Minnesota Bill to Defer Foreclosure Sales Waits on Gov.’s Signature

The Minnesota legislature has approved and passed on to Gov. Tim Pawlenty legislation that would allow borrowers to defer foreclosure sales until one year after the measure takes effect. It applies to some subprime and negative-amortization loans.

The Minnesota Subprime Borrower Relief Act enables borrowers with the subprime or negative amortization loans that closed between Jan. 1, 2001 and Aug. 1, 2007 to defer foreclosure only, not payments that must be made by the middle of each month. Only owner-occupied residences are eligible.

Lenders receive no additional compensation for the loan payments deferred under the proposed statute. However, borrowers must make regular mortgage payments to the lenders during the deferment period.

After expiration of the deferment period, the lender may schedule the foreclosure by serving notice in district court and publishing the notice of the foreclosure sale in the newspaper where the original foreclosure ad was published.

Any lender who violates the law, if it is enacted, will be subject to statutory damages of up to $25,000 as well as “punitive damages in an amount determined by the court, costs and reasonable attorney’s fees.”

There is no immediate indication as to whether Gov. Pawlenty will approve the legislation.