Mortgage Foreclosure Legislative Changes

New Resources Available:

For Attorneys representing clients with equity stripping and/or foreclosure defense issues,
you may be eligible to join the Equity Stripping or Foreclosure Defense Task Forces.  We
have a new practice area with sample documents, cases, practice aids, and a listserv
available on

Summary of Mortgage Foreclosure Legislative Changes

Created by the Legal Services Advocacy Project

A package of bills was enacted by the Legislature in an attempt to respond to the
epidemic of foreclosures that Minnesota has not seen since the Great Depression.
Under each entry in this summary you will find a notation listing the Chapter number.
Listed in parenthesis next to the Chapter number is the bill number.  The bill number will
have either an HF (for House File) or an SF (for Senate File) in front of it.  (Whether the
Chapter is associated with a House File or Senate File depends on which body passed the
bill first.)  This information is provided to enable you to more easily locate the exact
language contained in the bill signed by the Governor.  You can find the 2008 Chapters at
the following link:

A.        Abandonments and Vacancies
A new law declares that the failure of a homeowner to appear at a hearing to determine
whether the property is abandoned is deemed conclusive evidence of abandonment.  The
Legislature also gave the right to the lender holding the mortgage or the sheriff’s
certificate to take actions necessary to prevent the premises from “falling below
minimum community standards for public safety and sanitation” and to make reasonable
periodic inspections.  These new provisions were added to encourage lenders to use the
shortened, five-week redemption period option already available to them under law, and
to maintain foreclosed properties while the foreclosure process is underway.
Chapter 178 (SF 2918) (providing for conclusive proof of abandonment)
Chapter 341, Article 5, Section 22 (HF 3420) (taking actions to prevent deterioration of
the property)

B.        Foreclosure Data and Reporting
The Legislature required that lenders include in legal notices that a foreclosure is pending
the following information:  (1) the physical street address, city, and zip code of the
mortgaged premises; (2) the name of : (i) the residential mortgage servicer; (ii) the lender
or broker; or (iii) the “transaction agent, which is a third party other than a servicer,
lender, or broker (such as the Mortgage Electronic Registry Service or MERS); (3) the
tax parcel identification number of the mortgaged  premises; (4) if stated on the
mortgage, the transaction agent’s mortgage identification number; and (5) if stated on the
mortgage, the name of the mortgage originator.

In addition, the Legislature established a Statewide Foreclosure Data Collection working
group to study the most efficient and cost-effective way to develop and implement an
electronic system for the submission, collection, entry, retrieval, management, and
assessment of statewide foreclosure data.  The group must report to the Legislature on the
outcome of the study by February 15, 2009.
Chapter 238, Article 1 (HF 3516)

C.        Foreclosure Prevention Assistance
The Legislature raised the amount of assistance that can be provided by the Minnesota
Housing Finance Agency under the Mortgage Foreclosure Prevention and Assistance
Program from a maximum of $5,500 per borrower to an indexed amount that, today, is
nearly $11,000 for the Metro area and nearly $9,500 for Greater Minnesota.
Chapter 362 (HF 3346)

D.        Foreclosure Prevention Counseling
A lender must now transmit the borrower’s name and contact information to a Minnesota
Mortgage Foreclosure Prevention and Assistance agency when a lender sends the
borrower a notice of default.
Chapter 341, Article 5, Sections 6 and 7 (HF 3420)

E.         Foreclosure Process Changes
One new notice to homeowners in default was required, and one existing notice was
revised.  They are both aimed to providing information to homeowners about foreclosure
prevention counseling.  In addition, certain costs associated with the foreclosure process
were reduced, established or clarified certain costs associated with foreclosure.  Finally,
sheriffs were given the authority to request the current payoff amount and the name of the
person or entity with authority to act on behalf of the lender.  If the lender does not
provide the information in a timely manner, the new law directs the sheriff to postpone
the foreclosure sale.
Chapter 341, Article 5, various sections (HF 3420)

F.         Mortgage Debt Tax Forgiveness
Any mortgage debt forgiven (as a result of a short sale or other settlement of a mortgage
debt between a lender and homeowner) will not have to be reported on state taxes as
Chapter 154, Article 4, Section 2 (HF 3201)

Equity Stripping

This Tip provides information on how to spot an Equity Stripping case under Minn. Stat. § 325N, when the client has been involved in a foreclosure reconveyance scam, also known as equity stripping.


Equity Stripping may take many forms, but the scheme typically includes a person who purports to offer to “save” the homes of homeowners with substantial equity in their homes who are faced with foreclosure, and help the homeowners remain in their homes.  In reality, the objective is to obtain title to the home, extract as much money from the former homeowner as possible, and then evict the homeowners as quickly as possible so they can resell the home for its full market price, typically tens of thousands of dollars more than they paid to redeem it.

In response to the problems of foreclosed homeowners loosing their equity to equity stripping scams, the Minnesota Legislature passed Minn. Stat. § 325N, and this law went into effect August 1, 2004.  This law does two things; it regulates “foreclosure consultants” and “foreclosure reconveyance transactions.”


Minnesota Statute§ 325N.10 – 18 establishes the elements of an equity stripping claim.  Look for the following facts:

  1. Client previously owned their home.  The definition of home includes a condominium, the property must be residential and must be the primary residence of the client.
  2. Client’s home was in foreclosure at the time of the transaction.  If the client was not actually in foreclosure at the time of the transaction, then it does not fall within this statute. Please note that some “equity strippers” will identify potential victims before the home enters the foreclosure process.
  3. Someone other than Client has obtained title to the home.  Title could be transferred by the creation of a mortgage, creation of a lien or encumbrance that allows the property to be redeemed as a junior leinholder, or a transfer interest from the foreclosed homeowner.
  4. Client conveyed their home based on a promise of subsequent reconveyance.  This promise may take the form of a contract for deed, purchase agreement, option to purchase or lease.  Most importantly, the reconveyance MUST include a right to possession by the foreclosed homeowner following the conclusion of the foreclosure process.
  5. Client continued to live in the home after the sale.
  6. The transaction took place after August 1, 2004.

Equity Stripping cases can be first spotted at many different points.  An attorney may encounter an equity stripping situation when the client has been served with an Eviction Action Complaint or a Notice of Cancellation of Contract for Deed.  If you spot a case that seems to have the elements listed above, have the client call Legal Aid’s intake number:  612/334-5970 to be screened for Equity Stripping, and possible subsequent representation by an attorney on our Equity Stripping Task Force.

Please Note:
Not all equity stripping cases fall within Minn. Stat. § 325N, and some of these cases still may have valid consumer protection claims.  If you spot a case that is close to meeting the above criteria, please do not hesitate to direct the client to call 612/334-5970 to be screened.

Submitted by: Darielle Dannen
Housing Law Resource Attorney
Volunteer Lawyers Network