The countrywide epidemic of foreclosures does not stop at the boundaries of the Twin Cities. ACORN, a nationwide community organization of low-and moderate-income families working for social justice and stronger communities, published a report on foreclosures in St. Paul and Minneapolis which reveals the seriousness of the problem.
In April alone, 535 families living in St. Paul and Minneapolis received foreclosure notices from their lenders. In St. Paul, mortgage companies filed 24 times more foreclosures against homeowners than in April 2006. In Minnesota in 2006, there were 5995 foreclosure filings. This was an increase of 167% from
the number of foreclosures filed in 2005, the second largest percentage increase in the country. Minneapolis-St. Paul-Bloomington has the 83rd highest foreclosure rate in the country. In Minneapolis, foreclosures hit hardest on the north side, which had seven of the top ten Minneapolis zip codes for foreclosures.
The national foreclosure problem is expected to get worse this year. Steadily rising interest rates in the past months affect all home-owners with adjustable rate mortgages. When those homeowners signed their mortgage contract, they were facing bearable interest rates. By now, many of them are facing foreclosure.
Adjustable rate mortgages seem to be desirable, since during the initial period the monthly payments are lower than those of a fixed rate loan. Nevertheless, they bear the risk of changing interest rates. This change might be to the advantage or disadvantage of the borrower.
“I’ve known my loan broker for five years. So I trusted him when he told me that the interest rates would adjust only a little bit”, says Al Ynigues, a 65-year-old music teacher from Apple Valley who gives lessons at his home. Like many other homeowners he feels cheated and misinformed by predatory lenders.
“I always felt that the broker and I had this trust thing, but now I’ve discovered that he put his interests before mine.” Although two months behind in payments, Ynigues has not given up and wants his lender to renegotiate.
ACORN attacks the problem, trying to help affected people to negotiate with their lenders. “Lenders still use aggressive measures to threaten families,” says Brandon Nessen, head organizer of Minnesota ACORN. The organization is calling on lenders to modify loans so that they will be affordable to borrowers. One way to modify loans would be a temporary foreclosure freeze. For this reason, ACORN is calling on the largest subprime mortgage lenders not only to voluntarily agree to a three month suspension on foreclosures, but also to make every effort during these three months to develop a long-term solution that allows the homeowners to stay in their home.
Whether this resolution will bear fruit depends largely on the brokers. So far, Al Ynigues experience his broker as relentless: “I was on his doorstep, and he just shined me off.” Nevertheless, he is still hopeful to be able to maintain his home and place of business.