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American College of Mortgage Attorneys — Partner with the Best®

Formed in 1974, the American College of Mortgage Attorneys (ACMA) is comprised of over 500 lawyers in North America who are experts in mortgage law.

United States

Minnesota

Mortgages are the customary security instrument used.

SECURITY INSTRUMENT USED

To be recorded, mortgages must comply with the general document formatting requirements set forth in Minn. Stat. &sect; 507.093. The name and address of the party drafting the document must appear on the document. Minn. Stat. &sect; 507.091. Signatures must be acknowledged before a notary public. Minn. Stat. &sect; 507.24. Minnesota has adopted the Revised Uniform Law on Notarial Acts, which provides a form of acknowledgment that should be used. Minn. Stat. &sect;&sect;&nbsp;358.51 to 358.76. Any electronic instruments, including signatures and seals, affecting real estate may only be recorded in conformance with standards implemented by the Electronic Real Estate Recording Commission created under the Minnesota Real Property Electronic Recording Act. Minn. Stat. &sect;&sect; 507.0941 to 507.0948. Remote online notarization is permitted only by notaries specifically registered to do so, and meeting all requirements listed under Minn. Stat. &sect; 358.645. A party recording a mortgage must pay mortgage registration tax of .0023 multiplied by the maximum principal amount secured by the mortgage. Minn. Stat. &sect;&nbsp;287.035. In certain counties with special legislation, the tax is .0024 multiplied by the maximum principal amount secured. Certain counties also impose is an additional $5 “conservation fee.” Minn. Stat. &sect;&nbsp;40A.152. The first page of the mortgage must include a statement as to the maximum amount secured by the mortgage, excluding protective advances. See also Mortgage Tax infra. Minnesota has 2 real estate recording systems: the abstract system and the registered property system (sometimes referred to as the “Torrens” system). Each county has a County Recorder responsible for recording instruments affecting the title to property in the abstract system and a Registrar of Titles responsible for recording instruments affecting title to registered property. When recording a mortgage or other instrument affecting title to property, it is critical the instrument be submitted to the correct recording office(s). Generally, the Registrar of Titles' office will not accept documents that do not affect registered property, but it is possible to inadvertently record a document affecting registered property with the County Recorder. Absent actual notice, recording a mortgage or other instrument in the wrong office may be ineffective notice under Minnesota's race-notice recording statute. Some parcels are part abstract and part registered property, and in those cases recording in both offices is required. Certain mortgages to secure debt of a public utility or pipeline company must be filed in the Office of the Minnesota Secretary of State. Minn. Stat. &sect;&sect; 507.327 and 507.328. If a married person holds title to property individually, the person's spouse may have or acquire an interest in the property under the statute governing marriage dissolution. Minn. Stat. Chapter 518. Therefore, when a married person holds title to property, it is customary to require both spouses to sign a deed, mortgage, or other instrument affecting title in order to bind the marital interest of the spouse. A mortgage of a homestead (other than a purchase money mortgage) is void without the signature of both spouses. Minn. Stat. &sect;&sect;&nbsp;507.02 and 500.19, Subd. 4.

RECORDING REQUIREMENTS

None. But see Guaranty infra.

STATUTES TO BE WAIVED

Minnesota has a unique receivership statute. Minn. Stat. &sect;&sect;&nbsp;559.17 and 576.21, et seq. See Receiver Available infra.

UNUSUAL TREATMENT OF STANDARD PROVISIONS

Mortgages may secure both obligatory and voluntary future advances. If the mortgage secures future advances, the mortgage has priority over liens attaching after recordation of the mortgage only if the mortgage secures a revolving line of credit or the advances are obligatory. A mortgage securing a revolving line of credit, as described in Minn. Stat. &sect;&nbsp;507.325, is effective as notice for purposes of Minnesota's race-notice recording statute, regardless of the time or amount of advances, payments, or readvances and regardless, whether the advances or readvances are obligatory or voluntary, provided that the correct amount of mortgage registration tax is paid and the mortgage includes a statement that it secures a revolving loan. Minn. Stat. &sect;&nbsp;507.325. If, after the recording of a mortgage (other than a mortgage securing a revolving loan as described above) the mortgagee makes a voluntary advance, a lien recorded between the recording of the mortgage and the making of the voluntary advance may have priority over the lien of the mortgage to the extent the lien of the mortgage secures the amount of the voluntary advance. See Erickson v. Ireland, 134 Minn. 156 (1916). If a mortgage secures future advances of an indeterminate amount, care must be taken to insure proper mortgage registry tax is paid. See Mortgage Tax infra.

SECURING FUTURE ADVANCES

If, as is customary, a mortgage requires the mortgagor to pay real estate taxes and to maintain insurance and if the mortgagor fails to do so, the mortgagee may advance funds to pay the overdue taxes or insurance premiums and the amount of the advance is secured by the lien of the mortgage. See Minn. Stat. &sect;&nbsp;507.15, Subd. 7, &sect;&nbsp;580.29 and &sect;&nbsp;582.03, Subd. 1. In addition, a junior mortgagee may pay unpaid installments due on a prior lien and the payment will be secured by the junior mortgage. Minn. Stat. &sect;&nbsp;580.29. It is not necessary to pay mortgage registry tax on amounts a mortgagee advances to protect the mortgaged premises, including amounts advanced for the payment of taxes, assessments, charges, claims, fines, impositions, and insurance premiums, the amounts due upon prior or superior mortgages and other prior or superior liens, encumbrances, and interests and amounts advanced to pay legal expenses and attorney's fees. Minn. Stat. &sect;&nbsp;287.05, Subd. 4.

SECURING ADDITIONAL ADVANCES TO PROTECT THE COLLATERAL, INCLUDING PAYMENT OF TAXES AND INSURANCE

TRUSTEE UNDER DEED OF TRUST: N/A.

