Primarily Minnesota is a “title” theory state. This means that the main vehicle used to secure a property is a Trust Deed. A trust deed ensures that the property remains in trust until such time as the underlying loan has been paid in full to the lender. Only then is the title transferred to the owner.
As this is the case, trust deeds contain a power of sale clause, giving the trustee the rights to repossess the property if the owner should be delinquent with their loan repayments. If this is the case a non-judicial foreclosure takes place and this takes approximately 60 days in this state if it is not contested. The notice of foreclosure has to be personally served on the borrower at least four weeks prior to the date of the sale of the property.
If there is not power of sale clause in the loan agreement, this is generally called a Mortgage Deed. In the instance of these primary instruments of security being used, the foreclosure process to be followed is judicial. This means the foreclosure has to go through the courts of Minnesota and can take a good deal longer and cost much more money than a non-judicial foreclosure.
In Minnesota a non-judicial foreclosure is known as “foreclosure by advertisement” and judicial foreclosure is known as “foreclosure by action”. Also of interest is the fact that farm and residential property has different processes which are required to finalize a foreclosure, and with farmland a mediation process is used.
On completion of a foreclosure the lender is allowed to pursue a deficiency judgment and the borrower has rights of redemption. Any redemption action on the part of the borrower will nullify the sale of the property, but junior liens held by the lender will also be revived. The home owner has a period of between 6 and 12 months to institute this action.