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Minnesota - Facing Mortgage Foreclosure, From the Office of Minnesota Attorney General

Minnesota - Facing Mortgage Foreclosure, From the Office of Minnesota Attorney General

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Published by: ForeclosureGate.org Library on Apr 10, 2011
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Facing Mortgage Foreclosure
If you are a home owner that has fallen behind onyour mortgage payments, you are not alone. Asmany as 2.2 million Americans may face mortgageforeclosure over the next few years. Predatorymortgage lending, exploding interest rates and atight economy have contributed to a mortgage crisisthat threatens to destroy the American Dream of home ownership for people across the state. If youare faced with mortgage default or foreclosure, armyourself with information, ask for help, and takedecisive action to protect your interests.
TAKE ACTION IMMEDIATELY!The most important step in preventingforeclosure or the loss of your home istimely action. Don’t be embarrassed to ask for help. Contact the lender and contacta
counselor at the
rst signs of trouble in paying your mortgage.
Non-Traditional Mortgages.
If you are oneof the millions of Americans who were sold anAdjustable Rate Mortgage, or an “ARM,” over thelast several years, you may experience explodinginterest rates that may nearly double your monthlypayment. Adjustable Rate Mortgages may beginwith a low introductory “teaser” rate that a borrower is able to afford, but quickly become unmanageablewhen the “teaser” period ends and the interest rateresets to a higher rate. These “exploding ARMs” areone of the primary causes of the current foreclosureepidemic. In recent years, some lenders beganrelaxing standards, no longer verifying whether agiven borrower can actually afford the loan. Sincemost mortgages today are subsequently sold toanother entity, the original lender may no longer beinterested in the long-term viability of the mortgage,or whether a borrower will be able to afford to keepthe home if the interest rate resets to a level that isunmanageable.Minnesota Attorney
 1400 Bremer Tower  
 445 Minnesota Street
 St. Paul, MN 55101(651) 296-3353 
 TTY (651) 297-7206 
 TTY 1-800-366-4812
How does Foreclosure Work?
 Foreclosure is aprocess by which a lender that is servicing a mortgageloan repossesses the property and forces the borrower out of the home because he/she has failed to meet theterms of the mortgage loan, or has “defaulted” on his/her payments. The foreclosure process takes placein several stages including default, sheriff sale, andredemption period.
 A borrower can default on his/her loan assoon as one month’s payment is late. By notifying aborrower that he/she is in default, the lender is puttingthe borrower on notice that he/she has failed to makepayments required in the mortgage agreement and isin jeopardy of losing the home. Generally, the lender will request that the borrower contact the lender todiscuss options and may begin additional collectionefforts on the mortgage. Borrowers should takeaf 
rmative action to contact the lender at this point totry to work out any short-term or long-term paymentproblems. Do
ignore correspondence from thelender or its legal representatives. The sooner theborrower contacts the lender to address the problem,the better.
Sheriff Sale.
 In the event that the default is notresolved, the lender may take action to force a saleof the property, known as the “sheriff sale.” Theborrower will either receive a notice of sale four weeks before the sheriff sale, or in some cases, asummons to court, where the lender will requestthe court to authorize the sheriff sale. The sheriff for the county where the property is located willconduct a sheriff sale in a public place. Once thesheriff sale has occurred, it may be dif 
cult to savethe home. Generally, the mortgage can no longer be “cured” or “worked out,” but rather a whole newloan must be obtained to cover the amount bid for theproperty at the sheriff sale, interest, attorneys fees,and various other fees relating to the foreclosure.Obtaining new
nancing for a loan that may be larger than the original loan (due to fees) is dif 
cult and
Minnesota Attorney General’s Of 
 1400 Bremer Tower  
 445 Minnesota Street
 St. Paul, MN 55101(651) 296-3353
 TTY (651) 297-7206 
 TTY 1-800-366-4812
 www.ag.state.mn.usmay be compounded by damage to the borrower’scredit caused by the foreclosure. If at all possible,borrowers are encouraged to take action to resolvethe defaulted mortgage
before the sheriff sale.
After the sheriff sale, the borrower does have some optionsfor recourse, however, during the “redemptionperiod.”
Redemption Period.
After the sheriff sale, theborrower typically has a “redemption period” of six months, and can remain in the home during thisperiod (in some cases, the redemption period may beextended to twelve months). During the redemptionperiod, the borrower may attempt to refinancethe home through a new mortgage. Remember,however, that the borrower may be responsiblefor fees incurred during the foreclosure process inaddition to the amount bid for the property at thesheriff sale. The total amount the borrower mustpay to redeem may be more or less than the amountowed on the mortgage before the sale. Alternately,the borrower may attempt to sell the home in order to take advantage of any equity that he/she has builtup in the home. If the borrower has been unableto re
nance or sell the home after the six monthredemption period, he/she must vacate the property.
I’m Behind In Payments-What Can I Do?
 Contact the lender as soon as possible. Ask the lender what the options are. Don’t ignore the problem or correspondence from the lender, as late charges (andother fees) can pile up, compounding the problem.Be realistic about your 
nancial situation. Since eachperson’s situation is different, there may be a rangeof solutions. For instance, some borrowers may fallbehind