TRUSTEE UNDER DEED OF TRUST N/A.

Minnesota has 3 forms of mortgage foreclosure: foreclosure by advertisement, foreclosure by action and voluntary foreclosure. (Foreclosure of one or more installments is also available, Minn. Stat. &sect;&sect;&nbsp;580.09 and 581.07, but is rarely used.) To foreclose by advertisement, the mortgage must contain a power of sale, Minn. Stat. &sect;&nbsp;580.01. See, e.g., Minn.&nbsp;Stat. &sect;&nbsp;507.15 (the Minnesota statutory short form mortgage for the power of sale clause equivalent). In addition, a default must have occurred; no action can be pending on the debt or any part thereof; the mortgage and any and all assignments must be recorded; a notice of the pendency of the foreclosure must be recorded before the first publication of the notice of foreclosure (but not more than six months before the date of the first publication); the notice of foreclosure must be published for at least 6 weeks preceding the sheriff's sale; and a power of attorney to foreclose the mortgage must be recorded prior to the sheriff's sale. Minn. Stat. &sect;&sect;&nbsp;580.02, 580.05. The notice of pendency and power of attorney to foreclose usually are combined in a single document. In addition, if the premises are occupied, the notice of foreclosure must be served on the person(s) in possession of the premises at least 4 weeks before the sale. Minn. Stat. &sect; 580.03. The notice of foreclosure must also be served at least 14 days prior to the sale upon any person having a redeemable interest in the property who has recorded a request for notice prior to the recording of the notice of pendency. Minn. Stat. &sect; 580.032. A foreclosure by action is conducted like any ordinary civil suit. Minn. Stat. &sect; 581.01.&nbsp;The mortgagor(s), their successors and assigns, and all persons having an interest in the property inferior to the mortgage should be named as defendants. A notice of&nbsp;lis&nbsp;pendens&nbsp;should be recorded immediately after the complaint is filed.&nbsp;See&nbsp;Minn. Stat. &sect; 557.02. After trial or default proceedings, a&nbsp;judgment is entered for the amount due and the sheriff is ordered to sell the mortgaged premises or some part thereof to satisfy the judgment. Minn. Stat. &sect; 581.03.&nbsp;Notice of the sale must be posted and published for six weeks prior to the sale. Minn. Stat. &sect; 550.18.&nbsp;The sale must be confirmed by the&nbsp;court. Minn. Stat. &sect; 581.08.&nbsp; Additional notices may be required in both a foreclosure by advertisement and a foreclosure by action, depending upon the nature and use of the property.&nbsp;See, e.g.,&nbsp;Minn. Stat. &sect; 47.20,&nbsp;Subd. 8(3)(c) (30 day notice for “conventional loan”); 580.021 and 580.022 (foreclosure prevention counseling for 1-4 family dwellings, one of which is owner-occupied); 580.041 (foreclosure advice and notice of redemption rights for 1-4 family dwellings, one of which is owner-occupied); 580.042 (foreclosure advice notice to tenant for 1-4 family dwellings, one or more of which are occupied by a tenant as a residence); 582.041 (homestead designation notice); 582.042 (separate tract designation notice) and 583.26 (mediation notice for certain mortgages on agricultural property). In both foreclosure by advertisement and foreclosure by action, the mortgagor and the holder of a junior lien may reinstate the mortgage prior to the sheriff's sale by paying the amount in default plus various costs and disbursements. Minn. Stat. &sect; 580.30. At the request of the mortgagor or the sheriff, the mortgagee must inform the requester of the amount necessary to reinstate the mortgage.&nbsp;Id.&nbsp; A mortgagor and mortgagee may enter into an agreement for voluntary foreclosure if the mortgage was executed on or after August&nbsp;1, 1993, the mortgage has been in default for at least 1 month, and the property is not classified as a homestead and is not used for agricultural purposes. Like the foreclosure by advertisement, a voluntary foreclosure is a non-judicial proceeding. The procedures for a voluntary foreclosure are set forth in Minn. Stat. &sect;&nbsp;582.32. In a voluntary foreclosure, the mortgagor's post-sale redemption period is reduced to 2 months, the mortgagee waives any right to deficiency or other claim for personal liability against the mortgagor, the mortgagor waives any right to surplus sale proceeds and to contest the foreclosure and waives any rights to rents and occupancy during the period from the date of the agreement through the end of the redemption period. Id. The mortgagee must record the voluntary foreclosure agreement, or a memorandum of the agreement, within 7 days of its effective date. Id.

BRIEF DESCRIPTION OF PROCEDURE

Foreclosure by advertisement generally takes from 8 to 15 months: 2 weeks to draft the foreclosure notice and arrange for publication, 6 to 8 weeks to publish the notice of foreclosure, and 6 or 12 months for the redemption period. Foreclosure by action generally takes a year or more depending on the length of the applicable redemption period (6 or 12 months) and the defenses or affirmative claims that the mortgagor asserts in the litigation. Absent special circumstances (such as where there is a defect in the mortgage requiring, for example, reformation, where priority is at issue or where the mortgagee desires a deficiency judgment), most mortgages are foreclosed by advertisement.

