May 11, 2015
by Brian H. Liebo
Usset, Weingarden & Liebo, PLLP – USFN Member (Minnesota)
Working with the Minnesota legislature through the Minnesota Bankers Association, this author’s firm was able to significantly alter a piece of legislation that would have otherwise created large difficulties and delays for mortgage servicers seeking to foreclose mortgages in Minnesota.
In a recent case, the federal district court in Minnesota held that a mortgage servicer must provide a reinstatement quote to a requesting borrower within twenty-four hours of the request under Minnesota Statutes Section 580.30. That statute was silent on the deadline for providing reinstatement figures to requesting borrowers. In this legislative session, the Minnesota legislature introduced a bill to amend the statute (in response to the federal case) to provide a longer response time than twenty-four hours.
However, the original bill introduced in the legislature still only gave mortgage servicers a total of three days to provide reinstatement figures following a borrower’s request. Further, this original bill did not address which alternatives would be available if a mortgage servicer needed more than three days’ time to respond to a reinstatement inquiry, including the scenario of a borrower faxing a request late on a Friday night. As a result, the original bill would have effectively required that the mortgage servicer completely stop pending foreclosures altogether in situations where they were unable to provide borrowers with reinstatement quotes within three days of the request.
Additionally, the original bill did not contain any language allowing mortgage servicers to postpone foreclosures in order to provide reinstatement figures if they were unable to meet the three-day deadline. Moreover, the original bill did not restrict the amount of times that a borrower could submit reinstatement quote requests. Thus, borrowers seeking to disrupt and delay foreclosure proceedings could repeatedly submit reinstatement requests under the original bill.
Upon seeing the original bill language and recognizing its troublesome implications, Usset, Weingarden & Liebo, PLLP (UW&L) reached out to the parties involved in negotiating the terms of the original bill. Both the Minnesota Bankers Association and Legal Aid were receptive to UW&L’s concerns and accepted verbatim the “safe harbor” language that the law firm submitted. That language provides the following: “If the amount necessary to reinstate the mortgage was not mailed to the mortgagor within three days of receipt of the request, no liability shall accrue to the party foreclosing the mortgage or the party’s attorney and the foreclosure shall not be invalidated if the mortgage reinstatement amount was mailed by first class mail to the mortgagor at least three days prior to the date of the completed sheriff’s sale.” This language was carried into the final bill version passed into law.
Based on this new language, mortgage servicers will have far more breathing room in complying with borrower requests for reinstatement figures, and will also have the option to postpone sheriff’s sales, where necessary, to give this information, without having the entire foreclosure invalidated for doing so. Borrowers will also be assured of getting reinstatement figures prior to the sheriff’s sale. Mortgage servicers can now provide reinstatement quotes within three days of a request, or ensure that they convey a reinstatement quote at least three days before the date of the final sheriff’s sale as an alternative (and can postpone the original sale to accomplish this). The reinstatement quotes must be effective for seven days or until the foreclosure sale, whichever occurs first.
In a related development, the legislature also adopted into these bills additional language drafted by this author’s firm for another statute. This language will be an additional curative statute provision under Minnesota Statutes Section 582.25. These provisions cause various errors to automatically “cure” with the passing of time, so that the issues can no longer be raised to overturn a completed foreclosure. In this particular situation, any errors made by a foreclosing party in connection with publishing or mailing notices for postponements of sheriff’s sales will automatically “cure” after one year has passed from the date of the expiration of the redemption period.
Finally, these bills contain a provision simply clarifying that if a borrower postpones a sheriff’s sale under Minnesota Statutes Section 580.07, subdivision 2 (for five or eleven months, whichever is applicable, in exchange for a five-week redemption period), and the related foreclosure is stopped and then restarted, the new redemption period is not permanently five weeks for any future foreclosures, unless the bankruptcy stay provision of the statute applies.
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