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Your Rights in Foreclosure
Be Careful! Foreclosure is complicated and confusing. Make sure you understand the process and your rights. Talk to a lawyer or foreclosure prevention counselor.
- If you miss some mortgage payments, your mortgage company (also called the lender) sends you a notice letter telling you that you are in “default” on your loan. The notice says that you must pay a certain amount of money to catch up on your mortgage. They may use terms like “cure” the default, or “reinstate” the mortgage. Both of those mean that you need to catch up on your payments.
- If you do not catch up on your payments, most mortgage companies can start the foreclosure process as soon as you are 4 months delinquent.
- You know that your home is in foreclosure because you will get a letter from a law firm. The letter will say they have been hired by your mortgage company to foreclose if you do not catch up on your payments. The letter may give you an amount that you need to pay to avoid foreclosure. If it doesn’t, call the law firm to find out.
- If you do not catch up, there will be a sheriff’s sale of your home. The lawyer must publish a notice of the sale in a special newspaper at least 6 weeks before the sale happens. If you need to find that notice call the county and ask. If you are living in the home that is being foreclosed, a copy of the notice of sheriff sale MUST BE SERVED on you or someone in your household at least 4 weeks before the sale date. This means the papers have to be handed to someone in person.
- At the sheriff’s sale, your home will be sold to the highest bidder, which is usually the bank.
- A mortgage company must decide if you qualify for a loan modification or other help BEFORE it forecloses on your home. If it does both at the same time, it’s called “dual tracking.” That is illegal in Minnesota.
- A mortgage company can’t start the foreclosure process if you applied for a loan modification or other option that may help you keep your home.
Even if the foreclosure process has already started, a mortgage company must stop the foreclosure sale if you applied for a loan modification or other option after the sale is scheduled but at least 7 business days before the sale happens. But if you plan to apply for a loan modification, do not wait until the last minute. Send all the paperwork to the mortgage company as soon as you can.
Before a mortgage company can sell your home at a foreclosure sale, it must:
- tell you in writing of any available loan modification or other option that could help you lower your payments or keep your home.
- help you understand what documents the mortgage company needs in order to review your application for help.
- decide if you qualify for help, and if you do, it must give you the chance to accept the loan modification or other option for help.
- give you the chance to appeal if the mortgage company denies your application for help.
- After the sale, you can’t “catch up” on your mortgage payments. But you do have 6 months to try and “redeem.” If you have paid off at least one third of the original mortgage amount, or if you have a reverse mortgage, you have 12 months to try and redeem.
This is called the redemption period. This means that if you can pay the sheriff the same amount as the highest bidder plus other costs, you get to keep your house. The other costs may include taxes, assessments, lawyer fees, sheriff fees and any interest that has built up until the day you pay.
- If no one is living in the house and the bank can prove to a court that it is vacant, a court may shorten the redemption period to 5 weeks instead of the normal 6 or 12 months. The bank must serve you with court papers if it asks a court to shorten the redemption period.
- During the redemption period you can try to sell the house. This is a good option if your house is worth more than what was bid at the sheriff’s sale. If you can sell the house for enough to pay off the amount bid by the highest bidder, plus other costs (the same things you would have to pay to redeem), you get to keep any money that is left over.
BUT, if you are trying to sell your house, you MUST sell it BEFORE the end of the redemption period. If the sale is not completed before the end of the redemption period, YOU WILL LOSE THE HOUSE AND ALL OF THE EQUITY IN IT. If you decide to sell your house, start the process as soon as possible. That process may include talking to a real estate agent of your choice.
- You can live in your house during the redemption period, even if you can’t redeem. If you do not move by the end of the redemption period, the new owner (usually the bank) can file an eviction in court to have you removed from the property.
NOBODY can kick you out of the property without filing an eviction and getting a court order. BUT, it is a good idea to move before the end of the redemption period, so you do not end up with an eviction on your record. An eviction on your record can make it harder for you to rent a home in the future.
