If you have not heard about the recent increase in Minneapolis foreclosures, then you probably live under a rock. I think there is an article every day about the foreclosure “problem”, unethical lenders, and the government stepping in to conduct hearings on proper lending practices. To help some of you understand the foreclosure process in general and how it works in Minnesota, I thought I would create a three part blog post for my current and future readers.
Pre-foreclosure in Minnesota
Once a home owner begins to stop making payments and the bank is aware of the default, the home enters the state of pre-foreclosure. One thing that should always be done is keep in constant contact with the bank. From the second an owner knows they can no longer pay the loan, they should call or write the bank with an explanation of their problems. Banks are not the bad guy (yet) and are willing to work with customers and advise owners of possible solutions. If you choose to ignore their letters of inquiry, you are only making matters worse.
During this time period, it is also advisable to seek help through a Realtor to market the home for sale. Try contacting a local investment club for potential buyers. They might know someone looking for a deal. What ever you do, don’t haggle too much. Your goal is to get out of this home without going into full foreclosure and ruining your credit for 10 years. Check your pride at the door and try to leave emotions out of negotiations. (I have first hand knowledge on the stress a possible foreclosure can cause to yourself and your family and will feature a post on the subject at the end of April).
There is hope should you find yourself able to reinstate payments or pay for the loan in full. After default, and up until the time of the sheriff’s sale, the borrower can stop the foreclosure process by bringing past payment up to date and paying any penalties the bank has charged (usually lawyer fees and such).
Another plus is that Minnesota state law gives the borrower the right to redeem the property after the auction, too. To get your property back, the owner usually has to pay the bank the price bid at auction plus interest. Here are the Statutory Redemption Periods in Minnesota:
6 Months – Most mortgages allow only six months time to return home to owner
12 Months – in order to have a year, one of the following must be met:
- the Mortgage is more than one-third paid off
- the Property is more than 40 acres
- the Property is more than 10 acres and is used for agricultural purposes
- the Property is more than 10 acres and mortgage was originated before July 1, 1987
5 Weeks – if the property has been abandoned, is residential of 10 acres or less, and no more than four units, a home owner won’t have much time to redeem the property
Look for future posts on the Foreclosure Process in Minnesota when I discuss the Methods of Foreclosure and What Foreclosure Means for You.