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Report proposes solution to Minnesota's foreclosure crisis
In your neighborhood, on your block and probably even people you know have been foreclosed upon. Where I live in Minneapolis there are blocks where nearly half the homes are foreclosed. We read horror story after horror story. The banks are corrupt and incorrigible. And there doesn't seem to be an end in sight.
Today, a coalition of community organizations, faith groups and Occupy Homes MN released a report detailing a plan to get us out of this morass.
"This was a crisis caused by a system of corruption that preyed on the vulnerable and people of color," explained Rev. Paul Slack, Pastor, New Creation Church Minneapolis and President of ISAIAH. "It was not caused by individual homeowners who have suffered the greatest burdens and are left with too few solutions. We need bold action from our policymakers from the local to the national - implementing principal reduction and foreclosure mediation to protect our families and rebuild our communities."
Here are their main conclusions:
- Lenders with a history of improper mortgage servicing and foreclosure practices account for at least half of the foreclosures in Minneapolis.
- On average, banks lose more than $93,400, or half of the principal they are owed, when they foreclose on a home in Minneapolis. Banks could forgive the principal instead keep many more people in their homes, and still come out ahead.
- Underwater homeowners in Minneapolis would need an average principal reduction of 35 percent to get right side up, significantly less than the loss banks incur on foreclosures.
- If banks reset mortgages to current interest rates and market value, they could save underwater Minnesota homeowners an average of $365 a month on their mortgage payment, pumping more than $402 million into the local economy every year, which would help create more than 5,941 new jobs annually.
I find it surprising that not foreclosing is in the bank's best interest. But since banks are intractable, the Minnesota legislature will need to pass a law to save them money and help endangered homeowners. Ironically, I'll bet their lobbyists will oppose this legislation.
Of course, a DFL legislature might be able to pass such a bill ... so here's hoping!