Bulletin: MN2012002

Dear Associates:

The Minnesota Court of Appeals, an intermediate appellate court, recently issued an opinion in the case of Ruiz v. 1st Fidelity Loan Servicing, LLC, 2012 WL.762313, dated March 12, 2012 as an unpublished opinion. The case is a challenge to the validity of a non-judicial foreclosure based upon the foreclosing mortgagee violating MSA Sec. 580.032 Subd. 3 by recording a foreclosure pendency notice on the same day that the mortgagee published the first notice of the foreclosure sale rather than on a date prior to such first notice.

The statute reads:  "A person foreclosing a mortgage by advertisement
shall record a notice of the pendency of the foreclosure…before the first
date of publication of the foreclosure notice…" of the foreclosure sale.

The court recited various cases since 1910 wherein our Supreme Court has consistently held that if a foreclosing party avails itself of the less time-consuming but purely statutory process, they must "show an exact literal compliance with its terms," and concluded that recording the pendency notice on the same day that the first notice of the foreclosure sale was published in the newspaper was not "before the first date of publication of the foreclosure notice" and thus did not comply with the statute. As a consequence the court found the proceeding void.

Minnesota Statues Sec. 582.25 provides validation for any foreclosure that is deficient in any of the ways recited in the statute and no objection has been made within one year (in most cases) of the expiration of the mortgagor’s redemption period. Thus we may be protected or able to underwrite around the issue in many cases. However, please review all foreclosures by advertisement for precise compliance with the statute, particularly when we are insuring the first transaction after the foreclosure, and contact our underwriting department for guidance if any deviations are observed.

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