By Brian H. Liebo, Esq.

 Liebo, Weingarden, Dobie & Barbee, PLLP

USFN Member (MN)

Current Minnesota law requires that mortgage servicers provide a rapid response to a borrower’s request for reinstatement figures—just three (3) days. The applicable statute, Minnesota Statutes § 580.30, specifically requires that mortgage servicers “shall inform” borrowers of the mortgage reinstatement amount within three days of receipt of the request.  This obligation may be triggered as late as three days before the sheriff’s sale date.

This quick, three-day turnaround requirement obviously poses difficulties for mortgage servicers with loans in active foreclosure.  Property preservation teams, escrow teams, as well as the servicers’ attorneys may all need to coordinate to produce a reinstatement quote at any given time.  If reinstatement figures cannot be provided within those few days, foreclosure delays will inevitably occur.  If a foreclosure is completed and the reinstatement statute is not fully complied with, the entire foreclosure could be declared void as Minnesota is a strict-compliance state for foreclosures.

This could lead to a frustrating scenario if a sheriff’s sale is scheduled for a Monday morning, and the borrower submits a reinstatement quote request the Friday night before that foreclosure sale.  Normally, this situation will require the servicer to delay the foreclosure.

A servicer unable to provide a timely reinstatement quote would have the option to postpone the sheriff’s sale to allow additional time to provide the figures.  Minnesota has no restriction on the number and length of sale postponements by the mortgagee.  Postponing the sale still involves a delay though.  Also, importantly, there is a real risk that the servicer could miss the borrower’s last-minute reinstatement request.  If the servicer proceeds with the sheriff’s sale unaware that a timely reinstatement quote was requested, the foreclosure could be successfully challenged.

A close review of the Minnesota reinstatement statute yields an effective and efficient strategy to avoid these potential issues and delays.   The statute only requires that a servicer be proactive.  Specifically, Section 580.30 provides that a sheriff’s sale cannot be invalidated under the statute if the mortgage reinstatement amount was mailed by first class mail to the mortgagor at least three days prior to the date of the completed sheriff's sale.

As a result, a mortgage servicer can avoid foreclosure delays around reinstatement requests by simply mailing reinstatement quotes to borrowers—unilaterally.  Mortgage servicers should therefore consider automatically mailing to Minnesota borrowers reinstatement quotes at least three days before all sheriff’s sales to take advantage of this safe-harbor language.  A standard practice could be to mail out quotes seven to 14 days before all sheriff’s sales in Minnesota.  All such quotes should also be effective “for 7 days or until the foreclosure sale, whichever occurs first” to further comply with the statute.

By mailing out reinstatement quotes without waiting for possible, surprise requests, a mortgage servicer will be less likely to be taken off guard and will be able to avoid unnecessary delays—even if the borrower makes multiple requests later.

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