Governor Pawlenty Annonces $4.8 Million to Help Minnesotans Facing Foreclosure

Federal money will be used to expand current foreclosure prevention counseling; Marquette Financial Companies adds $500,000 grant ~Saint Paul – With more Minnesota homeowners potentially facing foreclosure this year, Governor Tim Pawlenty today announced that foreclosure prevention counseling in the state will be greatly expanded through a $4.3 million federal grant, the second-largest such grant made to any state. In addition, Marquette Financial Companies is providing the state a $500,000 grant for foreclosure prevention deferred loans.

NeighborWorks America has awarded the $4.3 million federal grant to the Minnesota Housing Finance Agency under the National Foreclosure Mitigation Counseling Program to assist homeowners in danger of foreclosure. The boost will enable Minnesota Housing, in cooperation with the Minnesota Home Ownership Center, to fund more counseling through more foreclosure counselors statewide.

“We want to do everything we can to reach homeowners before they end up in foreclosure,” Governor Pawlenty said. “The foreclosure crisis is affecting people across Minnesota. We’ll put this money to good use to help homeowners stay in their homes.”

With the NeighborWorks funding, 37 additional counselors will be added to the statewide counseling network, for a total of 76 counselors. It is estimated that this will result in 7,500 foreclosures being prevented this year.

The Governor said that counselors will advise homeowners about various types of mortgages, work with lenders to secure more affordable payment plans, and develop household budgets. The Governor also encouraged lenders to continue working with homeowners who have fallen behind on their mortgage payments and are at risk of delinquency.

NeighborWorks America is a national nonprofit organization created by Congress to provide financial support, technical assistance, and training for community-based revitalization efforts. The nonprofit Minnesota Home Ownership Center works with Minnesotans with low and moderate incomes to purchase and maintain homes.

Marquette Financial Companies adds $500,000 to bring delinquent loans current

In addition, Marquette Financial Companies is providing a $500,000 grant to Minnesota Housing for foreclosure prevention deferred loans in the Twin Cities metropolitan area. These loans will be offered to homeowners who, with a modest amount of additional assistance, will be able to bring delinquent loans to current status over the long term. The loans will be available through foreclosure counselors.

“Thousands of homeowners throughout Minnesota will face their own foreclosure crisis this year,” Minnesota Housing Commissioner Tim Marx said. “Minnesota is recognized for our strong partnerships and established efforts to help people before they lose their home. These additional funds will allow us to expand and continue that important work.”

Foreclosures typically occur due to unemployment or other loss of income. However, the increase in foreclosures beginning in 2006 is related to an increase in subprime 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 were an estimated 20,573 foreclosures in Minnesota in 2007 – an 84% increase from 2006. Housing Link is projecting between 29,000 and 37,000 foreclosures in 2008. The figures are based on sheriffs’ sales of foreclosed properties.

Pawlenty Administration’s ongoing efforts to curb foreclosures

Today’s announcement continues efforts by the Pawlenty Administration to address foreclosures and predatory lending practices in the state:

• Minnesota mortgage laws were strengthened in 2007, significantly increasing the net worth requirements for mortgage originators operating as Minnesota corporations, requiring training for loan officers, and making mortgage fraud a specific crime in Minnesota. Minnesota law also now requires originators to verify a borrower’s ability to repay a loan and prohibits negatively amortizing loans, churning, subprime prepayment penalties, and partial payment quotes. These are among the toughest such laws in the nation.

• The Pawlenty Administration requested, and the legislature agreed, to add additional investigators at the Department of Commerce. The department assigned three additional investigators to respond to the increasing volume of cases and complexity of housing and lending fraud.

• 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.

• In 2007, Minnesota Housing made its largest single funding award ever of $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.

• In 2007, the Minnesota Department of Commerce, with the support of the Minnesota Association of Realtors, transferred $500,000 to Minnesota Housing from the Real Estate Education, Research and Recovery Fund which is funded by real estate license fees. Minnesota Housing awarded the grants to the Minnesota Home Ownership Center and the Minneapolis Urban League for an early intervention foreclosure initiative for at-risk homeowners in targeted areas.

• In November 2007, Governor Pawlenty announced state funding for early intervention efforts and foreclosure prevention counseling. The Minnesota Housing award to the Greater Minnesota Housing Fund of $1 million was part of a response to a predicted 3-5 year situation. Another $800,000 in private, philanthropic and local funds were also committed to the effort. The funding doubled the number of foreclosure prevention counselors from 18 to 37 statewide and effectively tripled the number of households that can be served.

The Minnesota 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. The web site is www.hocmn.org/