TYPICAL LENGTH OF PROCEDURE

Except in the case of a voluntary foreclosure under Minn. Stat. &sect;&nbsp;582.32 and postponement of the sale of homestead property under Minn. Stat. &sect;&nbsp;580.07, Subd. 2, the redemption period in Minnesota is either 6 or 12 months. Minn. Stat. &sect;&nbsp;580.23. The mortgagor has a 12-month period of redemption if: (i)&nbsp;the mortgage was executed before July&nbsp;1, 1967; (ii)&nbsp;the amount owing is less than 2/3 of the original principal amount of the loan; (iii)&nbsp;the mortgage was executed before July&nbsp;1, 1987, and the mortgaged premises exceeded 10 acres; (iv)&nbsp;the mortgage was executed before August&nbsp;1, 1994, and the mortgaged premises exceeded 10 acres but was less than 40 acres and in agricultural use when the mortgage was executed; (v)&nbsp;the mortgaged premises exceeded 40 acres; or (vi)&nbsp;subject to certain qualifications, the mortgage was executed on or after August&nbsp;1, 1994, the mortgaged premises exceeded 10 acres but was less than 40 acres, and was in agricultural use when the mortgage was executed. Minn. Stat. &sect;&nbsp;580.23, Subd. 2. If the foreclosure is not a voluntary foreclosure pursuant to Minn. Stat. &sect;&nbsp;582.32, the mortgagee has not obtained a court order reducing the redemption period to 5 weeks pursuant to Minn. Stat. &sect;&nbsp;582.032 and none of the 6 circumstances described in the preceding sentences exist, the redemption period is 6 months. Minnesota Statutes &sect;&nbsp;582.031 requires the holder of a sheriff's certificate of sale to secure and periodically inspect the property described in the certificate if the holder “knows that there is prima facie evidence of abandonment of the property.” The amount the mortgagor must pay to redeem is the sale price plus interest (at the rate provided in the mortgage, if that rate is stated in the sheriff's certificate, or 6 percent) and certain costs allowed by statute (such as taxes and insurance) provided such allowed costs have been established by an affidavit furnished to the sheriff before expiration of the mortgagor's redemption period (or earlier if requested by the sheriff). Minn. Stat &sect;&sect; 580.23 and 581.10. If the mortgagor does not redeem, junior lienholders may redeem in order of priority, provided they have recorded a notice of intention to redeem and have complied with certain other statutory requirements at least a week before expiration of the mortgagor's redemption period. Minn. Stat. &sect; 580.24.&nbsp; State redemption statutes are not applicable to the foreclosure of federally held or insured loans under the National Housing Act. Once the federal government forecloses on a mortgage, the rights of the mortgagor to regain the property are extinguished. See United States v. Victory Highway Vill., 662 F.2d 488, 497-498 (8th Cir. 1981). WAIVER OF REDEMPTION; REDUCTION OF REDEMPTION PERIOD:&nbsp;The statutory right of redemption may not be waived, and a purported waiver is unenforceable.&nbsp;U.S. Bank, N.A. v. RBP Realty, LLC,&nbsp;888 N.W.2d 699 (Minn. Ct. App. 2016) (review denied April 18, 2017). Likewise, the equitable right of redemption may not be waived or bargained away at the time of or as part of the mortgage transaction.&nbsp;O'Connor v. Schwan, 190 Minn. 177, 251 N.W. 180 (1933). However, a mortgagor may bargain away or sell the equitable right of redemption for a fair consideration after and apart from execution of the mortgage, but such transactions are scrutinized “with jealous care.”&nbsp;De&nbsp;Lancey&nbsp;v. Finnegan, 86 Minn. 255, 90 N.W. 387 (1902). The mortgagor may waive the 12-month redemption period applicable to property in agricultural use if the mortgage is executed after August 1, 1994 and the waiver is either:&nbsp;i) a separate document in recordable form (and is recorded within 10 days after the mortgage is recorded) that either refers to the mortgage recording information or contains specific identifying information; or ii) a separately executed and acknowledged addendum to the mortgage. Minn. Stat. &sect; 580.23,&nbsp;Subd. 4. If this 12 month redemption period is validly waived, the applicable redemption period is 6 months. A mortgagee or holder of a sheriff's certificate may seek a court order reducing the redemption period to 5 weeks if the mortgaged premises contains 10 or fewer acres, is not used in agricultural production, contains a residential dwelling of fewer than 5 units (that is not a model home or under construction), and is abandoned.&nbsp;

REDEMPTION PERIOD AND PRICE

A Minnesota anti-deficiency statute limits the circumstances where a lender can obtain a deficiency judgment against a mortgagor. Minn. Stat. &sect;&nbsp;582.30. A deficiency judgment is not allowed if a mortgage is foreclosed by advertisement and has a redemption period of 6 months or if the redemption period is reduced to 5 weeks pursuant to Minn. Stat. &sect;&nbsp;582.032. If a mortgagee forecloses by voluntary foreclosure, the mortgagee waives any right to a deficiency, but that does not preclude an agreement between the mortgagor and mortgagee to a payment to the mortgagee as part of the voluntary foreclosure. Minn. Stat. &sect;&nbsp;582.32, Subd. 3. The limitation on deficiency judgments under the voluntary foreclosure statute does not apply to an agreement between a mortgagee and a guarantor. See Minn. Stat. &sect;&nbsp;582.32, Subd. 3. Regarding availability of a deficiency against a guarantor generally, see GUARANTY infra. In circumstances where a deficiency is allowed, the deficiency amount normally equals the difference between (i)&nbsp;the outstanding amount secured by the mortgage, in a foreclosure by advertisement, or the amount of the judgment, in a foreclosure by action, and (ii)&nbsp;the amount bid at the sheriff's foreclosure sale. In the case of agricultural property, the deficiency amount is normally the difference between the amount owed and the fair market value of the property, as determined by a jury. Minn. Stat. &sect;&nbsp;582.30. A mortgagee is barred from enforcing a deficiency judgment or personal judgment on a mortgage debt on property used in agricultural production 3 years after the date judgment was entered. In all other cases, the deficiency judgment is enforceable for 10 years. There are a number of other restrictions that apply to executing on deficiency judgments arising from a mortgage foreclosure on agricultural property.

