Deficiency Judgment Due To Foreclosure

[Woolsey]

First of I will apologize for the length. My fiance and I purchased a house in April of 2004 in the state of Minnesota. We ended up falling behind on mortgage payments due to lack of employment. Are home got foreclosed on August of 2008. The home was sold at a sheriffs sale at which the lender purchased the home for $4,000 more than we owed. I called the mortgage company the day of the sale. I was told that we had a 6 month redemption period and after that we had to be out. I asked her if there was going to be any additional costs to us and she told me know. However we were not able to redeem are home within this redemption period and complied and moved out a week before the redemption period was over in February of 2009. We moved out trying to move on from this. Then all of a sudden August 09 we received a letter from USDA rural development, coming after us for a loss of approximately 20,000 which just floored me since the lender purchased are house for more than we owed.  I did talk to a lawyer for advise from free legal aid and she was also shocked and said that she hasn't even heard of this and she doesn't know why or if they even can do this to us. We don't even have any assets to come after, all they could do is garnish are wages. On top of all of this I was looking through my mortgage papers and we didn't even take out a government loan, we took out a conventional uninsured loan. But if we had taken out a government loan can they do this? Any advise as to what I should do and the process no one seems to have the answers.

[Camden]

First of all it is fine to have a lengthy post.  The more information you give the better the answer we can give.

I am right here in Minnesota so I am very familiar with our state foreclosure statutes.  A couple of things to note right off.  First, when a person is notified of the Sheriff Sale and it is publicly posted, the amount given is for what is owed that day of first posting.  As the time between notice and actual sale date is usually 8-10 weeks the number is revised the day of the sale to include those two extra months of missed payments, additional late fees and legal costs of the foreclosure.  So seeing a $4000 difference is fairly normal.  The starting bid at the auction is almost always for the current(that day) total of all owed and costs associated with the foreclosure.

Typically the amount of deficiency judgement(if one is granted)is for any loss the lender has incurred.  Simply put, they take what they have into the property and subtract what they ultimately received selling it.

The kicker here is just who had this loan and why a deficiency judgement was granted.  You see in Minnesota usually there is not deficiency allowed on a first mortgage on a principal residence.  And why is the USDA involved?  That doesn't make sense to me either.

You need the advice of a legal professional or other counselor who specializes in Minnesota foreclosure law.  Not knocking legal aid but often these professionals are more generalist.  If you haven't already done so I would be contacting the Minnesota Home Ownership Center.  This is a non-profit organization with counseling assistance at low or no cost.  They may be able to help you.http://hocmn.org/en/index.cfm

Also, as I am right here in Minnesota, I invite you to contact me direct if you have further questions.  My email is below my name.

Best wishes,

Steele V. Propp

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