due to a change in work status,health issues, or other short-term economic changes.Other borrowers may have long-term problems intheir ability to pay a given mortgage, because theycould not afford the loan in the
rst place, or are avictim of exploding interest rates. If you’re behindin your payments, consider the following tips:
1. Find a reputable mortgage counselor.
Contactthe Minnesota Housing Finance Agency or U.S.Department of Housing and Urban Development(“HUD”) to
nd an approved counselor. A reputablecounselor may be able to help you locate fundingassistance or negotiate a solution with your lender.
. Re
uest a loan modi
The lender may bewilling to permanently modify the terms of the loanto make it more affordable for you. For instance,if you have an exploding ARM, ask the lender tomodify you into a
xed-rate loan that you can afford.
. Re
nance with a new loan.
You may be ableto
nd another lender that will give you a loan withbetter terms (such as a
xed rate) that are moremanageable. Before pursuing re
nancing, however,review your current loan to determine whether itcontains a prepayment penalty.
4. Consider reinstatement.
Under a reinstatement,you pay off the past-due amount and any fees in order to bring the mortgage current again. Reinstatementmay be a good option if your default was caused by
uctuations that you are ableto rectify.
5. Ask for a forbearance.
A forbearance may reduceor temporarily suspend your monthly payments untila set date, allowing you to get back on your feet andbegin repaying the mortgage.
6. Set up a repayment plan with the lender.
Ask the lender to allow you to pay the past-due amountin partial payments along with each of your monthlypayments, rather than all at once. This may be moremanageable than having to pay back the past-due allat once.
7. Ask the lender to waive fees or penalties.
Alender may be willing to waive fees, penalties,or other charges if it believes in good faith that aresolution can be reached where you can beginmaking timely monthly payments and repay thepast-due principal and interest.
8. Explore selling the home.
In some cases, sellingthe house may be the best option. If you have equitybuilt up in the property, this may allow you to bene
nancially, and perhaps afford another home.
Minnesota Attorney General’s Of 
 1400 Bremer Tower  
 445 Minnesota Street
 St. Paul, MN 55101(651) 296-3353
 TTY (651) 297-7206 
 TTY 1-800-366-4812
Beware of Scams.
 Unfortunately, scam artistsoften attempt take advantage of people in vulnerable
nancial situations such as default or foreclosure.These unscrupulous actors prey on people whilepretending to offer them assistance. Don’t be fooledby these scams! If you seek assistance from a thirdparty, make sure that it is a reputable counselingagency. In particular, homeowners should beon guard against two forms of scams: 1) equitystripping scams; and 2) foreclosure consulting scams.
Equity Stripping Scams.
This scam worksin a variety of ways, but typically starts whensomeone promises the home owner that he/shewill solve all their problems and keep them in their home. The scammer may promise loan money thatnever appears, or have the home owner sign a lot of complicated papers. The scam artist may convincethe homeowner to sign the property over to him/her, claiming that only he/she can get a loan to savethe home. In reality, the loan does not exist, and thehomeowner becomes a renter in their own home,until they are eventually forced out by the inevitableforeclosure. In most cases, the homeowner receiveslittle or nothing for their home equity, which has,in essence, been stolen by the scam artist. Under Minnesota law,homeowners must be paid at least82 percent of the fair market value of their former homes (minus certain permitted costs or expenses)if they are not able to stay in their homes followinga foreclosure.
Mortgage Foreclosure Consulting Scams.
 Some organizations or individuals may representthemselves as counseling agencies, but are actuallyonly out to make a profit off the misfortune of others. Typically, these entities will ask for up-frontfees in exchange for “counseling” services suchas
nancial advice, negotiating payments or other solutions with the lender, or exploring the sale of theproperty. These are services that borrowers can dothemselves, and may be offered for free by reputableorganizations. Scam artists that collect up-frontfees may not actually provide any of the servicespromised, or may even disappear overnight. Under Minnesota law, a foreclosure counselor is prohibitedfrom collecting a fee until after it has provided aservice to you. Don’t be scammed by MortgageForeclosure Consulting Scams!
Resources for Help.
If you experience
nancialtrouble that may jeopardize your mortgage payments,ask for help. Timely action can make the difference!The following agencies and organizations may beavailable to provide information, referrals, andassistance to homeowners regarding foreclosureissues:
U.S. Dept. of Housing and Urban Development
451 7th Street SWWashington, DC 20410(800) 569-4287 or TTY: (800) 877-8339
Minnesota Housing Finance Agency
400 Sibley Street, Suite #300St. Paul, MN 55101(651) 296-7608 or (800) 657-3769
Minnesota Home Ownership Center
633 South Concord Street, Suite #250South St. Paul, MN 55075(651) 659-9336 or (866) 462-6466
Lutheran Social Services Financial Counseling
424 West Superior Street, Suite 600Duluth, MN 55802(888) 577-2227 or (218) 529-2227
(Ramsey, Rice, Goodhue, LeSueur, Nicollet, Sibley,Brown, Blue Earth, Waseca, Steele, Dodge, Wabasha,Winona, Houston, Fillmore, Mower, Freeborn,Faribault, Martin, Watonwan, McLeod, Meeker,Kandiyohi, Renville, Chippewa, Swift, Big Stone,Lac Qui Parle, Yellow Medicine, Lincoln, Lyon,Redwood, Pipestone, Murray, Cottonwood, Rock,Nobles, Jackson, Becker, Mahnomen, Hubbard, CrowWing, Todd, Morrison, Mille Lacs, Pine, Kanabec,Chisago, Benton, Isanti, Sherburne, Stearns,Koochiching, Itasca, Aitken, Carlton, Duluth)
Community Action Partnership of Suburban Hennepin
 33 - 10th Ave South, Suite 150Hopkins, MN 55343(952) 933-9639 ext. 202

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