Court Rules that Requirements Must be Met before Foreclosure Begins

The court has ruled that Minnesota Statute 580.02 must be strictly complied with in order for the foreclosure process can be executed by the mortgagee. This was a ruling by the Minnesota Supreme court in the case of Ruiz v. 1st Fidelity Loan Servicing. The ruling states that all assignments of a mortgage must be recorded before the process can begin.

In the case, the plaintiff had purchased the property, opening a mortgage with Chase Bank in 2005. In 2006, the mortgage was assigned to JP Morgan Chase Bank and that assignment was recorded in June 2006. In September 2008, Ruiz defaulted on the mortgages, which resulted in a second assignment in September 2008 and recorded in November. The assignee was listed as 1st Fidelity when it was to be 1st Fidelity Loan Servicing, LLC.

In March 2010, the plaintiff was sent a letter by the defendant that demanded payment and then commenced the foreclosure process by advertisement. In May 2010, 1st Fidelity published the first notice of foreclosure sale and recorded the notice of pendency of foreclosure. An assignment was recorded for a third time. The assignor was listed as JP Mortgage Chase Bank, NA and the assignee was listed as 1st Fidelity Loan Servicing, LLC. The lawyers representing 1st Fidelity delivered the third assignment by hand, as well as the notice of pendency to the Hennepin County Recorder in May 2010. However, the third assignment and the notice of pendency were not recorded until 4 days later.

1st Fidelity would then purchase the property at the November foreclosure sale. The plaintiff didn’t redeem the property and then sued, alleging that the assignment recording requirement was not complied with, nor the notice of pendency of foreclosure requirement and the preforeclosure counseling notice requirement. She alleged that she was wrongfully evicted from the property, so she sought a declaration that the sheriff’s sale was not valid and requested the recovery of monetary damages.

The District Court granted a summary judgment to 1st Fidelity, stating that the lender had at least complied substantially with the notice of pendency and assignment provisions. However, the Court of Appeals reversed this decision, stating that strict compliance standards needed to apply to the processes, concluding that the foreclosure was void because the standards were not adhered to strictly.

From there the court remanded the case to the District Court so that the proceedings could continue on the wrongful-eviction claim.

Attorneys have said that this ruling could benefit lenders more, allowing them to cover their bases better when executing the foreclosure process so that they see fewer lawsuits. This can also benefit the homeowners being foreclosed upon because they will not have to deal with wrongful evictions and other unfair issues.