Mortgagor Lacks Standing To Challenge A Foreclosure That Was Not Conducted In Exact Compliance With Minnesota Foreclosure Law

The plaintiff- mortgagor in Badrawi v. Wells Fargo Home Mortgage, Inc., 718 F.3d 756 (8th Cir. 2013) sued to invalidate a foreclosure proceeding claiming, among other things, that the mortgagee failed to comply with Minnesota’s requirements for foreclosure by advertisement when it published and recorded the notice of foreclosure on the same day. The suit was dismissed. On appeal the plaintiff only challenged the lower court’s determination that the mortgagee did not violate Minn.Stat. § 580.032, subd. 3 which required the foreclosing entity to record a notice of the pendency of the foreclosure before the first date of publication of the foreclosure notice. Relying on an unpublished state appellate decision that ruled for a mortgagor on a similar claim, the plaintiff argued that Minnesota law requires exact compliance with mortgage foreclosure laws. By publishing the foreclosure notice on the same day it recorded the notice, the mortgagee did not strictly comply with § 580.032, subd. 3 which rendered the foreclosure void. The Eight Circuit agreed with the district court and found that § 580.032 subd. 3 protects those with a redeemable interest in real property by allowing them to record a request for notice foreclosure with the county recorder. This provision is most sensibly read to protect the interest of third parties who own a redeemable interest in mortgaged property which might be jeopardized if the mortgagee foreclosed without notice. A secondary mortgagee’s interest would be at risk, for example, if the primary mortgagee foreclosed on the property and the sale proceeds were insufficient to pay both claims. In that case a secondary mortgagee would require notice before the commencement of foreclosure proceedings in order to protect its interest. Homeowners do not require the same particular type of notice protection since a separate Minnesota statute requires personal service of foreclosure notice to the person in possession of the mortgaged premises. Since the plaintiff received personal service of the foreclosure notice, she could not have been among those for whose benefit the separate notice requirement of § 580.032, subd. 3 was enacted. The court was not persuaded by the unpublished opinion that the plaintiff relied on because it was not binding on a federal court and the decision did not represent the best evidence of Minnesota law on that issue.

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