~$1 million for early intervention, counseling; lenders encouraged to work with homeowners ~
Saint Paul – To further assist homeowners facing foreclosure, Governor Tim Pawlenty today announced an additional $1 million in state funding for early intervention efforts and foreclosure prevention counseling. The Minnesota Housing Finance Agency (MHFA) initiative will support efforts to reach homeowners before they become seriously delinquent in their mortgage.
The Governor made the announcement at Lutheran Social Service in St. Paul where he was joined by mortgage lenders and leaders of non-profit agencies. Governor Pawlenty is also encouraging lenders to work with homeowners who have fallen behind on their mortgage payments and are at risk of delinquency.
“Home ownership is a cornerstone to our quality of life,” Governor Pawlenty said. “We need to reach more homeowners and tenants before they get to a foreclosure situation. These additional funds and the willingness of lenders to work with borrowers will help us reach out to homeowners before they are in trouble and before they lose their home.”
The MHFA award to the Greater Minnesota Housing Fund of $1,008,500 is part of a response to a predicted 3-5 year situation. Another $800,000 in private, philanthropic and local funds will be contributed to the effort. The funding will double the number of foreclosure prevention counselors from 18 to 37 statewide and effectively triple the number of households that will be served. It is estimated that this effort will prevent 5,700 foreclosures in Minnesota in 2008.
Earlier this year, the Minnesota Department of Commerce, with the support of the Minnesota Association of Realtors, transferred $500,000 to MHFA from the Real Estate Education, Research and Recovery Fund which is funded by real estate license fees. MHFA awarded the grants this week to the Homeownership Center and the Minneapolis Urban League for the early intervention foreclosure initiative for at-risk homeowners in targeted areas.
“Too many families are losing their homes to foreclosure,” MHFA Commissioner Tim Marx said. “We can help save families from the devastating effects of foreclosure by increasing the capacity of the foreclosure prevention system and improving our targeted early intervention tactics. Providing foreclosure prevention education and counseling contributes significantly to successful homeownership.”
Foreclosures typically occur due to unemployment or other loss of income. However, the increase in foreclosures beginning in 2006 is a result of an increase in sub-prime loans and other non-traditional loans. Additional causes include flattening housing values, home equity cash-outs, and buyers assuming too much risk.
According to the nonprofit Housing Link, there will be 20,573 foreclosures statewide in 2007 or an 84% increase from 2006. The figures are based on sheriffs’ sales of foreclosed properties.
Governor Pawlenty is also asking lenders to reach out to their customers who are at risk of delinquency in an effort to rework the terms of their loans. Many lenders are working with customers by changing the loan to a fixed rate, renegotiating the terms of the adjustable rate mortgage, or extending the loan term.
“No one, including your lender, wants you to fall into foreclosure and lose your house,” Commerce Commissioner Glenn Wilson said. “Foreclosure problems are affecting homeowners from all walks of life in Minnesota, so no one should be embarrassed about asking for help. The sooner you reach out to your lender, the better chance you have of staying in your home.”
The Department of Commerce also reminds borrowers to beware of predatory lending practices. Homeowners who choose to refinance their mortgage should deal with a Minnesota licensed mortgage originator; check the department’s website at www.commerce.state.mn.us to check the licensing status. Also, call the Minnesota Department of Commerce at (651) 296-2488 or 1-800-657-3602 to report suspected mortgage fraud.
To contact a foreclosure prevention counselor, call the Home Ownership Center at (651) 659-9336 or (866) 462-6466. They will identify a counselor in a specific area of the state.
Today’s announcement is part of a continuing effort by the Pawlenty Administration to address foreclosures and predatory lending practices:
• Earlier this year, Minnesota Housing made its largest single funding award ever, $11 million dollars, to fund an effort in Minneapolis to acquire, rehabilitate, and re-market foreclosed and other vacant and boarded properties. A similar award of $500,000 was provided for a similar pilot program in Saint Paul.
• Minnesota has an ongoing commitment to foreclosure prevention. This includes a broad partnership that provides funding for a statewide network of foreclosure prevention counselors and state funding for foreclosure prevention loans of up to $5,500. These efforts received an appropriation of $1.7 million in FY 2008-09.
• The Pawlenty Administration requested, and the legislature agreed, to add three investigators at the Department of Commerce to respond to the increasing volume of cases and complexity of housing and lending fraud. In 2007, the Department of Commerce has taken enforcement action in 139 real estate or mortgage related cases and collected $611,750 in civil penalties.
• Minnesota mortgage laws changed in 2007, significantly increasing the net worth requirements for mortgage originators operating as a Minnesota corporations. The law also requires training for loan officers and makes mortgage fraud a specific crime in Minnesota.