DEFICIENCIES

If property subject to a mortgage foreclosure is also subject to one or more leases, the foreclosure's impact on a specific lease depends on the relative priority of the mortgage and the lease and the presence or absence of agreements between or binding upon the mortgagee and the lessee. In the absence of a contrary agreement between or binding upon the mortgagee and the lessee (such as a subordination, nondisturbance and attornment agreement), the foreclosure of a mortgage with priority over the lease extinguishes the lease and the mortgagee may recover possession of the premises by giving at least 90 days written notice pursuant to Minnesota Statutes, &sect;&nbsp;504B.285, Subd. 1a. If the lease has priority over the mortgage, the foreclosing mortgagee takes title subject to the lease.

EFFECT OF FORECLOSURE UPON LEASES

The interest for any legal indebtedness shall be at the rate of 6% per year, unless a different rate is contracted for in writing. Unless an exception applies, a lender may charge interest at a rate not exceeding 8% per year. Minn. Stat. &sect; 334.01, Subd.1.

USURY CEILING

There are many exceptions to the general usury rule, depending upon the type of lender, the type of borrower, the amount of the loan, and the security for the loan. The most commonly applicable exceptions are the following: <ul>
 <li>If the borrower is a corporation, cooperative, limited liability company, or limited partnership, there is no limitation on the interest rate. Minn. Stat. &sect;&nbsp;334.022.</li>
 <li>If the lender is a bank, a bank and trust, a trust company with banking powers, a savings bank, a savings association, an industrial loan and thrift company, a regulated lender, or an operating subsidiary of any such institution, and the borrower is a corporation, government, government subdivision or agency, trust, estate, partnership, joint venture, cooperative, limited liability company, or association, there is no limitation on the interest rate. Minn. Stat. &sect;&nbsp;47.59, Subd. 2.</li>
 <li>If the lender is a bank, savings bank or savings association organized under U.S. or Minnesota law, or a trust company, or a banking institution subject to the supervision of the Minnesota Commerce Department, or a mortgagee or lender approved or certified by HUD, VA, FmHA, FLHMC, or FNMA, and the loan is secured by a mortgage on real estate, and except as provided in Minn. Stat. &sect; 58.137, there is arguably no limitation on the interest rate. Minn. Stat. &sect;&sect; 47.20, Subd. 1, 47.21.</li>
 <li>For most institutional lenders and some other lenders, if the loan is secured by a first lien on residential real estate, a first lien on all stock allocated to a dwelling unit in a residential comparative housing corporation, or a first lien on a residential manufactured home, there is no limitation on the interest rate. Minn. Stat. &sect;&nbsp;47.204. See also Stat. &sect;&nbsp;47.203.</li>
 <li>Except for contracts for deed (see Minn. Stat. &sect; 47.20, Subd. 4a) and except as provided in Minn. Stat. &sect; 58.137, if the amount of the loan is $100,000 or more, or if the loan is made pursuant to a binding commitment to lend $100,000 or more, there is no limitation on the interest rate. Minn. Stat. &sect; 334.01, Subd. 2.</li>
</ul> &nbsp; <ul>
 <li>If the lender is a bank, savings bank, savings association, or credit union organized under U.S. or Minnesota law, except an extension of credit made pursuant to Minn. Stat. &sect; 48.185, the lender may charge interest at a rate not exceeding 4&frac12;% per year in excess of the discount rate (including any surcharge) on 90-day commercial paper in effect at the Federal Reserve Bank of Minneapolis. Minn. Stat. &sect; 48.195.</li>
 <li>If the lender is not a credit union, and the loan is made to a non-corporate borrower in an original principal amount of less than $100,000, and the loan is secured by a mortgage on real estate containing (or that will contain) 1 or more residential units, and the loan is not insured or guaranteed by HUD, VA, or FmHA, the lender may charge interest at a rate as described in Minn. Stat. &sect;&nbsp;47.20, Subd. 2(3), 3 and 4a.</li>
 <li>If a loan in an amount less than $100,000 is for business or agricultural purposes, the lender may charge interest at a rate not exceeding 4&frac12;% per year in excess of the discount rate on 90-day commercial paper in effect at the Federal Reserve Bank of Minneapolis. The proceeds of any such loan must not be used to finance the purchase or maintenance of real estate used principally for the borrower's residence. Minn. Stat. &sect;&nbsp;334.011, Subd. 1.</li>
</ul>

USURY EXCEPTIONS

Minnesota enacted Revised Article 9 of the Uniform Commercial Code effective July 1, 2001. Minn. Stat. &sect; 336.9-101&nbsp;et seq. UCC fixture filings and UCC filings on as-extracted collateral and timber to be cut are filed in the real estate records in the county where the real estate is located. Minn. Stat. &sect; 336.9-501(a)(1). If the real estate is registered property, the recording office is the Registrar of Titles.&nbsp;If the real estate is abstract property, the recording office is the County Recorder. A properly drafted&nbsp;mortgage that&nbsp;is recorded in the&nbsp;applicable&nbsp;real estate records is effective as a fixture filing or as a financing statement covering as-extracted collateral or timber to be cut. Minn. Stat. &sect; 336.9-502(c). Manufactured homes are considered “Goods” under Minn. Stat. &sect; 336.9-102(44). Non-real estate UCC filings are filed with the Minnesota Secretary of State. Special rules apply if the debtor is a transmitting utility.&nbsp;See,&nbsp;e.g., Minn. Stat. &sect; 336.9-501(b).&nbsp;A mortgage filed as a fixture filing remains effective until the mortgage is released or satisfied of record.&nbsp;Minn. Stat. &sect; 336.9-515(g).&nbsp;An&nbsp;initial financing statement filed in connection with a manufactured home transaction is effective for 30 years after the filing date if it indicates it is in connection with a manufactured home transaction.&nbsp;Minn. Stat. &sect; 336.9-515(b).&nbsp;Minnesota accepts electronic filings&nbsp;(Minn. Stat. &sect; 336.9-516) and the&nbsp;uniform forms of UCC financing statement, addendum, amendment, and amendment addendum adopted by the National Conference of Commissioners on Uniform State Laws. Minn. Stat. &sect; 336.9-521.&nbsp;

FINANCING STATEMENTS

Lenders in Minnesota are concerned that guarantors understand and agree that the anti-deficiency statute does not limit the guarantor's liability for a deficiency after the mortgage is foreclosed. In addition, Minnesota case law provides that in at least some circumstances a guaranty that does not provide a prospective right of revocation to the guarantor as to future indebtedness (not the specific debt being guaranteed) is enforceable for only a reasonable period of time, which may be as short as 3 years. Because the case law does not provide clear outer boundaries for this potential guarantor defense, most Minnesota guaranties are drafted with a prospective right of revocation. The related loan documents typically are drafted to provide that the exercise of the right of revocation constitutes an event of default.

