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Changing face of foreclosures in Minnesota
The story behind the story: I've covered foreclosures up close and personal, interviewing Rosemary Williams and her supporters and telling stories of the handful of people actively resisting foreclosure and eviction in the Twin Cities. Then my editor asked me to take a step back and look at the big picture: Who is getting foreclosed? Are foreclosures increasing or decreasing? What do the numbers tell? This article combines the first-person stories and the big-picture questions.
Foreclosures in Minnesota - up, down, up again?
Foreclosures in Minnesota appeared to be down in the first two quarters of 2009, according to a report prepared by Minnesota Housing Link in partnership with the Center for Urban and Regional Affairs (CURA). According to Foreclosures in Minnesota: A Report Based on County Sheriff's Sale Data, there were 11,089 sheriff sales in Minnesota between January and July of this year, which included 6,903 in the Twin Cities. These numbers appear to have dropped from last year. In the first quarter of 2008, there were 6,446 sheriff sales in Minnesota compared to 5,157 in the first quarter of 2009. There were 7,349 sheriff sales in Minnesota in the second quarter of 2008 compared to 5,932 in the second quarter of 2009.
Why did January-June 2009 figures show foreclosures dropping? One contributing factor may be the actions taken by banks to halt foreclosures late last year and early this year. Last year, bailed out mortgage giants Fannie Mae and Freddie Mac put a moratorium on foreclosures and eviction proceedings between Nov. 26, 2008 and Jan. 9, 2009. Other mortgage companies followed suit: Wells Fargo, J.P. Morgan Chase, Bank of America and Citigroup Inc. agreed to halt home foreclosures from January to March of this year. Some moratoriums were extended into March 2009.
It's possible that the next wave of foreclosure is already imminent. A report by the University of Minnesota's Smart Politics blog indicates that Minnesota had a 67 percent increase in housing foreclosures since the 2008 election. The Minnesota Independent reported recently that while August foreclosure numbers decreased from July, they were still higher than the August 2008 numbers.
Fighting foreclosures - stories from the front lines
Don't get scammed!
The Minnesota Home Ownership Center has advice for homeowners on how to avoid the scam artists out there whose phony promises can cost you money AND your home:
It’s difficult to know who to trust – or even who to talk to -- when seeking advice about your mortgage or potential foreclosure. Working to stay in your home is a very personal issue and you don’t want to trust just anyone. Unfortunately, there are companies out there who look to take advantage of home owners in these difficult times, always promising a solution but ultimately making the problem even worse.
Watch out for the following warning signs:
• Calls offering you buyback or lease-to-own options
• Offers to provide "Walk-Away" services
• Requests for your social security number
• Counseling that requires fees for services
• Offers for quick and easy fixes
• Requests to sign binding contracts - including Power of Attorney - from sources other than your mortgage lender or your Foreclosure Counselor. [The Minnesota Home Ownership Center and our network of counselors at 24 non-profit partners throughout Minnesota are recognized by the Department of Housing and Urban Development (HUD) for their high quality and dedicated service, and their help is absolutely free.]
The Minnesota Home Ownership Center has published a fact sheet that warns consumers about for-profit loan modification companies.
In addition to the moratoriums, the Obama administration passed the Make Home Affordable Program, a $75 Billion program that supports loan modification for homeowners with mortgages from Fanny Mae and Freddy Mac. The program is supposed to offer relief to borrowers, giving them lower interest rates and longer repayment schedules.
Chip Halbach, from the Minnesota Housing Partnership (MHP), a nonprofit organization that provides resources to build and retain affordable housing , said that he didn't believe the Making Home Affordable Program was working. "Lenders say they don't want foreclosures," Halbach said, "Why aren't they able to use the resources from Obama? I don't know the answer."
Halbach said it was possible that the grassroots work being done by housing advocates might be starting to impact a drop in foreclosure ratings.
This past year, a number of groups have targeted individuals who are seen as at risk for foreclosures. For example the Northside Community Reinvestment Coalition (NCRC) has embarked on door knocking campaigns, reaching out to homeowners who are at risk of foreclosure.
One of those helped by NCRC was Flor Garcia. Garcia had sought help from the Neighborhood Development Alliance (NeDA) when her adjustable rate mortgage became so expensive she couldn't make her payments, despite working full time. "They told me about my rights," Garcia said in an interview earlier this year. Garcia worked with NeDA, but when her situation continued to be at-risk, she found Dave Snyder, from Jewish Community Action (JCA) at her doorstep. Snyder was going door to door with other volunteers, reaching out to homeowners who may be in danger of losing their home. Garcia not only was able to get help her own situation, she became a volunteer with JCA, speaking with Spanish-speaking homeowners and telling them about their options.
