|S.F. No. 340 - Homestead-Lender Mediation Act (Division Report)|
|Author:||Senator Linda Scheid|
|Prepared by:||Darlene Sliwa, Senate Research (651/296-1890)|
|Date:||April 24, 2009|
ARTICLE 1 HOMESTEAD-LENDER MEDIATION
Section 1 [Foreclosure Prevention Counseling; Mediation Referral], subdivision 1 (Applicability) provides that this section applies to mortgage foreclosures under Minnesota Statutes, Chapters 580 (Mortgages; Foreclosure by Advertisement) and 581 (Mortgages; Foreclosure by Action) on property that consists of one to four family dwelling units, one of which is owner-occupied.
Subdivision 2 (Requirement to Provide Notice of Opportunity for Counseling and Mediation) requires the party foreclosing on a mortgage to provide notice to the mortgagor that if the mortgagor receives counseling services, but is unable to resolve the default, the mortgagor may have the debt reviewed in a mediation proceeding with a mediator approved by the Attorney General. This provision expires December 31, 2012. Modifies the definition of an "authorized foreclosure prevention agency."
Subdivision 3 (Notification to Authorized Counseling Agency) makes conforming and technical changes.
Subdivision 4 (Notice of Provision of Counseling; Request for Contact Information) prohibits a mortgagee from commencing or continuing a foreclosure proceeding after an initial published notice is given, except when allowed under Sections 5 to 13 of this Article. Makes conforming and technical changes.
Subdivision 5 (Mediation Referral) specifies that an authorized foreclosure prevention counseling agency must discuss repayment options and alternatives for resolving the default. Specifies the process to initiate mediation if an agreement cannot be reached. This subdivision expires December 31, 2012.
Section 2, subdivision 1 (Counseling Form) provides the Preforeclosure Notice required in Section 1, subdivision 2 of this Article. Adds a section to the notice to inform the mortgagor about the option to have a mediation proceeding.
Section 3, subdivision 1a (Five-Month Redemption Period) provides that the redemption period is five months instead of six months, if before the sale of lands in conformity with the preceding sections of this chapter, the mortgagor participated in mediation proceedings under Sections 5 to 14 of this Article. Provides that the subdivision expires December 31, 2012.
Section 4, subdivision 2 (No Deficiency Judgment) provides that a deficiency judgment is not allowed if a mortgage is foreclosed by advertisement and has a redemption period of five months under Section 3 of this Article.
Section 5 [Definitions] defines "commence a foreclosure proceeding," "send," and "serve" for purposes of Sections 5 to 13 of this Article.
Section 6 [Applicability], subdivision 1 (Creditors) provides that Sections 5 to 13 of this Article apply to a person who is the holder of a mortgage to which Chapter 580.021 (Foreclosure Prevention Counseling) applies. Specifies that the sections do not apply to property if the holder of the mortgage occupied it prior to its sale to the owner.
Subdivision 2 (Debtors) provides that Sections 5 to 13 of this Article apply to a debtor who has received foreclosure prevention counseling and who is eligible for mediation or who files a mediation request indicating that the debtor did not receive the counseling and mediation notice. Specifies that the sections do not apply to a debtor who qualifies under the Farmer-Lender Mediation Act.
Subdivision 3 (Applicability), provides that Sections 5 to 13 of this Article do not apply to mortgages refinanced or modified under the Home Affordable Refinance or Home Affordable Modification Programs established by the U.S. Treasury Department in 2009.
Section 7 [Mandatory Mediation Proceedings], subdivision 1 (Mediation Request) specifies the process by which a debtor may make a mediation request.
Subdivision 2 (Mediation Proceeding Notice), paragraph (a) requires the Attorney General to send a mediation proceeding notice to the debtor and all creditors with a lien on the property within ten days of receiving a mediation request. Specifies the information that the mediation proceeding notice must disclose. Requires an initial mediation meeting to be held within 20 days of the mediation proceeding notice. Allows meetings to be held by interactive telephonic or other electronic means. Allows the debtor and creditor to pay for a professional mediator in lieu of the Attorney General as specified.
Subdivision 3 (Effect of Mediation Proceeding Notice) provides that Sections 5 to 13 of this Article do not prevent a creditor from continuing the foreclosure proceedings up through, but not including, the time when the initial published notice is given. Specifies situations in which a creditor receiving a mediation proceeding notice may commence or continue a mortgage foreclosure proceeding. Describes the information that the creditor must provide the debtor by the initial mediation meeting. Provides that the provisions of the subdivision are subject to Section 8 of this Article.
Subdivision 4 (Eligibility and Duties of Mediator) prohibits a person from acting as a mediator if there is a conflict of interest and specifies mediator duties. Allows the Attorney General to appoint and arrange for the compensation of qualified mediators.
Subdivision 5 (Mediator Liability and Immunity) provides that a mediator and the Office of the Attorney General are immune from civil liability for actions taken under this Chapter and are under no duty to advise a creditor or debtor about the law or their legal rights.
Subdivision 6 (Mediation Period) allows the mediator to call mediation meetings during the mediation period, which is up to 60 days after the debtor sends a mediation request to the Attorney General.
Subdivision 7 (Mediation Agreement) provides that the debtor and creditor are bound by the terms of the mediation agreement, which may be enforced as a legal contract. Specifies the process by which an agreement must be signed and submitted. Provides that a debtor may agree to allow a creditor to begin a mortgage foreclosure proceeding before the proceeding would be allowed under subdivision 3, provided that either party may rescind that agreement within five days after signing the mediation agreement.
