His north Minneapolis home in the early stages of foreclosure, Howard Crutcher scrambled to keep his family in the house he helped design and build.
But, out of work over the summer and behind on his $1,500 monthly mortgage payment, Crutcher, a single father of two, hit a big – if unexpected – hurdle in the fight to keep his home: his lender told him in repeated phone calls they had lost his loan modification paperwork, delaying help and eventually denying him access to federal assistance programs.
Housing advocates say Crutcher isn’t alone in his struggles. Those who testified Wednesday at an informational hearing before the House Housing Finance and Policy Committee described the foreclosure process as a maze of paperwork apt to confuse struggling homeowners desperate to hold onto the roof over their heads.
HF1941, sponsored by Rep. Raymond Dehn (DFL-Mpls), aims to alleviate the confusion by requiring a mortgage lender to participate in mediation with the borrower before proceeding with the foreclosure process.
“We know there’s an issue around connecting with people who are having trouble,” Dehn said, “and we’re working on a solution that will address that.”
The bill has no Senate companion.
Mandatory foreclosure mediation would follow on the heels of legislation signed last spring by Gov. Mark Dayton that prevents mortgage lenders from foreclosing on owner-occupied residential properties while simultaneously processing a loan modification application.
Mediation would give the lender and borrower the opportunity to sit down with a third party and work toward a solution, Dehn said. If no workable agreement is reached, lenders would be free to continue the foreclosure process; homeowners would also be able to opt out of the mediation, under the bill.
A $346 county recorder filing fee is proposed to defray costs related to the new mandate.
The Rev. Chris Becker of Amazing Grace Lutheran Church in Inver Grove Heights believes foreclosure mediation is a win-win. Banks won’t be left with empty properties, homeowners can stay in their homes and communities won’t be destabilized by vacant homes.
“Mediation offers a healing process, face-to-face,” Becker said.
Opponents of the bill, however, testified that the mediation process could muddy an already confusing process.
“The foreclosure process is already long and confusing,” said Tess Rice, general counsel for the Minnesota Bankers Association. “And we’re just not clear where mediation fits into the process.”
Mara Humphrey, a lobbyist for the Minnesota Credit Union, said the state’s credit unions don’t want to push aside financial counseling services currently available to struggling homeowners.
No lender wants to foreclose on a homeowner, Humphrey said; “Unfortunately, there are cases where we have to go through the process.”
For those wading through that process, more help is needed, though, Crutcher, the north Minneapolis homeowner, told the committee.
“I think passing this, mediation, would be a great thing for the community,” he said.