UNUSUAL PROVISIONS OR REQUIREMENTS

Lenders in Minnesota routinely require guarantors to acknowledge that they will be liable for any deficiency remaining after the foreclosure sale and waive the provisions of Minnesota's anti-deficiency statute, Minn. Stat. &sect;&nbsp;582.30, Subd. 2.

There are several courses of action when attempting to enforce a guaranty of a loan that is also secured by a mortgage on Minnesota real estate. First,&nbsp;under the current case law from the Minnesota Court of Appeals and the United States District Court for the District of Minnesota,&nbsp;the mortgagee may foreclose the mortgage by advertisement and then commence an action against the guarantor for any deficiency remaining after the foreclosure sale.&nbsp;See&nbsp;Nat'l City Bank of Minneapolis v. Lundgren, 435 N.W.2d 588, 591-93 (Minn. Ct. App. 1989);&nbsp;see&nbsp;also Ed Herman & Sons v. Russell, 535 N.W.2d 803, 806 (Minn. 1995). There is no decision from the Minnesota Supreme Court on this issue or interpreting the relevant statutes, so it is possible that a guarantor could raise the anti-deficiency statute in defense of any deficiency liability. A deficiency exists only to the extent the amount bid at a sale is less than the amount of the debt plus the costs of the sale. Second, the lender may foreclose the mortgage by action and name the guarantor in the same lawsuit. Third, the lender may sue the guarantors first and obtain a personal judgment against them. If an execution is returned unsatisfied, the lender may then foreclose the mortgage. The mortgage debt is reduced by any payments from the guarantor.&nbsp;Herman & Sons v. Russell, 535 N.W.2d 803, 808 (Minn. 1995). As stated above, a mortgagee cannot foreclose a mortgage by advertisement if an action has been instituted at law, and remains pending, to recover all or any part of the debt. Minn. Stat. &sect; 580.02. It is not clear under Minnesota law whether an action on a guaranty is an action on the mortgage debt, so mortgagees generally do not attempt to sue a guarantor and foreclose the mortgage&nbsp;by advertisement at the same time. The general practice is to foreclose the mortgage first and then seek to recover any deficiency from the guarantor.&nbsp;

SPECIAL PROBLEMS IN ENFORCEMENT OF GUARANTY

The statute limitations of a promissory note is 6 years from its maturity date or, in the case of a demand note, 6 years from the date the note is executed. Minn. Stat. &sect;&nbsp;541.05. See also In re Estate of Fauskee, 497 N.W.2d 324, 326 (Minn. Ct. App. 1993). The statute of limitations for a mortgage is 15 years from the maturity date stated in the mortgage, or if no maturity date is stated in or ascertainable from the mortgage, then 15 years after the date of the mortgage. Minn. Stat. &sect;&nbsp;541.03, Subd. 2.&nbsp; For this reason, it is important to state the maturity date in the mortgage instrument.

STATUTE OF LIMITATION PERIOD

Minnesota law imposes civil liability for actual damages upon a lender who fails to satisfy a mortgage within 10 days after the borrower's request and after the borrower tenders the lender's reasonable charges. Minn. Stat. &sect;&nbsp;507.41. A parallel statute also provides for the delivery of a satisfaction of mortgage and imposes a civil penalty of up to $500, in addition to any actual damages caused by the lender failing to deliver a good and valid satisfaction of mortgage in recordable form to any party paying the full and final balance of a mortgage indebtedness that is secured by Minnesota real estate, within 45 days of the receipt of the written request and the payment of all sums due. Minn. Stat. &sect;&nbsp;47.208. A release or satisfaction of a mortgage also releases the assignment of rents and profits related to that property. A separate satisfaction or release of the assignment of rents and profits is not required. Minn. Stat. &sect;&nbsp;559.17, Subd.3. Title insurance companies may execute and record a “certificate of release” with respect to a mortgage securing $1,500,000 or less if a satisfaction or release of the mortgage has not been executed and recorded after the date payment in full of the loan secured by the mortgage was sent in accordance with a payoff statement furnished by the mortgagee or the mortgage servicer. Minn. Stat. &sect;&nbsp;507.401. See this statute for the required contents of the “certificate of release.”

REQUIREMENTS FOR RELEASE OF LIEN

A conveyance of the homestead, including a mortgage that is not a purchase money mortgage, is invalid in Minnesota without the signatures of both spouses. Minn. Stat. &sect;&sect;&nbsp;507.02 and 500.19, Subd. 4. The general practice is to presume that all real property held by a married person is homestead property and, thus, require the signature of both spouses.

HOMESTEAD ISSUES

Minnesota is not a community property state. Nevertheless, if the borrower/mortgagor is an individual, then his or her spouse must join in the mortgage (but not the note) to avoid any doubt that the mortgaged property is a homestead or other marital property. See Homestead Issues, supra.

