Minnesota Hard Money Loan Guide

Minnesota has one of the highest rates of homeownership in the country, ranking 3rd at 73%. In recent years, the state came close to 80% but with the rest of the nation there was a downward trend following a national housing crisis. Still, the North Star State continue to outperform most others and is already seeing a slight increase following the national crisis. Home buyers in Minnesota sometimes seek out special financing options to try and move faster than the big banks usually can. Those willing to put up their own home or other owned real estate as collateral are finding a simple path to funding with hard money loans. These are offered by individual and small group investors and require much less time and paperwork than is usually expected with large mortgage lenders.

Minnesota Foreclosure Laws

Some states require that all foreclosures be managed by the state court system, with judicial foreclosure. However, most foreclosures in the state of Minnesota are managed outside of the courts, with non-judicial foreclosure. This can make the process move much faster than those in the court system can manage. Homeowners facing foreclosure in Minnesota are more likely to keep their homes if they are informed and understand what to expect from the process.

Property Redemption after Foreclosure Sale

In some states, you can redeem (repurchase) your home within a certain period of time, even after the foreclosure sale has taken place. Most borrowers in Minnesota have six months to redeem the home after the foreclosure. Minn. Stat. Ann. § 580.23. However, in certain situations, the redemption period will be different. For agricultural properties or when the homeowner owes less than 2/3 of the original principal amount of the loan, then they are able to redeem up to a full year after the sale. And if the home has been abandoned, left unattended for a period of time prior to the foreclosure sale, then the option to redeem after the sale is reduced to just five weeks. Minn. Stat. Ann. § 581.10.

Deficiency Judgments in Minnesota

When a home is lost to foreclosure and sold to the highest bidder, sometimes the money from that sale is not enough to cover what was owed by the homeowner in the first place. In these cases, a lender will sometimes seek relief by asking the courts to force that homeowner to pay the remaining balance with what is called a deficiency judgment. In Minnesota, the foreclosing party may obtain a deficiency judgment, though it must make every reasonable effort to obtain a fair and reasonable price at the sale. There are limits to what can be required of the homeowner to pay back if the lender actually purchases the property at the sale as well.

Deed in Lieu of Foreclosure

A deed in lieu of foreclosure is a deed instrument in which the borrower gives up all interest in a property to the lender to satisfy a defaulted loan. In Minnesota, this is one option that can help avoid foreclosure proceedings. The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The main advantage to the borrower is that it immediately releases him/her from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids a foreclosure proceeding and may receive more generous terms than he/she would in a formal foreclosure. Another benefit to the borrower is that it hurts his/her credit less than a foreclosure does. Advantages to a lender include a reduction in the time and cost of a repossession, lower risk of borrower revenge, and additional advantages if the borrower subsequently files for bankruptcy.

Grace Period Notice

Minnesota does not technically have a built-in grace period for the foreclosure process. As most foreclosures are managed outside of the court system, it would be too difficult to oversee this kind of set timeline. However, the lender does have to give lenders in default a notice of their intention at least thirty days prior to starting the foreclosure process, so homeowners do have some time to get caught up on back payments or to try and make arrangements that satisfy the lender so that they can avoid the foreclosure.

Protections For Military Service Members

Protections under the federal Servicemembers Civil Relief Act are extended to Minnesota service members who are called to state active service. Minn. Stat. § 190.055

High Risk Mortgage Protections

Some homeowners have what is known as a high risk mortgage. They have higher than normal interest rates or had a negative credit history when purchasing the home, resulting in a subprime or high risk mortgage. Following a national housing crisis, Minnesota law now permits these homeowners to postpone the foreclosure sale, but the trade-off is a reduced redemption period of five weeks. Minn. Rev. Stat. § 580.07.

Additional State Laws

The maximum interest rate allowed by law is 6%. Minnesota statute limits interest rates to 6 percent in general, and 8 percent for written contracts. Exceptions to the limits include state banks, state credit unions, dealers under the SEC Act, and loans secured by savings accounts.

Minnesota is a homestead state. Minnesota statute allows homeowners to claim up to $390,000 in property value, or $975,000 if agricultural, as a "homestead." State law limits this exemption to 160 acres, which in practice may apply to farms, but has removed what was once a half-acre limit on property within city limits. Minnesota does not allow married couples to double the homestead exemption amount as many other states do, but the exemption amount is already quite generous compared to other states.

Lender Licensing Requirements

In Minnesota a Mortgage Broker is referred to as a Mortgage Originator. All aspects of the licensing are handled through the Minnesota Department of Commerce. The Mortgage Originator License allows one to work with both first and second mortgages. The mortgage licensing process in Minnesota is handled through PULSE System. Licenses are valid for two years, and expire on July 31st of odd numbered years.