Subdivision 8 (Termination of Mediation) requires the mediator to serve an affidavit describing the result of the mediation process on the parties and the Attorney General.
Section 8 [Good Faith Required], subdivision 1 (Obligation of Good Faith) requires the parties to engage in mediation in good faith and specifies what constitutes lack of good faith.
Subdivision 2 (Party's Bad Faith; Mediator's Affidavit) requires the mediator to file an affidavit with the Attorney General and the parties to the mediation if either party is not participating in good faith.
Subdivision 3 (Creditor's Bad Faith) allows a debtor a six-month redemption period if the mediator finds that the creditor did not participate in mediation in good faith and the creditor continues with the foreclosure proceeding.
Subdivision 4 (Debtor's Lack of Good Faith) provides that if a mediator determines that a debtor did not participate in mediation in good faith and the creditor continues with the foreclosure proceeding, then the debtor must execute a deed in lieu of foreclosure no later than 90 days after the filing of the mediator's affidavit on the finding of bad faith.
Section 9 [Creditor Not Attending Mediation Meeting] provides that a creditor who does not attend an initial mediation meeting is bound by the mediation agreement unless the creditor files a claim form and objection prior to the meeting. Specifies the process by which a creditor may file an objection to the mediation agreement.
Section 10 [Data Practices] provides that the financial data of individual debtors and creditors that is collected by the Attorney General or mediators is classified as private data.
Section 11 [Forms and Compensation] requires the Attorney General to determine the compensation for mediators. Provides a standard form for an affidavit for requesting mediation.
Section 12 [Enforcement] provides that a mediation agreement is enforceable in state district court.
Section 13 [Inconsistent Laws] provides that this Article prevails over any laws that are inconsistent or conflicting, including specified chapters of law dealing with foreclosure procedure.
Section 14 [Expiration] provides that this Article sunsets December 31, 2012.
Section 15 [Effective Date] provides that this Article is effective July 1, 2009, and applies to foreclosures in which the default notice is sent on or after that date.
ARTICLE 2 MISCELLANEOUS
Section 1, subdivision 2 (Content of Notice) modifies the "Help For Homeowners in Foreclosure" notice to include information about reinstatement.
Section 2 [Certificate of Sale; Record; Effect], paragraph (a) provides that when a sale of real property is made under a power of sale contained in a mortgage, the officer must inform the purchaser via certificate of the time allowed by law for reinstatement, if applicable.
Paragraph (b) provides that a certificate of sale must not be recorded until after expiration of the redemption and reinstatement period and the sale is not final until the mortgagor's rights of redemption and reinstatement have expired and the certificate of sale is recorded.
Paragraph (c) changes references from "the sale" to "issuance" and makes a conforming change to provide for reinstatement.
Section 3 [Satisfaction of Judgment] provides that the amount received from foreclosure sale is full satisfaction of the mortgage debt unless the mortgage is reinstated.
Section 4 [Certificate of Redemption or Reinstatement; Record] makes conforming changes to provide for reinstatement with respect to a Certificate of Redemption or Reinstatement.
Section 5 [Effect of Redemption or Reinstatement After Sale], subdivision 1 (Sale Annulled) provides that if the reinstatement is made by the owner, it annuls the sale.
Subdivision 2 (Reinstatement After Sale; Status of Mortgage) provides that a mortgage note is not extinguished or discharged until the mortgagor's rights of redemption and reinstatement have expired and the certificate of sale has been recorded. Provides that the mortgage retains the priority it has at the time of sale with respect to other liens and encumbrances on the property, whether created or perfected before or after the sale.
Section 6, subdivision 1 (Reinstatement), paragraph (a) provides that if payment is made on a default as specified, the mortgage must be fully reinstated and further proceedings in the foreclosure must be abandoned.
Paragraph (b) provides the process of reinstatement on a foreclosed property consisting of one to four family dwelling units, one of which is owner occupied on the date of service of the notice of sale on the owner.
Paragraph (c) provides that paragraph (b) does not apply if the mortgage being foreclosed previously has been reinstated.
Section 7, subdivision 1 (Allowable Costs Collectable Upon Redemption) requires the holder of a sheriff's certificate of sale, from a foreclosure by advertisement or action of a mortgage or lien or execution, or the holder of a certificate of redemption as a junior creditor during the period of redemption, to pay and claim on the redemption as specified.
Section 8 [Taxes to be Paid in Full] prohibits a party to foreclose on a mortgage of real estate unless the party bringing the foreclosure proceedings has paid any outstanding taxes or assessments upon the mortgaged premises.
Section 9 [Effective Date] provides that the Article is effective the day following final enactment and applies to foreclosure proceedings commenced on or after that date.
ARTICLE 3 FEES AND APPROPRIATIONS
Section 1 [Homestead-Lender Mediation Act Account] establishes the Homestead-Lender Mediation Act account as a special revenue fund in the General Fund. Provides that the account will be administered by the Minnesota Housing Finance Agency and may be used to compensate mediators, reimburse staff and administrative costs, reimburse funds prior to deposit of revenue in the fund, and to make payments as designated under subdivision 3. Specifies that services provided under the Act are on a first-come, first served basis to the extent that funds are available. Funds that remain in the account after the Act expires will be transferred to the General Fund.
Section 2 [Effective Date] provides that the Article is effective July 1, 2009.
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