Another proactive trend in fighting foreclosures is legal advocacy. Mark Ireland, with the Minnesota Housing Preservation Project (MHPP), a nonprofit law firm that advocates for stopping foreclosures, said that his organization is about "holding people accountable". MHPP often represents cities and neighborhoods to keep people in their homes. MHPP has won numerous cases, including one against 10Spring Homes, a real estate development company, and another against CitiMortgage, which approved an inflated mortgage on a property in Hawthorne and let the property fall into disrepair after the foreclosure.
MHPP's most recent lawsuit, filed in July of this year, alleges that the federal government's Making Homes Affordable loan modification program "violates Constitutional procedural due process requirements," according to the organization's website.
Ireland said the federal program "Is a great program... but very few homeowners have access to it." Ireland said the lawsuit wants servicers that are partnering in the program- namely Fanny and Freddy- to put another moratorium on foreclosures until people are given proper notice about their rights. "Many people who are qualified for the program are not getting access to it," Ireland said.
If MHPP is successful in its lawsuit against the Making Homes Affordable program, it could have an impact on the number of foreclosures, both in setting a moratorium against foreclosures, and eventually making refinancing for homeowners a viable option.
Who is most at risk for foreclosure?
It's possible that Minnesota is experiencing a lull in foreclosures as the population of foreclosure victims changes from those who obtained bad mortgages such as adjustable rate mortgages or alt loans to those who have reasonable mortgages but can't make their payments because of economic reasons: they lost their job, they can't pay their medical bills, etc.
I spoke to one Northside woman, who asked to remain anonymous, who said that she purchased a house with 100% financing, no money down, almost at the top of the market peak. She was then persuaded by a predatory lender to re-finance, and was stripped of a lot of equity to cover inflated closing costs. Because her neighborhood has been devastated by falling home values, there was no hope for refinancing the house, and there was almost $100,000 difference between the amount owed on the house and the amount it was actually worth. She talked to foreclosure prevention programs, but they came up with no options for her. When the bank re-sold the home, they listed a "drastically low amount."
She said she was shocked that someone "would get my lovely little cottage for next to nothing." Luckily, a relative was able to purchase the home and "things fell into place," and the woman has now moved back in. "I feel so lucky," said the woman, even though she may face bankruptcy as a result of the ordeal.
The woman's story echoes calls for changes in predatory lending laws, and more action to help homeowners who got duped by lenders into taking out risky mortgages. But the Northside woman's story is an example of only one kind of foreclosure situation.
Jeff Skrenes, the Housing Director for the Hawthorne Neighborhood Community Council, said that in his two and a half years at Hawthorne, he was surprised by the number of foreclosures that were investor/speculator driven. Skrenes said that, in examining the numbers of boarded and vacant properties, and in viewing lists of properties at-risk for foreclosure provided by the Home Ownership Center, the percentage of non-owner-occupied exceeded that of owner occupied homes.
With over half the foreclosed houses non-owner-occupied, Skrenes said that door knocking efforts won't be an effective means of stopping foreclosures of those properties. Further, landlords aren't eligible for the Making Homes Affordable program. "This tells us there's some missing links in the service," Skrenes said
Screnes also said that it doesn't matter if a homeowner has a reasonable mortgage or not- if they lose their job, they aren't going to make their payments.
According to the Bureau of Labor of Statistics, the unemployment rate in Minnesota has decreased slightly, but is still nearly twice as high as it was a year ago. For all those people out of work, making mortgage payments becomes increasingly difficult, especially over time.
Annie Baxter at MPR reported state economist Tim Stinson as saying that Minnesota won't recover 115,000 jobs lost since December 2007 until 2012. People who are unemployed for the long term may have fixed rate mortgages, and may still be unable to make their payments.
Dan Hylton, a researcher with Housing Link said that while foreclosure rates based on sheriff sales were down in the first two quarters of 2009, "there's a lot of indicators of pre-sale foreclosure notices and delinquencies that indicate there's a trend of foreclosures on the way."
Chip Halbach from MHP agreed. "People are losing income," Halbach said. "They just can't afford to stay in their homes... What we're in now is a lull due to subprime damage that's been down. We haven't really seen the foreclosures yet that are coming of reduction in income."
So we're not out of the woods yet.
Sheila Regan (sheila [at] tcdailyplanet [dot] net) is a Minneapolis theater artist and freelance writer. If you would like to share your foreclosure story, email Sheila, or enter a comment below.
©2009 Sheila Regan