Minnesota has its own dual tracking law, the Minnesota Mortgage Foreclosure Dual Tracking law, enacted in 2013 and codified as Minn. Stat. § 582.043. The state law is somewhat similar to the CFPB rules on dual tracking, but has a large difference often initially overlooked by mortgage servicers: while the CFPB rules give borrowers a deadline to apply for loss mitigation of 37 days before the foreclosure sale to qualify for dual tracking protections, the Minnesota statute gives borrowers a more generous deadline of up to 7 days prior to the date of the foreclosure sale. The CFPB dual tracking rules also exclude more borrowers from protection, including borrowers who received bankruptcy relief or have already gone through the loss mitigation application process, among others.
Minnesota’s dual tracking law contains certain, important provisions that are relatively vague. Recent court decisions could provide some clarification though for those latter provisions. Unfortunately, the clarification provided by these recent decisions goes against the common understanding and practice with respect to the dual tracking statute.
The Minnesota dual tracking statute addresses three different points in a foreclosure: (a) prior to the time a mortgage servicer refers a loan to an attorney for foreclosure, (b) after a loan has been referred to an attorney for foreclosure, but prior to the time a foreclosure sale has been scheduled, and (c) after a foreclosure sale has been scheduled by a foreclosure attorney, but before midnight on the seventh business day prior to a foreclosure sale date. During each of these periods, the statute prohibits a mortgage servicer from moving forward with foreclosure activity unless, (1) the servicer determines that the mortgagor is not eligible for a loss mitigation option, the servicers informs the mortgagor of this determination in writing, and the applicable appeal period has expired without an appeal or the appeal has been properly denied; (2) where a written offer is made and a written acceptance is required, the mortgagor fails to accept the loss mitigation offer within the time specified in the offer or within 14 days after the date of the offer, whichever is longer; or (3) the mortgagor declines a loss mitigation offer in writing. The statute also prohibits a mortgagor from conducting a foreclosure sale while the mortgagor is complying with the terms of a trial or permanent loan modification or other loss mitigation option, including if a short sale has been approved by all necessary parties and proof of funds or financing have been provided to the servicer.
According to the language of the statute, it is clear that if a mortgage servicer has received an application before a foreclosure has been referred to an attorney, the mortgage servicer must not refer the foreclosure until the conditions of the statute have been fulfilled. In contrast, the statute appears less clear as to what steps the mortgage servicer can take after a loan has already been referred to an attorney for foreclosure once a loss mitigation application has been received. After that point, the statute provides that if loss mitigation activity is pending, the servicer “shall not move for an order of foreclosure, seek a foreclosure judgment, or conduct a foreclosure sale.” Further, if the servicer receives a loss mitigation application after the foreclosure sale has been scheduled, but before midnight on the seventh business day prior to the foreclosure sale date, the servicer must “halt the foreclosure sale” and evaluate the application.
The predominant method of foreclosing mortgages in Minnesota is through non-judicial foreclosure by advertisement proceedings. That method involves serving various notices and publishing a notice of foreclosure sale for six consecutive weeks. The final point of the foreclosure sale can be postponed to later dates by publishing the postponements and serving additional notices.