Minnesota foreclosure law

Minnesota foreclosure can be carried out in the judicial and non-judicial processes. This means that lenders may or may not have to go to court in order to foreclose. Minnesota foreclosure law applies to both mortgages and deeds of trust in default, with an average wait time of 60 days (two months).

Judicial foreclosure
The judicial foreclosure process involves a lawsuit filed by the lender against the borrower. This method is used when the contract does not include a Power of Sale, a clause that will otherwise allow the lender to foreclose directly. If the court confirms the default, the foreclosure is declared and the home is put up for public auction.

Non-judicial foreclosure
The Power of Sale clause authorizes lenders to sell the home as payment for the mortgage in case the borrower defaults. The presence of this clause allows lenders to foreclose outside of court, or do a non-judicial foreclosure. In Minnesota, however, the non-judicial process is only allowed if the mortgage meets the following requirements:

1) There is no ongoing lawsuit to collect on the mortgage;

2) The mortgage, as well any assignments to new lenders, have been duly reported; and

3) The lender has issued a notice at least eight weeks before the foreclosure is announced.

The Power of Sale may be exercised by the lender or an appointed representative, known as the trustee. The schedule, venue, and terms stated in the clause will usually be followed. If this information isn’t provided, and if all three requirements are met, the foreclosure will proceed as follows:

1) The Notice of Sale is filed in the county office where the property is located. The notice should contain the name of the lender and borrower, the amount of the original loan, the amount in default, and the time and place of the foreclosure sale.

2) The county sheriff will carry out the sale on the specified date. During the sale itself, the sheriff reads a statement filed by the lender indicating the amount currently due on the mortgage.

3) The sale is done through a public auction where the home is sold to the highest bidder.

Right of redemption and deficiency claims

After the sale, borrowers are given up to one year to redeem their property by settling the past due payments plus interest. This is called the Right of Redemption. Lenders can also file a deficiency suit, which is a separate lawsuit for the amount not covered by the foreclosure sale. However, they can only sue for the difference between the unpaid balance and the home’s fair market value.

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