Barham & Maucere, LLC

Minnesota state COVID-19 update provided by Barham & Maucere, LLC

Minnesota has enacted certain restrictions related to the COVID-19 emergency that apply to foreclosures and evictions. These restrictions effectively bar evictions and restrict the ability of foreclosing mortgagees to obtain title and possession of the subject properties.  Additional measures are under consideration (and favored by Minnesota’s Governor) that could virtually ban foreclosures until January 2021.

The Minnesota Governor’s Emergency Executive Order 20-79 places significant restrictions on evictions.  It continues prior orders that suspended the right of mortgage holders and other persons entitled to recover residential premises after a residential foreclosure redemption period has expired. Basically, if a property owner does not redeem the property post-foreclosure, then the high bidder at the foreclosure auction (typically the foreclosing mortgagee) becomes the legal title holder to the property after the redemption period expires but cannot evict. The Governor’s order states, however, that he “strongly encourage(s) property owners, mortgage  holders, or other persons entitled to recover residential  premises  to work with tenants  to  reach  amicable  resolutions  where possible  without filing eviction actions.” So, the spirit of the Order indicates that mortgagees’ and servicers’ communications and negotiations with residents to voluntarily vacate are permitted.

The Order further states that “financial institutions holding home mortgages are requested to implement an immediate moratorium on all pending and future foreclosures when the foreclosure arises out of a substantial decrease in income or substantial out of pocket medical expenses caused by the COVID-19 pandemic, or any local, state, or federal governmental response to COVID-19. Financial institutions are also strongly urged not to impose late fees or other penalties for late mortgage payments related to the COVID-19 pandemic.” This is only an “urging” but may become ensconced in law as set forth below.

The Governor supports additional restrictions on foreclosures that are contained in House File 4541. If the bill eventually becomes law in its present form, it will bar foreclosures until January 2021. The bill may have lost momentum because, as of the date of this update (July 24, 2020), the bill has not advanced since April 20, 2020. A competing Senate version of foreclosure legislation would only delay foreclosures and evictions for 60 to 90 days. Both bills carry mortgage payment relief measures. 

Noteholders and mortgage investors should keep an eye on the Governor’s office for future laws and regulations. Further, investors should educate themselves about funds and programs that may be available directly to them through the Minnesota Housing Finance Agency.  As for now, mortgagees and servicers can initiate foreclosures, but are encouraged not to do so by the Governor’s executive orders. Post-foreclosure evictions are at a standstill until the COVID-19 emergency declaration is lifted or until the order is rescinded by proper authority. Clients are encouraged to contact Barham & Maucere LLC with any questions or concerns about Minnesota COVID-19 foreclosure and eviction restrictions.

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