- If you have fallen behind on your mortgage payments, DO NOT WAIT for the foreclosure to start. Try to get help right away by calling a mortgage foreclosure prevention counselor. The number is at the end of this fact sheet.
You can also try calling your mortgage company. Many of them have programs to help you re-structure your mortgage so that you can avoid foreclosure.
If you qualify for a modification program, you will likely be able to lower your monthly payments and change other terms of the loan to make it more affordable for you. Even if you do not qualify for one of these programs, your mortgage company may have other ways to help you lower your payments.
The longer you wait, the harder it will be for anyone to help you avoid foreclosure.
- If you think you were eligible for a loan modification or other option to help you keep your home but you were denied, call a lawyer or your local legal aid office.
If you think you were eligible and were denied but the sale has already taken place, you can still go to court and ask that the foreclosure sale be undone. But you must start the court case BEFORE the end of the redemption period. Talk to a lawyer as soon as possible if you want to ask the court to undo a foreclosure sale.
- Any time before the sheriff sale, you have the right to “reinstate” your mortgage. To reinstate, you must pay the amount you are behind on your mortgage plus costs and fees. In order to know the amount needed to reinstate ask the mortgage company or its lawyer as soon as possible. You may also ask the sheriff for the amount. But you must ask in writing at least 7 days before the sale.
If you pay those amounts, the mortgage company must stop the foreclosure process, and you can keep your house. Your mortgage will be back on track at this point because you have paid everything you owe. You must keep making regular mortgage payments if you want to avoid going into a foreclosure again.
- Minnesota law lets you postpone your sheriff sale for 5 months. It can be postponed up to 11 months for families and people who are entitled to a 12-month redemption period. To do this, you have to file an affidavit with certain information in it with the county recorder’s office. This usually costs money. It depends on where you live.
After you file the affidavit with the county recorder, you must give copies of the affidavit to the sheriff’s office, and the foreclosing lawyer.
You need to do this at least 15 days before the sheriff sale is scheduled to happen. Also, if you do this, you only get a 5-week redemption period after the sale instead of the normal 6 months. You can only postpone the sale once in the life of the mortgage.
You may want to postpone the sale if you think you only need a little bit more time to catch up on your payments or qualify for a loan modification. For example, if you just got a new job or if you are expecting a sum of money from some other source in the near future, postponement may be a good idea.
If you can’t catch up or qualify for a loan modification, it’s usually not worth filing to postpone. Postponing the sale does not help you get more time in your home because your redemption period is shortened to 5 weeks.
If you want legal advice about how to postpone your sale contact a lawyer right away. You can also go online to create forms and get other information.
- Click on “Housing and Foreclosure”
- Click on “Foreclosure Sale Postponement”
You can also see a sample affidavit at www.hocmn.org.
- Click on “Foreclosure Prevention”
- Click on “Foreclosure Sale Postponement Information.”
When your house is in foreclosure, you will probably be contacted by several people and companies who will offer to help you. You should be very careful when dealing with anyone who is not part of a non-profit organization that you are familiar with. Some companies will tell you that they will contact your mortgage company and arrange for a modification of your loan with payments that you can afford. They will charge you $1,500 - $3,000 or more to do this. You should not give money to anyone (other than directly to your mortgage company) to help you get a loan modification.
Non-profit foreclosure prevention counselors are available throughout the state, and they will help you do this for free. Also, you can contact the mortgage company yourself to try and negotiate with them.
Someone may also offer to buy your home and then rent or sell it back to you. They say that they want to help you, and that this will give you a chance to save your home or fix your credit. Be careful! This may be an illegal scam called “equity stripping.” Some people giving these deals want to take your home, so they can profit from the equity you have earned. You always have other options. Do not sign anything that could put your home and equity at risk without talking to a trusted real estate or legal professional or a foreclosure prevention counselor.
Call the Home Ownership Center at (651) 659-9336 in the metro or 1 (866) 462-6466 outside the metro. You can also go to their website at www.hocmn.org. Their foreclosure prevention counselors will talk to you about your situation, identify your options, and help you make a plan to avoid foreclosure of your home.
You can also call your legal aid office.