Archive for 'Minnesota'

In the Twin Cities, an increasing number of first-time homebuyers are attending classes on home ownership, mortgages and foreclosure prevention as large numbers of cheap foreclosed homes for sale become available at low prices.

John Trostle, a nonprofit housing consultant, has been conducting nine-hour classes called Homestretch in Minneapolis. He has been discussing all the basic things that prospective home owners need to know. Typically, at the start of his class, he discusses income, savings and property taxes. He interjects the causes of foreclosed homes every now and then.

To inject humor and reality into his class, Trostle oftentimes ask his attenders how many of them have saved up $5,000 to start buying a house. He also asks how many have $2,500 and how many have $500. He then asks how many have some loose change that they can start to buy a home with.

As a conclusion to his joke, he advises attenders not to buy a house if they cannot really afford it and not to buy a house priced beyond their income levels.

Trostle also discusses subprime loans, predatory lending and home refinancing. He informs his listeners that most of the foreclosed homes being sold all around have been bought by borrowers who were enticed with low initial payments and who were not warned that the monthly payments will increase after several months.

After an attender completes the classes, he or she meets with a housing counselor who will look at the prospective home buyer’s financial documents and evaluate home buying capability and options.

In Minneapolis, from 2006 to 2008, most foreclosed homes in Minneapolis were formerly owned by Spanish-speaking immigrants, according to a study conducted by the University of Minnesota. The other groups most affected by foreclosed homes are African Americans.

Mark Dorshak, a mortgage counselor, said that as he talks with the attenders, he concludes that many former owners of foreclosed homes did not know much about home ownership and mortgages. He has observed that the background and surroundings of first generation homeowners do not give them opportunities to get some idea about the obligations entailed in home ownership.

Dorshak said that renters have difficulties in making the transition to home ownership and its consequent responsibilities. These first-time homebuyers need to be educated, he said, to prevent another wave of foreclosed homes in the Twin Cities.

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Heading Home Minnesota is an ambitious statewide plan to end homelessness in Minnesota counties and cities. An integral part of this plan is Heading Home Hennepin, designed by 70 Hennepin County community leaders aimed at providing housing opportunities to homeless people by 2016. For two years, Hennepin has started to see the benefits of their efforts with the considerable drop of people with no permanent address. The problem is, with the current economic crisis affecting the nation resulting to a great number of foreclosures, this program is now faced with a great impediment to success.

Since the inception of the Heading Home Hennepin program, the average number of days homeless families stay in shelter homes have dropped to 24. According to county commissioners, this number would be sufficient to provide ample time for the program to find alternative residences for these people.

However, with the current number of Minnesota foreclosures on the rise, the average shelter stays have increased to 34 days, with a corresponding increase of 26% in families using these shelters.

City coordinators focusing on homelessness have outlined difficulties the program will be facing with the increasing number of foreclosures in the county. The current economic crisis has made it difficult for families who spend up to 80% of their incomes for housing to survive in this situation. Income flows are more difficult to sustain with an increase in layoffs and a tighter job market.

This would result to delinquencies in mortgage payments, and eventually foreclosures. Homeless families in Minnesota receive a 60-month Family Investment Program assistance fund. With the weak economy, these funds will run out before they are able to get good sources of income.

With the current economic crisis facing the county, people thrown out from repossessed houses would either seek rental space elsewhere, or would end up in shelter homes. This would put Heading Home Hennepin’s 2008 target of relocating 2,900 homeless families in jeopardy.

It seems that Tim Pawlenty, the governor of Minnesota, is in quite a predicament. The Minnesota legislature has spent the past few weeks building and revising a bill that attempts to combat foreclosure in the state, and the bill has finally come across Pawlenty’s desk. Minnesota’s citizens are hungry for legislation to combat rising foreclosures in the state, which are currently at record highs. Homeowners are losing their property in huge numbers, and as 2008 goes on, experts are only predicting the situation to get worse.

The bill, called the The Minnesota Subprime Borrower Relief Act would seek to help homeowners held under sub prime and adjustable rate mortgages by allowing them to defer mortgage payments for up to one year and use the time to catch up with their back payments. However, Pawlenty’s situation is unique. This is exactly the kind of bill that John McCain and the republicans he represents are against, as they fear it would only make it harder for other homeowners to obtain loans as lenders would tighten up lending due to the delayed payments. And as one of the top candidates to be John McCain’s vice presidential running mate, Pawlenty is stuck between a rock and a hard place.

Pawlenty has also indicated that he is inclined to veto the bill, saying that while it would help sub prime borrowers it would hurt all other citizens seeking credit. But with citizens statewide urging him to pass the bill, he is stuck between adhering to the party line and pleasing the citizens of his state. Keep your eye on the developments regarding this foreclosure bill.

As Minnesota is currently experiencing a record number of homeowners in default facing foreclosure and foreclosure properties currently on the market, the state is making solid moves to come to the aid of indebted borrowers. The state will use a $4.3 million grant to help an estimated 7,000 borrowers avoid a foreclosure in 2008.

The grant is the second largest of its kind to be handed out in the nation, and Minnesota’s Governor Tim Pawlenty said that it will be used mainly to fund more foreclosure counselors so that they can expand their breadth of reach and effectiveness in getting to homeowners who need assistance, These foreclosure counselors provide advice on avoiding foreclosure by refinancing, working with lenders, or selling properties beforea foreclosure occurs.

Pawlenty, however, is opposed to the suggestion for a moratorium on foreclosures in his state, which has been proposed by the state Senate. He has said publicly that he would veto any such bill that came across his desk.

With over 37,000 new foreclosures predicted to come onto the books in Minnesota this year, the state could definitely use the money, especially since only 20,000 were sold off last year. The drastic increase, coupled with the economic recession, could have drastic effects on the state’s economy.

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