Your Resource Guide to Mankato Real Estate

1. Power of Sale/Foreclosure by Advertisement
   1. Most commonly used in Minnesota
   2. Lender has the power to conduct a foreclosure and sell the mortgaged property without going to court.
   3. The mortgaged property is advertised and then sold to the highest bidder at a public auction held by the sheriff (often called a sheriff's sale).
   4. The property must be advertised by publishing a notice in a newspaper in the county where the property is located for six weeks prior to the sale.
   5. At least four weeks before the sale, a copy of the notice must be served on the person in possession of the mortgage.
   6. The notice of the sale must state all of the following
      1. Name of the mortgagor and mortgagee
      2. The original principal amount.
      3. The date of the mortgage and the recording date.
      4. The amount owed on the mortgage, including taxes paid by the lender.
      5. The legal description of the property.
      6. The time and place the sheriff's sale will be held.
      7. The redemption period allowed by law.
   7. Up until the time of the sale the borrower may stop the foreclosure and reinstate the loan by paying all past-due installments and penalties (called equity of redemption).
   8. At the sale the purchaser receives a document called a sheriff’s certificate of sale, which should be recorded.
   9. If the property is not redeemed by the end of the statutory redemption period, the recorded certificate becomes a sheriff’s deed and the purchase then has title to and possession of the property.
   10. Bidders at mortgage foreclosure sales are uncommon and the lender acquires title to the property by bidding the amount owed.
   11. Minnesota law also gives the borrower the right to redeem the property even after the auction by paying the price paid at the sale, plus interest. (Statutory redemption).
       1. Statutory redemption period usually is for 6 months
       2. 12 months if following apply
          1. Mortgage more than 1/3 paid off.
          2. Property more than 40 acres
          3. Property used for agriculture and more than 10 acres.
          4. Property more than 10 acres and mortgage originated before 7/1/87.
       3. 5 weeks if property is abandoned. 
          1. Must be evidence of abandonment (boarded/broken windows, termination of utilities, two or more police reports of trespassing and vandalism, accumulation of trash).
          2. Applies only to residential property of 10 acres or less, with no more than 4 dwelling units.

   12. The foreclosure sale purchaser is not entitled to possession of the property until the statutory redemption period is over.

   13. Someone may be appointed to manage the property during the statutory redemption period.
   14. Borrower can usually remain in possession until the redemption period expires.
   15. If the foreclosure sale does not cover the full amount owed on the loan the lender may want to seek a personal judgment against the debtor for the difference.
       1. This is not allowed on foreclosure by advertisement if the redemption period is five weeks or 6 months even if the sale proceedings do not cover the amount owed on the loan.     
   16. The mortgagor receives any surplus from the sheriff's sale.

    

2. Judicial Foreclosure
   1. If mortgage does not contain a power of sale clause it must go through the judicial system.
   2. The lender may choose this system even if they have a power or sale clause in the mortgage.
   3. The lender files a lawsuit against the borrower in the county where the collateral property is located.
   4. A lis pendens (notice of pending legal action) must be recorded.  This makes the judgment of the court binding on all persons who acquire liens against or other interest in the property while the foreclosure action is pending.
   5. Complaint is heard in court.
   6. Court orders property sold to satisfy debt.
   7. The sheriff or court commissioner is appointed to conduct the same type of sale that follows a foreclosure by advertisement.
   8. A notice of sale must be posted at the courthouse and published in a newspaper of general circulation in the county.
   9. After the sale the borrower's redemption rights are essentially the same as they would be if the mortgage had been foreclosed by advertisement.

1. A foreclosure sale destroys the interest in the property of the borrower and any junior lien holder.
2. A junior lien holder can protect his or her interest by paying the delinquencies on the senior loan and adding the amount to the balance of the junior loan.
3. If a junior lien holder records a request for notice of default the senior lien holder is required to notify them if the borrower defaults and the junior lien holder has several steps they can take.
4. A borrower may be able to escape foreclosure by giving the lender a deed in lieu of foreclosure. 
5. This may protect borrower’s credit and prevent the additional costs of foreclosure.
6. Lender is not required to accept the deed but could to save them time and expense.
7. This alternative does not wipe out junior liens.
8. If the property is sold and all liens cannot be paid, the liens are not paid in a pro- rated fashion but are paid according to their priority. 
9. The general rule is that the priority of liens follows the order in which they were created with some exceptions:
   1. Property tax and special assessment liens are superior to all other liens.
   2. General property tax liens are superior to special assessments even is the special assessment lien was created first.
   3. Date used for a mechanics lien is the date the work first started on the project.
   4. Other liens, the date used is the date the lien was filed and recorded.
      1. Liens would generally be paid out in the following order:
         1. General property tax lien
         2. Special assessment lien
         3.   Mortgage lien
         4. Mechanics lien