ST. PAUL -- The much-publicized foreclosure crisis affects all of Minnesota, although experts say those outside the Twin Cities area apparently face issues other than the now-famous subprime concern.
For counties away from the Twin Cities, the foreclosure situation is a mixed picture, said Chip Halbach, Minnesota Housing Partnership executive director.
For instance, Halbach said, Iron Range communities in northeastern Minnesota are seeing a burst of economic activity, and the housing market there is robust.
Halbach said that risky loans have not played as big a role in rural Minnesota's foreclosure problem as in the extended Twin Cities area. He said that is in part because those communities have not seen the kind of inflated housing values that occurred in the Twin Cities in recent years.
"Loss of income was the main reason people were having trouble last year, more than exotic mortgage products," Halbach said of rural Minnesota. "What's really been driving outstate foreclosures is job loss, increasing fuel costs, illness, divorce."
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But figures are hard to find showing the difference between Minnesota's largest urban areas and the rest of the state when it comes to subprime loans.
Subprime loans typically are those made to low-income consumers who may have less than prime credit rating and payment history. Subprime loans have higher-than-market interest rates and have terms that financial experts say in the long run hurt the homeowner -- pre-payment penalties, adjustable rates and fees. Borrowers are lured to these loans by lower rates, but when the rates rise, often into the double digits, homeowners can't afford it and default on their loans.
Data from the state's housing agency shows the peak of these loan products was in 2005, when 47,122 people took out subprime mortgages. In 2000, when the housing boom began, the number of subprime loans was 8,347.
This legislative session, several lawmakers propose a variety of measures to help troubled homeowners, including a delay in foreclosures and a measure to make foreclosure data more accessible. Also, the state housing agency has received federal money to hire more foreclosure prevention counselors statewide to handle the increasing number of families facing foreclosure.
A recent study by Housing Link is helping lawmakers and advocates gain a better understanding of the ever-expanding foreclosure crisis. The study published last October surveyed sheriff's sales in all 87 counties. County sheriffs' offices are responsible for selling foreclosed homes.
The survey indicates 2007 foreclosures across Minnesota reached 20,573. That is an 84 percent increase over 2006, when the number of foreclosures statewide numbered 11,207.
The Housing Link data also shows that in 2006, the number of foreclosures in the seven-county Twin Cities area was 7,039. Estimates for 2007 show that number nearly doubling at 12,885.
Elsewhere in Minnesota, foreclosures equaled 4,168 in 2006. Projections for 2007 indicate that total jumped 84 percent to 7,688.
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The outstate numbers surprised advocates at the Greater Minnesota Housing Fund, who commissioned the Housing Link study. Overall, the study shows that figures for greater Minnesota are double what researchers previously thought, and the foreclosure rate is growing faster in some greater Minnesota counties than in the Twin Cities area.
The study shows the biggest foreclosure increases outside the Twin Cities are in the so-called "collar counties," including Isanti, Chisago, Sherburne and McLeod counties.
The Greater Minnesota Housing Fund's project director, Stephanie Omersa Vergin, said most of the foreclosed housing stock in those collar counties is new construction. She said she thinks subprime mortgages and a housing glut lured many people to buy bigger, more expensive homes which led to the high concentration of foreclosures in those counties.
"Folks moved farther out to get more affordability," Omersa Vergin said. "But then they find the costs associated with moving farther out, like gas prices, are going up significantly."
The result, played out over and over again in this crisis, is that families find their budgets stretched, unable to make monthly mortgage payments on loans whose rates were going up faster than families can afford. In some cases, borrowers owe more on their home than it is worth.
The University of Minnesota's subprime lending and foreclosure expert, Jeff Crump, agreed that subprime lending is less of a factor in greater Minnesota.
Crump said his research shows that 25 percent of households in greater Minnesota took out risky loans.
No matter the cause, Crump said, putting an end to the statewide foreclosure crisis will require a "significant federal response" in addition to state measures.
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"The federal government needs to move quickly to try to establish a program to refinance people out of loans they can't pay," Crump said. "They did this in the 1930s - the Homeowners Loan Corp.
"I'm afraid it should have happened a year or two ago, and I'm afraid it won't happen until after January. That worries me - the longer this goes on, the more we get in trouble. Foreclosures depress the housing market in general and that's costing everybody their home equity."
Marisa Helms works for Forum Communications Co., which owns the Bemidji Pioneer.