COMMUNITY PROPERTY

A mortgage registry tax is imposed on the recording of a mortgage in the amount of .0023 (.0024 currently in Hennepin and Ramsey counties) multiplied by the maximum principal amount secured by a mortgage. Minn. Stat. &sect;&nbsp;287.035. If all of the property subject to a mortgage is located in Minnesota, the mortgage registry tax is imposed on the maximum debt amount referred to or incorporated by reference in the mortgage. The front page of the mortgage should include a statement similar to the following: “THE MAXIMUM PRINCIPAL AMOUNT OF DEBT SECURED HEREBY IS $_____. If the mortgage is intended to secure only a portion of a debt recited or referred to in the mortgage, the mortgage may contain the following statement, or its equivalent, on the first page: “Notwithstanding anything to the contrary herein, enforcement of this mortgage is limited to a debt amount of $_______ under Chapter 287 of Minnesota Statutes.” In that case, the tax will be imposed only on the amount of the debt so stated, but the effect of the mortgage, or any amendment or extension of the mortgage, as evidence in any court in this state or as notice for any purpose in this state, is limited to the amount contained in the statement (i.e., the amount upon which the tax has been paid) and additional amounts for accrued interest and advances made to protect the mortgaged premises or the mortgage as described in Minn. Stat. &sect;&nbsp;287.05, Subd. 4. If the mortgage secures an indeterminate amount, the mortgage may be recorded without payment of any tax, but the mortgage may not be received in evidence in any court and is not valid notice (for purposes of establishing priority under Minnesota's race-notice recording act or otherwise) until an affidavit or other document stating the amount and the time of the actual advance is recorded and the tax is paid on that amount. In that case, the priority of the mortgage dates from the date of the recording of the affidavit or other document and the payment of the tax. If a mortgage covers property located both in Minnesota and in another state(s), the mortgagee may record an affidavit stating the value of the real property located in Minnesota and the value of all of the real property subject to the mortgage. The mortgage registry tax is determined by multiplying the maximum debt amount referred to, or incorporated by reference, in the mortgage by a fraction, the numerator of which is the value of the Minnesota real property secured by the mortgage and the denominator of which is the value of all of the real property secured by the mortgage. In the alternative, the mortgage may contain the following statement, or its equivalent, on the first page. “Notwithstanding anything to the contrary herein, enforcement of this mortgage in Minnesota is limited to a debt amount of $....... under chapter 287 of Minnesota Statutes.”&nbsp; In such case, the tax shall be imposed based only on the amount of debt so stated to be secured by real property located in Minnesota; and, the effect of the mortgage, or any amendment or extension, as evidence in any Minnesota court, or as notice for any purpose, shall be limited to the amount contained in the statement and for which the tax has been paid and additional amounts for accrued interest and advances not subject to tax under subdivision 4 or Section 287.035.

MORTGAGE TAX

Minnesota does not impose any documentary stamp taxes on mortgages.

DOCUMENTARY STAMP TAX

A deed tax is imposed upon each deed in the amount of .0033 (.0034 currently&nbsp; in Hennepin and Ramsy counties) multiplied by the consideration for the conveyance, including in some cases the fair market value of personal property located on the real estate, but excluding the value of any lien remaining on the property at the time of sale. Minn. Stat. &sect;&nbsp;287.21. The deed tax does not apply to contracts for deeds, mortgages, wills, plats, leases, deeds to or from the United States, deeds partitioning undivided interests in property, mortgage foreclosures, redemptions by mortgagors from mortgage foreclosures, and other situations. See Minn. Stat. &sect;&nbsp;287.22. Deed tax is not due upon the recording of a Sheriff's Certificate of Sale or a Certificate of Redemption in favor of the Mortgagor, but is due on the recording of a Certificate of Redemption in favor of a junior creditor. Id.

TRANSFER TAX

Minnesota courts allow parties to a contract, acting in good faith and without an intent to evade the law, to control the choice of law by express contractual provision consistent with constitutional requirements. OT Industries, Inc. v. OT-tehdas OY Santasalo-Sholberg Ab, 346 N.W.2d 162, 168 (Minn. 1984); Milliken and Co. v. Eagle Packaging Company, Inc., 295 N.W.2d 377 (Minn. 1980). The federal district court, in Carlock v. Pillsbury Co., 719 F.Supp. 791, 807 (D. Minn. 1989), applying Minnesota law, stated that Minnesota's approach to choice of law is based on 5 “choice-influencing considerations:” predictability of results, maintenance of interstate and international order, simplification of the judicial task, advancement of the forum's governmental interests, and application of the better rule of law. Id. at 807. Although this standard does not lend itself to a simple resolution as to which law to apply, the court noted that “[g]enerally, Minnesota enforces contractual choice of law provisions, so long as application of the chosen law is consistent with constitutional requirements.” Id. This rule is reflected in the Minnesota Uniform Commercial Code, which provides that “[e]xcept as otherwise provided in this section, when a transaction bears a reasonable relation to this state and also to another state . . . the parties may agree that the law either of this state or of such other state . . . shall govern their rights and duties.” Minn. Stat. &sect;&nbsp;336.1-301(a).

ENFORCEABILITY OF AGREEMENT OF BORROWER AND LENDER AS TO CHOICE OF LAW PROVISIONS

In Minnesota, a mortgage is deemed to be a lien and not a conveyance. A mortgagee is not entitled to possession of the mortgaged property or the rents prior to foreclosure of the mortgage and expiration of the applicable redemption period, except pursuant to an assignment of rents which complies with Minn. Stat. &sect;&nbsp;559.17 or as provided in Minn. Stat. &sect;&nbsp;576.25, Subd. 5. If the assignment so provides or upon the commencement of a mortgage foreclosure under Minn. Stat. Chapters 580 or 581, a court is authorized to appoint a receiver to manage the property and collect the rents from its appointment and through the entire redemption period, Minn. Stat. &sect; 559.17 and &sect;&nbsp;576.25, Subd. 5 (a). The rents shall be applied by the receiver as provided in Minn. Stat. &sect;&nbsp;576.25, Subd. 5(d).&nbsp; An assignment of rents may be contained within a mortgage or in a separate assignment.

