The first thing I ask people when they are facing foreclosure, is whether they’ve tried to get a loan modification. A prior blog entry suggests how to go about that. Often, people have assumed that loan modifications are handed out on a silver platter, but it’s not quite that easy – you have to go get it, and can’t be frustrated by sending things repeatedly. And sometimes you may not have had time to get a loan modification, perhaps you are working on one while simultaneously being foreclosed upon. That’s when it’s handy to get an extension of your sheriff’s sale, which you have a right to do under Minnesota law. Prior to doing this, if you really are earnestly working on a loan modification and have a contact person with the mortgage company, you can ask them to postpone it on their own, but sometimes that’s like pushing string.
Before explaining what the extension does, you should know a bit about the foreclosure process under Minnesota law. At a sheriff’s sale, there is an auction, where the mortgage company usually buys the property for what is owed on it, and after that you have a six month right of redemption, during which you can remain in the house, and would have the right to pay off the entire mortgage, which is normally only done if there is equity in the property, because traditional lenders won’t touch you during the redemption period, even if you have equity. Prior to the sheriff’s sale, you have the right to reinstate (i.e. catch up) or stop or delay the sheriff’s sale with a bankruptcy filing. When you apply for an extension (aka a postponement), that pushes the sheriff’s sale date back five months, but it reduces the redemption period to five weeks. So if all you do is the extension, but don’t get a loan modification or file bankruptcy, it really doesn’t do much, except you’d get about an extra week in the house. Importantly however, it takes the immediate pressure off, giving you more time to ponder options, try a loan modification, perhaps come up with the money to reinstate or to get your ducks in a row to file bankruptcy, e.g. if you are looking for a job to fund a chapter 13 repayment plan. Moreover, when you file a chapter 7 right before the sheriff’s sale, it will cancel the sheriff’s sale, thereby causing the mortgage company to seek permission from the bankruptcy court to recommence foreclosure (i.e. a motion for relief from the bankruptcy automatic stay) and then there will be a new sheriff’s sale 3 to 6 months later, sometimes it takes much longer than that. Then after the new sheriff’s sale, they’re only supposed to give you a five week redemption period, but most local foreclosure firms will give you another full six months of redemption, just so there aren’t any title issues.
I have had several clients who had been turned down for a loan modification, only to be able to get one after filing for an extension of their sheriff’s sale.
The things to keep in mind in obtaining an extension are that it needs to be completed 15 days prior to the sheriff’s sale, the property needs to be homesteaded (if it’s not for some reason, but you do in fact live there, it’s not too hard to file for that); and both spouses (and/or all owners) generally need to sign (the statute refers to “the” mortgagor needs to sign it).
You don’t need a lawyer to file for a postponement. But if you don’t follow the steps just exactly perfectly, you can get denied & run out of time. When we file a postponement for a client, we only charge $600 plus costs (usually $50 for the court, plus courier costs to your local courthouse, unless you want to run it there). But as part of that fee, in addition to just doing the extension, we go through your entire financial situation, and put together a written game plan tailored to your specific situation, including the possibility of having a chapter 13 or 7 bankruptcy as a backup option to save the house or extend the time in the house. Those options will be the subject of the next installments in this blog series.