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Grant funds mortgage counselors

ST. PAUL - A federal grant could make it easier for roughly 7,500 Minnesotans facing foreclosure this year to keep their homes. State housing officials and Gov. Tim Pawlenty said Tuesday a $4.3 million grant will double the number of counselors a...

ST. PAUL - A federal grant could make it easier for roughly 7,500 Minnesotans facing foreclosure this year to keep their homes.

State housing officials and Gov. Tim Pawlenty said Tuesday a $4.3 million grant will double the number of counselors available for a mortgage counseling program.

The grant to the Minnesota Housing Finance Agency will provide an additional 37 counselors statewide, bringing the total number to 76. Those counselors work with financially strapped homeowners and willing lenders to change loan terms to prevent or delay the threat of foreclosure.

"In many, many cases foreclosure can be avoided or reworked," Pawlenty said of when homeowners, counselors and mortgage lenders reach agreement.

Julie Gugin, executive director of the Minnesota Home Ownership Center, said roughly 65 percent of the counseling need is in the Twin Cities area and surrounding counties. The remaining 35 percent of need is in rural Minnesota.

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"The issue has certainly demonstrated itself statewide," she said.

Seeking help from mortgage counselors can be effective because they often negotiate new loan rates and terms with lenders, Gugin said. In contrast, consumers facing foreclosure may only be able to talk with a lender's collection department.

"Act early; there is help available," Gugin advised homeowners fearing they could be headed for foreclosure.

Statistics from December showed Minnesota ranked 12th in the nation in home loans in foreclosure; nearly 10 percent of all home mortgages in Minnesota are subprime loans. Those loans typically are made to lower-income consumers with poor credit ratings and have contributed to the mortgage foreclosure crisis because people could no longer afford to pay under terms of those loans.

Estimates put the number of Minnesota mortgage foreclosures this year at anywhere from 20,000 to 35,000, Pawlenty said, but homeowners make up only a portion of total foreclosures. The grant will pay for counseling this year and maybe longer.

"We have a significant challenge in Minnesota," he said.

Some Twin Cities-area homeowners also could benefit from a separate $500,000 grant also announced Tuesday. The funds from Marquette Financial Companies are to provide loans of about $5,000 to people who with some assistance could resolve their delinquent loan status.

The announcements came just hours after the Minnesota House approved a series of bills that address foreclosure problems.

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One proposal approved 127-2 increases financial assistance available to some families struggling to meet monthly mortgage payments and avoid foreclosure. The existing cap of $5,500 is replaced with a new formula that takes into account median monthly home ownership costs.

"Frankly, given the run-up in housing values ... that assistance is not sufficient in many, many cases," said bill sponsor Rep. Jim Davnie, DFL-Minneapolis, of the dollar cap.

Another aims to help people who rent in a foreclosed property. Too often, bill supporters said, tenants are automatically evicted when a lender takes possession of a foreclosed property. The bill would remove the eviction from renters' records and allow them to retain their final month's rent. That measure passed 129-0.

Still another proposal approved by the House would allow tenants of a rented property to pay for utilities if the landlord failed to do so. The tenant then could subtract that amount from their monthly rent.

"We don't want tenants freezing or being in the dark because of the actions of a landlord," said Rep. Bob Gunther, R-Fairmont.

The Senate also has passed foreclosure-related bills, and some must be reconciled with the House.

Pawlenty said he is working with lawmakers on mortgage-related legislation, but said he does not support a leading legislative proposal to defer subprime mortgage foreclosures by a year.

The Republican governor said that is a well-intentioned effort, but that it could have unintentional consequences for other borrowers.

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"There's probably a better way to do it," he said.

Scott Wente works for Forum Communications Co., which owns the Bemidji Pioneer.

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