RECEIVER AVAILABLE

Minnesota prohibits a lender from accepting a borrower's request for an interest rate lock-in if the request is made more than 10 days before the closing unless the borrower signs a lock-in agreement. These agreements are called “interest rate agreements” or “discount point agreements.” The requirements for an interest rate agreement are contained in Minn. Stat. &sect;&nbsp;47.206.

ANY PROHIBITION OR SPECIAL RULES REGARDING LOAN APPLICATION, LOAN FEES OR COMMITMENT FEES

. On various real estate loans (See Minn. Stat. &sect;&nbsp;47.206, Subd. 1(b)), a lender (See Minn. Stat. &sect;&nbsp;47.206, Subd. 1(a)) that offers the borrower (See Minn. Stat. &sect;&nbsp;47.206, Subd. 1(c)) the opportunity to enter into a lock-in agreement (or similar agreement) before the loan closing must give the borrower a written (See Minn. Stat. &sect;&nbsp;47.206, Subd. 3) disclosure of various terms (See Minn. Stat. &sect;&nbsp;47.206, Subd. 2). Any lock-in agreement or similar agreement should be in writing, should state consideration and the relevant terms and conditions, and should be signed by the borrower and the lender. However, an oral agreement is permitted within 10 days before closing (See Minn. Stat. &sect;&nbsp;47.206, Subd. 4). Any written statement of current loan terms and conditions must contain a specific disclaimer. No one may advise, encourage, or induce a borrower or a third party to misrepresent information in a loan application. A lender may be liable to the borrower for violating any of these rules or for causing unreasonable delay in processing a loan application. Minn. Stat. &sect;&nbsp;47.206. In any residential mortgage loan transaction, a lender should not unreasonably delay the processing of a residential mortgage loan application or the closing of a residential mortgage loan, or make any false, deceptive, or misleading statement regarding the borrower's ability to qualify for any loan, or issue any conditional qualification or approval of a loan without specific disclosures, or engage in various other actions. Minn. Stat. &sect;&nbsp;58.13, Subd. 1(3) and (9). A lender receiving a loan application should not discriminate against any person or group of persons because of race, color, creed, religion, national origin, sex, marital status, public assistance status, disability, sexual orientation, or familial status of the applicant or any occupant or tenant of the real estate, or because of the social, economic, or environmental conditions of the area. The lender also should not express any limitation, specification or discrimination on any prohibited basis. Minn. Stat. &sect;&nbsp;363A.09 and 363A.16, Subds. 1 and 2.

Loan Applications

. Residential mortgage originators and servicers must obtain a license or a certificate of exemption from the Minnesota Commerce Department and comply with record keeping, notification, disclosure, and other requirements if the borrower or the originator is located in Minnesota. Minn. Stat. Ch. 58. These requirements do not apply to a bank, savings bank, savings association, or a credit union that is subject to supervision by a federal agency or the Minnesota Commerce Department. Minn. Stat. &sect;&nbsp;58.04, Subd. 4. All licensed and unlicensed residential mortgage originators and servicers (including persons exempt from licensing) must comply with various standards of conduct. Minn. Stat. &sect;&nbsp;58.13. Mortgage brokers that negotiate or attempt to negotiate a real estate loan (other than a residential mortgage loan) for a fee or other consideration must be licensed as real estate brokers. Minn. Stat. &sect; 82.81, Subd. 1. Out-of-state lenders who make loans secured by Minnesota real estate must, in certain cases, file a notice of business activities report. Minn. Stat. &sect; 290.015. Failure to file the report when required deprives the lender of any cause of action (presumably in any court) upon which it may bring suit under Minnesota law unless and until it pays all taxes, interest, and civil penalties due the State of Minnesota for all periods, or provides for their payment by security or bond. Minn. Stat. &sect;&nbsp;290.371. Thus out-of-state lenders need to carefully review these statutes with their tax advisors to determine whether a notice of business activities report is required.

Licenses

. Minn. Stat. &sect;&nbsp;58.137 restricts the finance charges, points, fees, and other charges that a residential mortgage originator can charge in connection with a residential mortgage loan. In addition, there are limitations and restrictions on the ability to include prepayment premiums or fees on residential mortgage loans. If a residential mortgage originator offers to make residential mortgage loans to any borrowers located in Minnesota with prepayment premiums, penalties, fees or other charges exceeding the maximum amount permitted under Minn. Stat. &sect;&nbsp;58.137, then the residential mortgage originator must make the following disclosure to each prospective borrower located in Minnesota, whether or not the prospective borrower receives a residential mortgage loan: “THIS IS VERY IMPORTANT: THIS LENDER CHARGES YOU A SUBSTANTIAL PENALTY IF YOU PAY OFF OR REFINANCE YOUR LOAN BEFORE MATURITY. ASK THE LENDER HOW MUCH THE PENALTY WILL BE FOR YOUR LOAN.” This disclosure must be read to the prospective borrower when the residential mortgage loan is requested, and again within 3 days before the borrower signs the note or other agreement for the residential mortgage loan. The disclosure should also be provided in writing. Minn. Stat. &sect;&nbsp;58.137, Subd.&nbsp;2&nbsp;(b) provides detail as to the timing and type size for such disclosures.

Prepayment Penalties

See Minn. Stat. &sect;&nbsp;287.01, Subd. 2 with respect to the definition of “amendment” to a mortgage. Pursuant to Minn. Stat. &sect;&nbsp;287.05, Subd. 8, a mortgage “amendment” may contain the following statement, or its equivalent, on its first page: “This is a mortgage amendment, as defined in Minnesota Statues, section 287.01, subdivision 2 and as such it does not secure a new or an increased amount of debt.” Since the mortgage amendment does not secure new (or increased) debt, no additional mortgage registry tax is due upon filing of the mortgage amendment. Other mortgage modifications (including modifications occurring after principal has been repaid and the lender has agreed to advance additional funds) may require payment of additional mortgage registry tax; in such cases the mortgage modification should include a statement regarding the amount of mortgage registry tax previously paid.

