A Minnesota real estate agent is working with a buyer who purchased a property at a Ch. 580 foreclosure sale on June 1. The original mortgagor had paid 28% of the original loan principal before defaulting, and the property is a standard residential home (not agricultural). The agent advises the buyer that the mortgagor's redemption period will expire on December 1 of the same year. Is this advice correct, and why?
Correct Answer
D) No, the advice is incorrect because 28% paid is less than one-third of the original principal, so the 12-month redemption period applies and expires on June 1 of the following year
The agent's advice is INCORRECT. Under Minn. Stat. § 580.23, the 12-month redemption period applies when less than one-third of the original principal has been paid. One-third equals approximately 33.3%. Since the mortgagor paid only 28% — which is less than one-third — the extended 12-month redemption period applies, not the standard 6-month period. The mortgagor's redemption period therefore expires on June 1 of the following year (12 months from the June 1 foreclosure sale), not December 1. The buyer should be advised accordingly, as this significantly affects when they can take clear possession.
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Related Concepts
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
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