Foreclosed Minnesota Homeowner Says She Was Duped Into Signing Away Deed & Redemption Rights For $5K; Sues To Undo Title Transfer

In Washington County, Minnesota, Minnesota Public Radio reports:

• Many [Minnesota] homeowners in foreclosure may not be aware there's another option that would allow them to keep their homes. Under state law, they can buy their home back after the sheriff's sale for the price of the winning bid. That bid can be tens or even hundreds of thousands of dollars less than what they owed on the house.

• But the law is not widely known, and as a result many homeowners have lost out on the chance to stay in their homes. Marie Forsell, who owned a home in Washington County, is one of them.

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• After Forsell's house was sold at a sheriff's sale this fall, people started showing up at her doorstep with offers of help. Investors offered her money -- $5,000 -- in exchange for her deed. The $5,000 sounded pretty good at that time, because Forsell figured she could never scrape together enough money to redeem her house.

• What Forsell didn't know was how much her house had sold for at the sheriff's sale. After she'd agreed to take the $5,000, Forsell found out that her house -- on which she owed close to $600,000 -- had sold at auction for only about $86,000. [...] That's when Forsell discovered something else: under state law she could have bought her home back during the redemption period that follows the sheriff's sale, for far less than what she owed.

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• The investors who bought Forsell's deed also bought her rights to redeem her house. Now, they can put it back on the market for a profit. [...] The deal Forsell agreed to amounts to equity stripping, according to her attorney Jerome Ritter. He says homeowners in foreclosure are vulnerable to such deals because they may not know their rights.

• "They trusted people who said, 'I am here to help, here is some money, it's the best you can get,'" he said. "They made it work because they did not tell the homeowner the true set of facts, and that is wrong."

• Minnesota updated its foreclosure laws this year in an effort to prevent mortgage fraud. The law requires people seeking title to a foreclosed property after the sheriff's sale -- and before the end of the redemption period -- to notify the homeowner that the house can be redeemed for the sheriff's sale price, if it's less than the amount owed before the sale.

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• Forsell is suing the investors she made the deal with, claiming they broke the law. She hopes a judge will grant her a second chance to get her house back.

For the story, see Little-known law could help foreclosed homeowners.