North Minneapolis homeowner Cathy Spann is in many ways a typical example of the foreclosure crisis. She had lived in her 1925 bungalow home for nearly than ten years, but a series of personal disasters, including the death of her husband and the loss of her job, made it difficult for her to make her mortgage payments.
Late in 2010, she received notice of a foreclosure and within days, her home was sold to JP Morgan Chase Bank at a sheriff’s sale. She had tried to talk with representatives at the bank, but for her, as for thousands of others facing the loss of her home, the bank wasn’t open to negotiations.
Spann, turned to the Northside Community Reinvestment Coalition (the NCRC) which, in collaboration with Jewish Community Action (JCA), is working to stop home foreclosures in economically struggling areas like North Minneapolis.
During the same year the bank took Spann’s home, 25,000 other Minnesota homeowners faced foreclosure, with with a greater percentage of these occurring in neighborhoods with a high concentration of minority populations.
“Our goal is to stop individual foreclosures, to build resident power and challenge financial discrimination,” said Dave Snyder, an organizer with Jewish Community Action and vice-chair of NCRC. Each week, Snyder, Harrison Neighborhood President and JCA organizer Maren McDonell and a group of dedicated volunteers knock on the doors of North Minneapolis homeowners who are scheduled for a sheriff’s sale. The organization’s goal is to direct the homeowners, many who feel they have nowhere to turn, to non-profit foreclosure prevention counselors.
Cathy Spann was one of the group’s success stories. With the help of the NCRC/JCA, she got the mortgage company to reverse her foreclosure and modifynher mortgage loan. Spann found a new job and now can afford to stay in her home.
Not all stories have a happy ending. CitiBank is one of the biggest offenders, said Snyder, and so far, negotiations with them have been unsuccessful. One of their clients, North Minneapolis resident Hawthorne Vinson, received a mortgage modification. but it lowered his monthly payments only by $80 and he racked up additional bank fees during the process. NCRC/JCA, said Snyder, is still working with Vinson toward a solution.
Currently, the group is working with eight families who are at the end of the foreclosure period, and with another 60 families who are getting assistance earlier in the process. “At least 65 percent of the time, we hit a home run,” McDonell said. “We can at least give the families a fighting chance, if they’ll work with us. We put pressure on banks to postpone sheriff’s sales. We try to give the families more time to get loan modifications. More times than not, we’ve been successful. What we do is connect the unconnected.”
The group uses other methods to influence banks to work with homeowners, calling political and community connections. “We’ve accumulated contacts at the banks. We send letters from clergy and from our coalition. We’ve gotten the attorney general’s office, Senator Franken and Keith Ellison involved to put pressure on the banks,” Snyder said.
Both McDonell and Snyder see how their organization’s tactics might be compared to the home sit-ins of the Occupy Movement, but both insist that their approach is different. “It’s important that Occupy play their role, but we’re not quite as dramatic,” Snyder said. “We have a core group of resident leaders who are active and committed. We’re trying to stop foreclosures, but we’re also trying to pass new banking laws and we want to change the terms of engagement between the community and the banks.”
Often, banks can make more money foreclosing on a home than they do when they cooperate with a homeowner. Part of the reason this is true is because in the first years of a mortgage, the largest part of the payments go to the loan’s interest, not the principal.
For example, after five years of monthly payments, a homeowner with a 30-year mortgage of $100,000, at a five percent interest rate, would have paid only $8,171 toward the principal, and would still owe nearly $92,000. After 10 years, a homeowner would have paid $18,657 and would still owe more than $81,000.
This may be one reason stopping foreclosures is not easy. The banks do not communicate with homeowners in distress because they don’t need to do so, said McDonell. They repeatedly lose paperwork. Bank employees assigned to individual cases will suddenly be unavailable – reassigned or resigned. “The banks want people to give up. This is one of the many reasons they want to make the modification process as difficult and anxiety producing as possible, “ Snyder said.
At any given time, said McDonell, there can be from 10 to 40 houses in north Minneapolis on the list for a sheriff’s sale. “It’s a really hard time, emotional and draining,” she said. “The hardest part is that families have overflowing files of paperwork and the banks lose it. If the banks would give families more time and offer them modification they can afford, we could solve the foreclosure crisis.”
Banks may also be less than cooperative because, unlike in the past, banks are often not local and not tied to the community. Snyder is hoping that his organization can convince some banks to play by different rules by showing them how their interests and the interests of the community can be the same.
Since last July, the organization has been lobbying Hennepin County to pressure banks change their foreclosure practices by threatening to move county and city monies to other financial institutions. While Wells Fargo and US Bank have the highest foreclosure numbers in Minnesota, Snyder said, he realizes that getting local governments to change banks might be difficult. “Right now, these are the only real game in town as far a depository services. These are the only ones who can process the payroll for 30,000 employees. And they’re both well-liked locally,” he said.
But Snyder said he hopes pressure on government officials, such as members of the city council, might eventually have an effect. “The point is not to scare the banks,” said Snyder. “It’s to pass laws to use leverage so they start disclosing data and improve their practices. It’s not a threat of immediate disinvestment. This is a medium to long-term plan. But what’s worked for us so far is modest pressure like this.”
Snyder said that the group also plans to expand their outreach to other neighborhoods in the near future, including door knocking in Northeast Minneapolis and neighborhoods in South Minneapolis.