Postponing a mortgage foreclosure sale

10 Sep

Note – although we posted a previous T&N Legal Update blog article (June 16) regarding the change in law allowing a mortgage foreclosure sale to be postponed for a five-month period, questions still arise about this issue, and this article is intended to provide explanation for recent and current questions.

 

In Minnesota, new legal ground was broken in June regarding the applicable timelines and remedies available in the real estate mortgage foreclosure process.  On June 15, 2009, a law became effective (although it is not yet widely understood or frequently utilized) that allows a mortgage foreclosure sheriff’s sale to be postponed for a period of five months. 

 

Typically, a mortgage foreclosure in the state of Minnesota provides a six-month “right of redemption” for the homeowner to buy the property back after the sheriff’s sale, by paying all outstanding amounts (including the full amount of the mortgage not just the past due debt) and applicable costs.  This six-month period may be shorter if the property is abandoned, or in other circumstances provided for by statute.  Quite often, by the time the property is in foreclosure, rebounding from the past due debt is difficult enough and paying the full balance of the mortgage is next to impossible.

 
The effect of the new law is to allow the foreclosure sale to be postponed for an extended period (five months) for the borrower to catch up on the past due amount owed, without having to repay the full loan (which would be required during the redemption period).  If the loan is not made current in the 5-month extended period before sale, the redemption period is automatically shortened to five weeks (from the typical six months).

 

The result of this law, effectively, is that a homeowner facing foreclosure can make an elective decision to have an extended period of time prior to sale, to try to collect the funds needed to payoff any past due debt on the mortgage, to bring it current and stop the sale.  This shortens the redemption period after sale, but in many cases will afford borrowers a more realistic chance of saving their home from foreclosure.  For more questions about this, see your attorney.

 

This blog entry is written by Brad Boyd, Shareholder at Thomsen & Nybeck, P.A. Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law, and Wind Energy Law.  Brad works regularly with real estate buyers, sellers, and investors, real estate brokerages and agents, and small businesses.  He provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.

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