Home Building & Loan Assn. v. Blaisdell

1934-01-08

Headline: Minnesota mortgage moratorium upheld, allowing temporary postponement of foreclosures and court-ordered rental payments to protect homeowners during an economic emergency while delaying mortgage purchasers’ possession and title.

Holding: The Court affirmed that Minnesota’s 1933 mortgage moratorium law is constitutional because, during a declared economic emergency, the State may temporarily extend foreclosure redemption periods with reasonable judicial conditions that preserve lenders’ core rights.

Real World Impact:

Allows states to temporarily delay foreclosure redemptions during declared emergencies.
Permits courts to require mortgagors to pay reasonable rental value toward taxes and interest.
Delays mortgage purchasers’ possession and title while preserving core lender rights.

Topics: foreclosure rules, mortgage relief, economic emergency powers, contracts and debt, housing protections

Summary

Background

A mortgage lender challenged Minnesota’s 1933 Mortgage Moratorium Law after a married couple defaulted on a 1928 mortgage and the property was sold to the lender at a foreclosure sale on May 2, 1932 for $3,700.98. Under state law the couple had a one-year redemption period that would have ended May 2, 1933. They applied for relief under the new statute. The trial court extended redemption to May 1, 1935 and required the couple to pay $40 a month; the Minnesota Supreme Court upheld the law, and the lender appealed to the U.S. Supreme Court.

Reasoning

The central question was whether the state law unlawfully impaired private contracts or violated due process or equal protection. The majority, led by Chief Justice Hughes, held that a declared economic emergency justified a temporary, limited state measure. The Court stressed that the law did not cancel the mortgage debt: interest continued, the foreclosure sale remained valid, and the lender could still obtain title or a deficiency judgment after the extended period. The extension required judicial findings and payment of the fair rental or income value, which the Court viewed as reasonable compensation while possession was delayed. The statute was time-limited (no later than May 1, 1935) and subject to judicial modification if circumstances changed.

Real world impact

The decision allows a State, when faced with a verified public emergency, to authorize courts to postpone foreclosure redemptions temporarily and to require mortgagors to pay reasonable rental or income value toward carrying costs. That relief must be limited, conditioned, and accompanied by procedures to protect lenders’ interests. The judgment affirmed the Minnesota courts’ application of the statute.

Dissents or concurrances

Justice Sutherland dissented, warning that the contract-protection clause cannot be relaxed in times of distress and predicted the decision risks eroding constitutional safeguards for contracts.