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75 » VISIT US ONLINE @ DSNEWS.COM MINNESOTA "STRICT COMPLIANCE" IN NON-JUDICIAL FORECLOSURE PROCEEDINGS By Curt Trisko, Schiller & Adam, P.A. What's the difference between size 13 font and size 14 font? A bad foreclosure and poten- tially thousands of dollars. In a foreclosure- by-advertisement (also known as non-judicial foreclosure) a mortgage is foreclosed not in a court proceeding, but by following separate, notice-based process set forth by state statutes. e process is quicker and cheaper for mortgage servicers and alleviates the courts of the caseload burden of judicial foreclosures. In Minnesota, the trend in the law is to require absolute adherence ("strict compliance") to the statutory provisions governing non-judicial foreclosures. is trend is noteworthy because there are hundreds of procedural requirements, some of which would be considered minutiae in other areas of practice. e opening line of this post is such an example. In performing a foreclosure-by-adver- tisement, the holder of the mortgage is required by statute to serve several notices. For one of the notices, the Minn. Statute § 580.041 "Help for Homeowners in Foreclosure" notice, the statute requires the text to be in 14-point type. What is the consequence when it isn't, but where there was no prejudice? In McGraw v. Fed. Nat'l Mortg. Association, a Judge in the United States District Court for the District of Minnesota re- cently held that the foreclosure is still void. e order in that case did not state what size type the offending notice contained, a fact which is unimportant because the Judge found any size other than 14-point type to be a fatal defect. How did this trend develop? A brief, specu- lative answer is that a bright-line rule is very useful for courts in this area of the law, where the procedural requirements are overwhelming to most and the purpose and intention behind them are understood by very few. In the past, two rules of interpretation existed side-by-side: "strict compliance", in which the application of the statutory requirements are uncritically examined for literal, exact compliance; and "substantial compliance," in which the party claiming that the foreclosure is void must prove that they were prejudiced by the procedural noncompliance. However, with the rise of mortgage foreclo- sures and mortgage foreclosure-related litigation several years ago, this dichotomy began to disintegrate. e trend toward wholesale appli- cation of the "strict compliance" standard began with dicta contained in a Minnesota Supreme Court opinion case which was irrelevant to the issue of which standard should be applied, Jackson v. Mortgage Electronic Registration Systems, Inc. Immediately after that decision, courts generally did not interpret that dicta as providing guidance on the issue. However, the issue came squarely back before the Minnesota Supreme Court in Ruiz v. 1st Fidelity Loan Servicing, LLC. In that case, the court held that "strict compliance" applies to the prerequisites for foreclosure-by-advertisement (Minn. Stat. § 580.02), which must be completed before the actual foreclosure process can begin. ough the holding pertains only to those prerequisites, the court did not explicitly limit it. us, it is not difficult to argue that the court either did not intend to limit or would not limit it if a subsequent, on-point case was brought before it. Indeed, the Minnesota Court of Appeals did just that in Hunter v. Anchor Bank, N.A. While the "strict compliance" standard provides a simple answer to the question of what types of procedural defects should result in a bad foreclosure (i.e., all of them), albeit a blunt, oversimplified one, it creates a new question. Just how far can this standard be taken? Many of the procedural requirements incorporated into the statutes were not enacted with "strict compli- ance" in mind. Some requirements are vague. Others create disproportionate complexity for compliance, not just by the foreclosing party, but also by third-parties such as county sheriffs. It is presently unknown what the limits of the "strict compliance" standard are or whether it will eventually be reversed or scaled back. For now, it seems that it will not reach the tipping point of pushing mortgage servicers to elect to foreclose by judicial action. However, it appears that any change will have to come from the legislature and not the courts.

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