Minnesota’s 2015 legislative session ended on May 18, 2015. Two significant amendments were made to foreclosure-related laws, plus three minor amendments. SF1444 and SF1147 contain five amendments. WGC does not anticipate making any process changes as a result of the amendments, and some of the changes are favorable to the default servicing industry!
Reinstatement Quotes Mailed Within Three Days; Safe Harbor Provision (SF1444)
Effective August 1, 2015, the legislature added a new requirement to Minn.Stat. §580.30, subd. 1 that requires a foreclosing mortgagee to inform a borrower of the amount necessary to reinstate the mortgage “within three [calendar] days of receipt of a request for a reinstatement amount from the mortgagor.” Statutory construction requires counting calendar days, except where the last day falls on a Saturday, Sunday or legal holiday. Minn.Stat. §645.15 (2014). Thus, the response for a request received on a Wednesday or Thursday will be due the following Monday (or Tuesday if the Monday is a legal holiday). The amendment does not define how the mortgage holder “shall inform” the mortgagor, but mentions sending the reinstatement amount by first class mail. All reinstatement quotes must be effective for seven days, or until the date of the sale, whichever occurs first.
Safe Harbor: If a reinstatement quote is mailed by first class mail to the mortgagor “at least three days prior to the date of the completed sheriff’s sale,” no liability accrues to the mortgagee or its attorney, and the foreclosure sale is not invalidated by the failure to mail within three days of the request for the reinstatement amount.
No Postponement Obligation: An additional sentence clarified (consistent with existing practices) that no obligation existed to postpone a sheriff’s sale if the mortgagee receives a request for reinstatement less than three days prior to the sale. WGC still expects many servicers to postpone sales due to last minute reinstatement requests for business reasons, and Minnesota’s postponement statute allows a mortgagee to voluntarily postpone a foreclosure sale at any time and for any reason.
WGC’s response to reinstatement requests will not change, except for quicker follow ups as the three day deadline approaches, and we will continue following all servicer-specific procedures for reinstatement quotes.
Choice of Qualified Legal Newspaper Clarified; Litigation Risk Minimized (SF1147)
The legal newspaper amendment was a much needed and exciting clarification that will reduce litigation and liability risk for the industry. Minn.Stat. §580.033 clarifies how foreclosing lenders select an appropriate legal newspaper for publishing foreclosure notices by removing the ambiguity in Minnesota’s legal newspaper statute. Longstanding practice among real estate attorneys in Minnesota allowed for selecting any qualified newspaper publishing in the county where the subject property was located, which is now exactly what the amendment does to eliminate uncertainty for lenders. Without the amendment, the statute challenged a lender to select a qualified legal newspaper “that is likely to give notice in the affected area or to whom it is directed,” which potentially raised fact-driven disputes that were leveraged by consumer advocates to commence litigation and challenge foreclosures. Minn.Stat. §331A.03, subd. 1 (2014). The amendment removes the litigation risk for foreclosures commenced by recording a Notice of Pendency on or after July 1, 2015.
Under the new standard, if the legal newspaper’s “known office of issue” is located in the county, or in an adjoining county, where the property or some part of the property is located, publication in that newspaper is legally sufficient. The Affidavit of Publication prepared by the legal newspaper must now state either that its “known office of issue” is located in the same county as the mortgaged premises, or in an adjoining county and that a substantial portion of its circulation is in the same county as the mortgaged premises. WGC maintains an existing list of legal newspapers that cover all 87 counties in the state of Minnesota that satisfies the new standard. Beginning July 1, 2015, we will work closely with all legal newspapers to ensure their Affidavits of Publication meet the statutory requirements during our normal proofing and quality assurance reviews.
Redemption Period After Borrower Postponement Clarified (SF1444)
Since 2009, Minnesota has allowed a borrower to unilaterally postpone a foreclosure sale for five months, but only once during the life of the mortgage. In exchange for an extra five months to attempt a reinstatement of mortgage defaults, a borrower’s redemption period is automatically reduced to five weeks (from six months in most cases) from the actual sheriff’s sale. The net delay in the foreclosure process is only one week. If a borrower files bankruptcy after requesting a postponement of the sale, the redemption period remains five weeks for the future foreclosure after termination of the bankruptcy stay.
This session, the Minnesota legislature clarified that a shortened five week redemption period reverts back to the full redemption period for future foreclosures in all instances except in the event of a bankruptcy filing. Minn.Stat. §580.07, subd. 2 (2014). Previously, some practitioners argued that the redemption period remained at only five weeks for all future foreclosures, even in the absence of a bankruptcy filing. In theory, a foreclosing lender could cancel and immediately reschedule a new foreclosure sale in response to receiving a borrower postponement notice, but retain the five week redemption period from the notice, and effectively “speed up” by months the end of the foreclosure process, thwarting the borrower’s statutory rights. This amendment is retroactively effective and puts an end to the practice, and is consistent with WGC’s existing practices. No changes to WGC’s processes are necessary for this clarification.
Curative Act (SF1147 & SF1444)
Minnesota’s Curative Act, Minn.Stat. §582.25 was amended to add two additional defects to a long list of defects in a foreclosure process that are cured with the passage of time. Both relate to foreclosure publication requirements under Minnesota law.
The first addition cures a failure to publish in the correct legal newspaper, assuming no objection is raised within one year from expiration of the redemption period, and is effective for foreclosures commenced by recording a Notice of Pendency on or after July 1, 2015. (SF1147) The second addition cures a failure to publish a postponement notice or mail notice of the postponement assuming no objection is raised within one year from expiration of the redemption period, and is effective August 1, 2015. (SF1444)
These amendments will not require process changes, and will rarely be relied upon in practice.