MODIFICATIONS TO MORTGAGES

Pursuant to Minn. Stat. &sect;&nbsp;514.672, Minnesota grants to itself a lien for environmental cleanup in real property that is owned by the person responsible for the cleanup and that is also affected by the cleanup. The lien attaches when the state has incurred cleanup costs related to a release of hazardous substances or a release of petroleum from a tank, notice to the affected person has been provided, and notice is filed in the appropriate county offices. The lien is subject to all existing perfected interests. Pursuant to Minn. Stat. &sect;&nbsp;115B.412, Subd. 5, Minnesota also grants itself a similar lien under its statutes regarding landfill cleanup, but the landfill lien is a superlien, taking precedence over all other liens on the property regardless of when the other liens were or are perfected.

ENVIRONMENTAL LIEN LAWS.

LABOR AND MATERIAL LIEN CLAIMS

Except with respect to a bona fide purchaser, mortgagee, or other encumbrancer without actual or record notice, all contractors and materialmen on a project have a lien that attaches at the time the first item of labor or material is furnished for the beginning of the improvement. That is, labor and material lien claims for all claimants relate back to the furnishing of the first item of labor or material without regard to when any particular claimant began furnishing labor or material to the improvement. Minn. Stat. &sect;&nbsp;514.05. With respect to a bona fide purchaser, mortgagee, or encumbrancer without actual or record notice, no lien attaches prior to the actual visible beginning of the improvement on the ground, except that a contractor or materialman may file, in the appropriate county land records, a notice that constitutes notice only of that claimant's lien. Visible staking, engineering, land surveying and soil testing are not considered actual and visible beginning of improvements. Minn. Stat. &sect; 514.05, Subd. 2. What constitutes the actual and visible beginning of the improvement beyond these specified activities is a matter of substantial case law. Vegetation removal, grading, or excavation preparatory to construction of a building would constitute the actual visible beginning of the improvement. The lien ceases at the end of 120 days after the last item of work unless a statement of the lien claim is recorded in the appropriate county land records within the 120-day period. Minn. Stat. &sect;&nbsp;514.08. Failure to record a notice of a lien within the 120-day period extinguishes the lien. No lien may be enforced in any case unless the lien claimant files a complaint within 1 year of the date of the Title insurance companies will generally delete the “standard” exception for mechanic's liens in the title insurance commitment if the title company is assured via affidavit and inspection of the property that there is no construction in progress predating the recording of the mortgage and no work for which payment has not been made. Where visible work commences prior to recording of the mortgage, the mortgage will not have actual priority over mechanic's lien claims. Title insurance companies may nonetheless insure priority of the lien of the mortgage either by deletion of the mechanic's lien exception or through use of the ALTA 32 series endorsements, based on the title insurance company's underwriting criteria. See TITLE INSURANCE infra. Title insurance companies will typically insist on making construction loan disbursements when issuing any form of mechanic's lien coverage.

INCEPTION OF L&M LIEN (Priority of Lien of Mortgage)

The 2021 ALTA Loan Policy form with extended coverage is available and most frequently used. The 2006 ALTA Loan Policy form may also be available upon request.

FORM USUALLY REQUIRED BY LENDER

Minnesota law does not regulate or restrict the availability of particular endorsements and most title insurance endorsements are generally available. Title insurance companies are not prohibited from negotiating the terms of endorsements. In residential transactions, the variable rate endorsement (ALTA Form 6-06) is the only one commonly requested by lenders. This endorsement insures against invalidity or loss of priority of the mortgage lien as a result in changes in the interest rate. With respect to commercial transactions, the following list includes the most common endorsements requested by lenders: <ol>
 <li>Comprehensive Endorsement, ALTA Form 9-06</li>
 <li>Zoning Endorsement, ALTA Form 3.1 (or ALTA Form 3, if vacant land)</li>
 <li>Access Endorsement, ALTA Form 17-06 (or other)</li>
 <li>Same as Survey Endorsement, ALTA Form 25-06</li>
 <li>Single Tax Parcel Endorsement, ALTA Form 18-06</li>
 <li>Contiguity Endorsement, ALTA Form 19-06</li>
 <li>Legal Subdivision Endorsement, ALTA Form 26</li>
 <li>Location/Address Endorsement, ALTA Form 22-06</li>
 <li>i. Utility Access Endorsement, ALTA Form 17.2-06</li>
 <li>Usury Endorsement, ALTA Form 27</li>
 <li>Deletion of Arbitration Provision</li>
 <li>Mortgage Registry Tax Endorsement, ALTA Form 38-06</li>
 <li>Environmental Lien Endorsement, ALTA Form 8.2-06</li>
 <li>Private Rights Endorsement, ALTA Form 9.6-06</li>
 <li>Minerals Endorsement, ALTA Form 35-06</li>
 <li>Doing Business Endorsement, ALTA 24-06</li>
 <li>Future Advances Endorsement, ALTA 14</li>
 <li>Aggregation (“Tie-in”), ALTA 12</li>
 <li>Construction/Disbursement&nbsp;(for construction loans), ALTA 32/33</li>
</ol> Few lenders would require all of the endorsements on this list, and in many cases several of these endorsements would not be available (for example, if there is only a single parcel, then a contiguity endorsement would not be needed).&nbsp;The Mortgage Registry Tax Endorsement, ALTA Form 38-06, is important in Minnesota as the lien of a mortgage is perfected only if the correct amount of Mortgage Registry Tax is paid. &nbsp;

Minnesota

Mortgage Law Summary

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Mortgage Law Summary for Minnesota

Minnesota

Mortgage Law Summary

Continue reading theMortgage Law Summary for Minnesota

Continue reading the
Mortgage Law Summary for Minnesota