Foreclosure papers must be in order,

Minnesota Supreme Court rules

The state Supreme Court decision could boost homeowners fighting defective sheriff’s sales.

Minnesota’s Supreme Court has tightened the screws a bit on home foreclosures.

In a ruling out Wednesday, the state’s highest court decided unanimously that a foreclosing party must strictly comply with a state law requiring all the different banks and parties that have held a mortgage be clearly documented and filed before a foreclosure-by-advertisement can be initiated.

The case involved Doris Ruiz, a woman whose south Minneapolis duplex was foreclosed on by 1st Fidelity Loan Servicing. The court voided her foreclosure because 1st Fidelity filed its paperwork on the same day that it began advertising for a sheriff’s foreclosure auction on her home.

Her lawyer, Jonathan Drewes, said the decision sets a strict standard that could impact “hundreds” of potentially defective or illegal foreclosure sales in the state.

“I anticipate that many more lawsuits will arise in Minnesota over the coming year,” Drewes said.

Foreclosures in Minnesota are down from peaks during the worst of the housing crisis but they remain elevated. There were 17,895 sheriff’s foreclosure sales statewide last year, according to Twin Cities-based HousingLink, which tracks them. That’s the lowest annual total since 2006 but it is still nearly triple the number of foreclosures in 2005.

Prentiss Cox, a consumer law expert at the University of Minnesota law school, said the new Supreme Court decision gives homeowners who find problems in their foreclosure paperwork a new avenue to argue in court.

“This is the first decision from [the] Minnesota Supreme Court that suggests strict compliance really means strict compliance,” Cox said. “This is an industry that has had extraordinary problems putting one foot in front of the other to comply with legal requirements when they foreclose.”

Eric Cook, a local lawyer for Florida-based 1st Fidelity, said he couldn’t comment on the case.

Minneapolis lawyer Kevin Dunlevy, who filed a friend-of-the-court brief on behalf of the Minnesota Bankers Association, the Minnesota Land Title Association and the Minnesota Association of Realtors, downplayed the decision.

It’s narrow, he said, and only applies to potential errors in documenting mortgage holders. It simply means that foreclosure lawyers in Minnesota will have to be more vigilant about crossing t’s and dotting i’s, he said. He said he doesn’t think it will slow down the pace of foreclosures.

Ruiz could not immediately be reached for comment.

The onetime owner of a Minneapolis temporary-work agency called Olen Staff Co., Ruiz, 40, was sentenced in federal court last summer to one year and one day in prison for tax evasion.

She pleaded guilty to taking more than $425,000 from employees’ paychecks. Court documents alleged that most of the workers she placed in jobs were undocumented workers.

Drewes, her lawyer in the foreclosure fight, said he didn’t know much about that. “I’m just helping to keep her family rightfully in their home,” he said.

Jennifer Bjorhus • 612-673-4683 | StarTribune