February 5, 2014
by Paul Weingarden
Usset, Weingarden & Liebo, PLLP – USFN Member (Minnesota)
Following last year’s decision in Ruiz v. First Fidelity, 829 N.W.2d 53 (Minn. 2013), where the Minnesota Supreme Court declared that strict compliance was necessary in the foreclosure process to prevent a void foreclosure, a U.S. District Court in Minnesota has now interpreted the Minnesota reinstatement statute to require a 24-hour turnaround time in responding to a borrower’s request for reinstatement or else the sale is void, unless there is proof that the homeowner did not have access to funds sufficient to reinstate.
In Nelson v. Saxon Mortgage and FNMA, the federal district court issued an order denying the lender’s request for summary judgment where the owner requested reinstatement seven days before the sale but asserted he did not receive it until the day before. Although there was evidence the lender called three days after the owner’s request, the court thought that the lender response did not meet the requirements of the statute.
Reinstatement is governed by Minn. Stat. § 580.30, which mandates the right to reinstatement AT ANY TIME prior to the foreclosure sale (emphasis added). There is no case law interpreting this provision. This author’s firm has generally believed that so long as the amount is communicated prior to sale, the statutory requirements have been met; or, if the reinstatement figure was supplied right before sale, so that the right to reinstate might arguably be frustrated, we would recommend postponing the sale.
In Nelson, the court was not interested in the timeline presented, nor did it consider whether the phone call three days hence was sufficient. In a discussion on the right to reinstate, the court established a “bright line” rule that the reinstatement figure must be tendered within 24 hours of request. Moreover, unless it could be found that the borrower did not have access to the necessary funds to reinstate, the foreclosure would be voided. The case was remanded for trial on the issue of the homeowner’s access to funds, an “after-the-fact” analysis that may ultimately result in an adverse decision given the limited amounts in controversy.
While this decision is NOT binding precedent (such as a published Minnesota Supreme Court or Minnesota Court of Appeals decision, or an Eighth Circuit federal opinion), it is troubling nonetheless. The judge is a respected jurist and a possible flood of cases pointing to this strict compliance standard may be anticipated. At trial, it is possible that the court will alter its stance, or that the case may be appealed on the timeliness issue. However, until then, this serves as a cautionary word on the right to reinstatement as interpreted by a sitting judge in the absence of a legislatively-imposed requirement.
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