4,000 foreclosures in Minneapolis—what is being done to help people?

Ward 2 Council Member Gary Schiff says the foreclosure crisis causes “damage to our city [that] is far greater than the crack epidemic.”

“This is the biggest challenge facing the City of Minneapolis, and the biggest economic crisis to hit this country since the Great Depression,” said Minneapolis 9th Ward Council Member Gary Schiff about the ever-rising number of home foreclosures in Minneapolis. “The damage to our city is far greater than the crack epidemic,” Schiff said.

Schiff echoed the words of financier George Soros, who when asked during a May 13 airing of the PBS NewsHour to assess the strength of the nation’s finances today, said, “I think this is the most serious crisis of our lifetime.”

“It’s not just a housing crisis, but a crisis of the financial system,” Soros said.

Across the nation, home foreclosure actions hit an all-time high of 243,353 in April, an increase of 65 percent from April of last year, according to a survey released by the research firm RealtyTrac in the middle of May. A May 15 article in the Toronto Globe and Mail quoted RealtyTrac Chief Executive James Saccacio as saying, “[This is] the highest monthly total we’ve seen since we began issuing the report in January 2005.”

Projections from the Minnesota Legislature show that home foreclosures will increase 39 percent this year statewide, with one out of every 31 Minnesota households experiencing foreclosure between 2005 and the end of this year. State estimates indicate there will be more than 8,500 home foreclosures in Hennepin County in 2008, rising more than 400 percent between 2005 and the end of this year.

Today there are close to 4,000 foreclosure listings in Minneapolis. A survey of current real estate foreclosures listed for the Phillips/Powderhorn, Noko-
mis and Riverside sections of the City show at least 380 properties—mostly single and multi-family homes—in foreclosure, bankruptcy or with tax liens. About half of those properties are in Phillips/Powderhorn area, which comprises more than half of Schiff’s 9th Ward.

And next door, in the Nokomis neighborhood, Martha waits for an eviction notice to tell her that she must move out of her home of 30 years, out of the house on top of the berm on Garfield Avenue that her grandparents built. Martha’s house was sold in March by the Hennepin County Sheriff’s Office, whose records show that the buyer, a holding company that was the only bidder, paid $317,219.47.

Martha, who has worked her whole life as a contract educator, does not negate her own responsibility for her financial troubles. “I made some bad choices,” she said about signing a refinanced mortgage a few years ago to cover some bad credit card debt. In spite of the fact that the new mortgage required monthly payments that anyone could have easily seen she was not in a position to make. Martha, who is now in her late 50s, has found it very difficult if not impossible to secure a permanent job that pays enough to cover the bills. Now the house, which she’d decided when she was just a little girl would always be her home, has been taken over by a web-based clearinghouse for home foreclosure sales.
“Just awful,” Martha said a few days ago, sitting sore-eyed at her dining room table.

RealtyTrac researchers say that “banks will seize about 60,000 properties a month through December, when about one million U.S. homes, or a quarter of all homes for sale, may be bank-owned.”

According to financial justice group ACORN’s predatory lending specialist, Emily Kortiz, mortgagors must seek help before foreclosure actions are taken too far.

“Depending on the situation, ACORN may be able to help you negotiate a repayment plan or [a] change in your loan so that you can afford it,” Koritz said. (ACORN’s first responder help number is 651-642-9639.) Koritz also pointed out the importance of new legislation passed last month by the state, called the Minnesota Subprime Borrower Relief Act of 2008. The law would “help up to 12,000 Minnesota home owners by encouraging the use of foreclosure counseling services and good-faith negotiations between lenders and home owners,” according to the office of State Senate Majority Leader Larry Pogemiller (DFL-Minneapolis).

The act, which was sponsored by five female DFL senators, was passed by the full Legislature and sent to the governor on May 19. According to Pogemiller’s staff, as of May 28, the bill had not been acted upon by Governor Pawlenty.

