Minnesota’s Foreclosure Process

When a payment is missed this process begins

  • Lender calls and sends a letter stating a payment was missed.
  • Homeowner receives Default and Intent to Foreclose Notice.
  • Homeowner receives Preforeclosure Notice.
  • The account is given to a foreclosure attorney and legal fees can begin accruing.

Sheriff’s Sale scheduled by the attorney

Redemption period follows the Sheriff’s Sale

  • Typically 6 months (12 months if agricultural).
  • Shortened to 5 weeks if property is abandoned or Sheriff’s Sale was postponed by homeowner.
  • Homeowners may stay in their home during the redemption period.
  • To redeem and keep the property, homeowners must pay off Sheriff’s Sale price plus interest and fees.
  • At the end of the redemption period homeowners must vacate or face eviction.
  • See the entire foreclosure timeline on a calendar

Options for keeping your home and avoiding foreclosure

Here are the “workout” options your lender may offer

  • Reinstatement: You pay what you owe in missed payments plus fees by a specific date.  This is referred to as the amount needed to become current.
  • Repayment plan: You and your lender workout a monthly payment plan that lets you catch up on past due payments.  This new payment is calculated by dividing the amount that you are behind by the time frame for the repayment plan and then adding the result to your monthly payment.  
  • Forbearance: An agreement to temporarily change or suspend payments. One common method used to calculate forbearance payments is multiplying a homeowner's current income by 30% and using the result as the payment.  If your income is zero, your payment may be, too.  Forbearances usually last six to twelve months and at the end of the process, the homeowner can apply for a continuation of the forbearance and for a modification.  If the extension or modification are denied, the foreclosure process picks up where it left off.
  • Refinance:  The replacement of an existing loan with an entirely new loan with a new interest rate, payment, and term.  Some refinances are with the same lender while others are with different lenders.  Sometimes the homeowner is required to pay closing costs or a down payment.  To qualify for a refinance, a homeowner must be current and have a stable and sufficient source of income.
  • Loan Modification: A change to the structure of the loan that changes the payment, interest rate, term, or principal of the loan.  The amount that a homeowner is behind is added to the remaining balance of the loan and that amount is spread out over 20-40 years using interest rates between 2 and 5% to reach a monthly payment that is no more than 31% of the homeowner's monthly gross income.  If the balance on the loan is significantly more than the value of the house, part of the principal may be set aside to make it more affordable.  The amount set aside may be totally forgiven, made into a second mortgage, or made into a balloon payment due at the end of the loan.
  • Partial Claim or Advance Claim: If your mortgage is insured, you may qualify for a low-interest or interest‐free loan to bring your loan current through the insurer (FHA or private mortgage insurance).  This loan may have small monthly payments, or it may be repaid when you pay off your first mortgage or sell your home.
  • Making Home Affordable: A federal government program that provides incentives to lenders to modify loans.  Visit www.makinghomeaffordable.gov for details.

Options for leaving your home

Although we will do our best to help you keep your home, it may turn out that it is not financially feasible for you to remain in your home.  If that is the case, these are your options to move in an orderly manner.

  • Regular Sale:  Homeowners can sell the home for more than the amount left on the mortgage until the end of the Redemption Period.  Once the mortgage is paid off, the homeowner can keep the difference.
  • Pre‐Foreclosure Sale or Short Sale: If you owe more on the home than its value, your lender may agree to accept less than what is owed on the mortgage, allowing a “short” sale. Typically you would need a 3‐6 month period for your real estate agent to sell the house to a qualified buyer at a price agreed upon by the lender.
  • Deed‐in‐lieu: A deed‐in-lieu of foreclosure is an option where your lender forgives the debt you owe if you sign over (give back) the property.  Typically you would first have to try to sell the home for 90 days before the lender would consider this. If you have a second mortgage or judgment on the property, a deed‐in‐lieu may not be an option.
  • Foreclosure:  Foreclosure can be a strategy for leaving a home in an orderly manner.  Once a first mortgage is foreclosed, the homeowner is, in most cases, no longer liable for the debt.  After a Sheriff's Sale, the homeowner can remain in the property until the end of Redemption Period but does not have to pay the mortgage.  This can be a time to save and plan for the future.  If the homeowner leaves within a timeframe decided by the lender, they may be eligible for relocation assistance that can be used for moving expenses or to pay the application fee and security deposit on new housing.

How we help you

You’ll work directly with a Mortgage Foreclosure Prevention Counselor

  • To determine if staying in your home is realistic
  • To create a household budget
  • To learn about your rights, the foreclosure process, and how to communicate with your lender
  • To create an Action Plan for regaining housing stability by actively working with your lender and helping you save money for mortgage payments
  • To assist you with guidance as you explore possible solutions

Other things to consider

  • In some cases, selling your home will be considered as a way to prevent foreclosure.
  • Referrals to other community resources will be provided for free.

Contact Us

Twin Cities Habitat for Humanity
Mortgage Foreclosure Prevention Program
Main Office:  1954 University Ave W, St. Paul, MN 55104
Minneapolis Office:  2100 Plymouth Ave N, Minneapolis, MN 55411
Email:  Click Here 
Phone and Fax:  612-305-7189

What to Do If You Miss a Payment

When people find themselves unable to afford their mortgage payments, they become extremely stressed out and fear that they have to leave the home immediately.  Although this stress and fear is understandable it is often unnecessary as the foreclosure process takes at least six months and often can be delayed or halted completely by the homeowner.

If you find yourself in danger of missing a payment, here is what you should do:

  • Don't Panic:  Foreclosure is an orderly legal process that takes at least six months to complete and cannot be started until a homeowner misses four payments.
  • Talk to Your Bank:  The sooner you tell your lender what is happening the better.  They may be able to put you on a plan to reduce or suspend your payment before you ever fall behind.  If your hardship will be long term, they may be able to help you apply for a modification.
  • Save:  If you cannot afford an entire payment and your lender won't accept a partial payment, save the money that you would be spending on your mortgage payment.  You can use this money to make other mortgage payments down the road or as a down payment on a modification.  When you are applying for a modification, lenders like to see that you are able to save some money, even if it's not a lot.
  • Budget:  Examine your budget and determine whether you can cut other expenses to leave more money available for your mortgage payment.  Lenders consider a mortgage affordable when it is around 30% of a homeowner's gross monthly income.  If your mortgage payment is less than 30% of your income but you are having difficulty making payments, your lender may expect you to trim money out of other areas of your budget instead of reducing your payment.
  • Call Us:  We can help you get started working with your bank to delay or prevent foreclosure.
For more information on the Foreclosure Process, check out the information available at the Minnesota Homeownership Center, a nonprofit devoted to preserving and promoting homeownership.

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