Year

Minnesota bill HF1941/SF2779—Alternative Dispute Resolution/Real Property did not make the second policy deadline and will not be passed this session.

HF1941 set out to introduce mandatory mediation into Minnesota’s non-judicial foreclosure process, but encountered significant pushback from a variety of stakeholders including banks, credit unions, title companies, foreclosure counselors, attorneys, and the like.  The ADR and Real Property sections of the MSBA weighed in with concerns regarding the bill as drafted, citing due process and equal protection issues, infringement on contracts issues, and a fear of the unauthorized practice of law.  HF1941 appeared to allow servicers to start the mediation process at 45 days delinquency, but would have required servicers to obtain current title work at an early stage to identify and include junior lienholders.  If a second mortgage holder failed to participate in the mediation in good faith under HF1941, after receiving only 14 days notice, the lien of the mortgage could have been eliminated from the title.

After passing through several committees in the House, the bill eventually stalled and did not receive a hearing in any Senate committee. The bill did not make the second policy deadline, and therefore will not be passed in Minnesota this session.  Its author plans to reintroduce it next session.  Minnesota has avoided statewide foreclosure mediation for a number of years, starting with Governor Tim Pawlenty’s veto of foreclosure mediation legislation in 2009.