Other officials across the country are scrambling to stem the foreclosure tide. Federal Reserve Chairman Ben Bernanke has urged lawmakers to take steps to alleviate the crisis. Democrats in Congress are pushing through several bills designed to provide relief to borrowers caught up in unmanageable mortgages. Perhaps most significantly, Rep. Barney Frank’s (D-Mass.) plan would allow the Federal Housing Administration to insure up to $300 billion in new mortgages at more favorable terms for home owners, and require lenders to assume some of the loss. The Congressional Budget Office estimates it would help a half million borrowers, at a cost of $2.4 to $2.7 billion. Although threatened by veto from the Bush administration, which calls the plan a “bailout,” Frank’s bill passed the House, and a similar provision has been approved by the Senate Banking Committee.

Analysts say that criticism invoked by using the term “bailout” is dimmed by the Bear and Stearns deal in March, when the central bank agreed to lend JP Morgan $29 billion as an enticement to buy the troubled Bear and Stearns, one of the largest global investment banks, securities trading and brokerage firms in the world. The President reportedly welcomed news of this loan.

U.S. Rep. Betty McCollum (D-MN) is a co-sponsor of the Frank bill and has signed on to a bill along with Keith Ellison (D-MN) that would prohibit lenders from adding fees, costs and charges to borrowers while a bankruptcy case is pending. Other legislation by Minnesota’s congressional representatives include U.S. Sen. Norm Coleman’s (R-MN) Community Foreclosure Assistance Act of 2007, which would provide $1 billion in emergency grant funding for expenses related to the impact of foreclosures on communities. Coleman has also co-sponsored bills to aid families and neighborhoods facing home foreclosure, to amend IRS code to provide tax credit for certain home purchases and to change bankruptcy laws referring to home mortgages that would be favorable to borrowers.

Sen. Amy Klobuchar (D-MN) co-sponsors bills to amend HUD policies to provide better assistance to low- and moderate-income families, to create a national licensing system for residential mortgage loan originators with minimum standards of conduct and to amend the Truth in Lending Act to provide more protection to consumers. Reps. James Oberstar and Collin Peterson (D-MN) have both signed on to Nancy Pelosi’s Foreclosure Prevention Act of 2008, which would initiate a number of housing reforms, and Rep. Timothy Walz (D-MN) co-sponsors a bill to limit the sale, foreclosure or seizure of property owned by a member or former member of the armed services.

Ellison has co-sponsored mortgage reform and anti-predatory lending, as well as legislation supporting home ownership and responsible lending. He has also authored a Truth in Lending Act to protect tenants’ interests in foreclosure proceedings and a bill to protect the interests of bona fide tenants.

“Most of the foreclosures in Minneapolis have been on rental property—88 percent in Phillips alone,” Schiff said. “After all the progress we’ve made here with homelessness, now the shelters are all full again—after these people have done nothing wrong,” Schiff said.

“I’ve been a strong voice for recognizing that our City’s affordable trust fund be focused on affordable rental housing,” said Schiff. Schiff also sits on the board of the nonprofit Family Housing Fund, whose stated mission is to preserve and produce affordable housing for families with low and moderate incomes in the seven-county metro area. Founded in 1980, the fund says it has more than 30,000 new housing opportunities for low- income families.

Schiff also praised the City’s Planning and Economic Development Dept. (CPED) for its partnership with community organizations, housing developers, funders, lenders and other government agencies. CPED furthers strategies to restore a healthy housing market in Minneapolis that include mortgage and home improvement programs and single and multifamily housing development. The mayor and City Council have engineered the prosecution of lenders who have taken advantage of local home owners.

“We recently won our lawsuit against lender TJ Waconia,” Schiff said. “The judgment gave the City receivership of 141 properties. Now they need to be rehabbed—that’s what we should be putting our money into,” he said.
Yet Schiff criticizes what he sees as lackluster efforts put forth by policymakers on his own Council, like a program called “Minneapolis Advantage” that offers a total of fifty $10,000 zero-percent interest rate loans, forgivable over five years, to eligible home buyers.

“Fifty people get $10,000 to buy a home regardless of their income? This is an example of what we shouldn’t be wasting money on,” Schiff said. “This won’t help foreclosures at all—it represents a feeling of hopelessness and pain by local policymakers,” Schiff said.

“What we should be putting our money into,” Schiff said, “is funding money for people who have been stuck with these subprime mortgages—for people facing these large balloon payments,” Schiff said.

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