Minnesota law can help postpone home foreclosure

When Dan Carlson heard last week that a state law scarcely a week old allowed people facing sheriff's foreclosure sales to postpone them for five months, he jumped into action.

With the sheriff's sale on his Greenfield home just a week away, he and his wife, Kathy, filled out a sworn statement, then filed it with the Hennepin County recorder.

With that, the couple became one of the first in the state to use the new legal tool to try to stave off foreclosure.

But Carlson wasn't able to block his sheriff's sale. The law requires the affidavit be filed two weeks before a foreclosure sale, and it's so new that Carlson didn't hear about it in time. Their home was sold Tuesday, though state law allows them to stay for six more months.

"If a year or two ago someone would say I'd be in this position, I would have laughed," Carlson said. "Well, welcome to reality."

Amber Hawkins, an attorney he contacted, is hoping that publicity about the law, which took effect June 15, will help others facing imminent foreclosure sales to act in time to save their homes.

"I'm certainly going to recommend that a lot of my clients do it," said Hawkins, an attorney at the Legal Aid Society of Minneapolis. "I think it's a great tool for the right person."

"I think it's going to be used," said state Rep. Joe Mullery, DFL-Minneapolis, who got the law passed despite what he said was resistance from committee chairs in his own party to giving it a hearing.

Normally, property sold in foreclosure proceedings may be redeemed by the owner if the full loan amount is paid off within six months after the sale.

But Mullery's law allows the sale to be postponed for five months, with a tradeoff: if the borrower can't make the loan current in that period, he or she gets only five weeks to redeem it after the foreclosure sale. The rationale is that it's easier to bring a loan current than to repay the entire loan post-sale, Mullery said.

In a faltering economy, with people missing payments because they're thrown out of work, it makes sense to give them more time up front to find a new job and come up with the missing payments, Mullery said. "There's a very good chance you can get a job," he said.

The Carlsons borrowed from Washington Mutual, but the loan was later assigned to Wells Fargo as a trustee. An attorney representing the lenders refused to comment on Tuesday. But Hawkins said Tuesday's sale of the property to Wells Fargo for $222,331.35, isn't official until the lender files the sheriff's certificate of sale with the county recorder.

Carlson has had his house for about 19 years. He said he got in trouble when he swapped a higher-interest fixed-rate mortgage for an adjustable one that looked like a better deal.

"We were told we'd save money," he said. Meanwhile, job changes and a slow economy sapped the couple's ability to keep up the payments, Carlson said.

Kathleen Somers of Elk River found another use for the new law. She's been working toward a short sale on the single-family home she's occupied for nine years. That means the lender will accept the money from the sale, although it's less than the amount due, and wipe out her debt, leaving her with better credit than a foreclosure.

She invoked the new law shortly after it took effect, staving off a planned July 9 sheriff's sale until a purchase agreement she signed Tuesday is consummated. A sale means the lender avoids holding costs on the house, the new buyer gets a house that once was valued $100,000 higher, and Somers protects her credit, she said.

"It came along just in time for me," she said of the new law. In fact, she's learned so much about the foreclosure process and the new law that she'd like to start a side business helping others go through the process, she said.