The Minnesota Supreme Court recently dealt a blow to mortgage lenders who have foreclosed against properties despite technical defects in their documentation. In Ruiz v. 1st Fidelity Loan Servicing, LLC (A11-1081 Apr. 17, 2013), a borrower challenged the validity of a foreclosure where the lender had recorded an assignment of the mortgage on the same day that it had published the first notice of foreclosure sale and recorded a notice of pendency of foreclosure. The Court determined that Minnesota's foreclosure by advertisement statute requires all assignments of the mortgage are to be recorded before a lender has a right to foreclose. In the Ruiz case, since the assignment at issue was not recorded until the same date that the lender made its first publication of the notice of sale, it was not recorded before commencement of the foreclosure proceeding. Thus the foreclosure was defective.
Given that the foreclosure was deemed defective in Ruiz, the Court remanded the case back to the district court for further proceedings on the borrower's wrongful eviction claim.
The Ruiz case emphasizes that lenders should take caution to strictly comply with the requirements of Minnesota's foreclosure by advertisement statute or face serious consequences.