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Governor announces additional actions to assist homeowners facing foreclosure

April 14, 2008

Governor announces additional actions to assist homeowners facing foreclosure

FOR IMMEDIATE RELEASE: April 14, 2008                                          
Contact:    Brian McClung
(651) 296-0001

Includes Foreclosure Counseling Workshops, funding for mediation, lender compact

Saint Paul - To provide Minnesota homeowners with additional tools to prevent foreclosure, Governor Tim Pawlenty today announced expanded foreclosure counseling workshops to be held around the state, creation of a compact with lenders to reduce foreclosures, and state funding for voluntary third-party mediation when counseling is unsuccessful.

"With additional help, the American dream of home ownership can be kept alive for more families facing foreclosure," Governor Pawlenty said. "Foreclosures continue to hit families and our state's economy hard.  We are hopeful that connecting more homeowners with counselors and providing a neutral third-party in some cases will help keep more homeowners in their homes, without negatively impacting the availability of credit in Minnesota."

Actions announced by Governor Pawlenty today include:

  • Expanded Foreclosure Counseling Workshops to be held around the state

  • Creation of the Minnesota Foreclosure Prevention Compact

  • Mediation funding to assist homeowners when counseling is unsuccessful

  • New Commerce Department assistance hotline for counselors

Expanded Foreclosure Counseling Workshops to be held around the state

Governor Pawlenty announced a series of expanded mortgage Foreclosure Counseling Workshops around the state that bring lenders and borrowers together in one location.  These workshops, sponsored by the Minnesota Home Ownership Center, will be greatly enhanced with additional lender participation.  Lenders are being contacted directly by Department of Commerce to participate in these events.

Mortgage lenders and servicers will meet directly with homeowners to review their individual situation, and when possible, modify the terms of the loans in an effort to prevent foreclosure.

The first four expanded workshops will be held:

  • Tuesday, April 22, 4:30-8:30 p.m.
    Minneapolis Urban League, 2100 Plymouth Avenue North, Minneapolis

  • Tuesday, May 13, 4:30-8:30 p.m.
    Anoka County Technical College, 1355 West Highway 10, Anoka

  • Tuesday, May 20, 4:30-8:30 p.m.
    Buffalo Discovery Center, 301 NE Second Avenue, Buffalo

  • Thursday, June 5, 4:30-8:30 p.m.
    Eagan Community Center, 1501 Central Parkway, Eagan

Additional workshops in St. Cloud, Rochester and Duluth are being planned. More information is available at www.hocmn.org  .

At Foreclosure Counseling Workshops, homeowners can ask questions and receive free and confidential advice from non-profit foreclosure counselors and mortgage lenders.  The events are free and open to the public. There is no registration required and homeowners may stop by any time during the "open-house" style events. 

Lenders and servicers asked to sign Minnesota Foreclosure Prevention Compact

Governor Pawlenty is asking lenders and servicers to sign a compact and agree to efforts to reduce foreclosures in Minnesota. The Department of Commerce has been meeting with lenders and servicers regarding the compact.  Principles of the Minnesota Foreclosure Prevention Compact include:

  • Work with mortgage foreclosure prevention counselors, and when necessary, participate in voluntary mediation.

  • Participate in all Foreclosure Counseling Workshops in Minnesota.

  • Engage in a substantial and large-scale loan modification effort for subprime mortgages and adjustable rate mortgage resets.

  • Identify, evaluate and make good faith attempts to contact at-risk or defaulting borrowers as soon as possible.

  • Modify loans to the extent permissible within existing fiduciary, contractual or other legal obligations and in accordance with prudent mortgage lending and servicing practices.

  • Report progress to the Minnesota Department of Commerce.

Mediation funding to assist homeowners when counseling is unsuccessful

Because there are times when counseling cannot resolve issues surrounding a possible foreclosure,  Governor Pawlenty has directed Minnesota Housing and the Department of Commerce to work with the Minnesota Homeownership Center and lenders to provide access to mediators when housing counselors and lenders believe it would be effective in keeping families in their homes.

Lenders and counselors have indicated that on occasion their efforts could benefit from the perspective of a neutral third party with mediation skills.

Mediators will be paid for by the state through grants from Minnesota Housing.

Earlier this month, Governor Pawlenty announced a $4.3 million federal grant, the second-largest such grant made to any state, to expand foreclosure prevention counseling in the state. With this funding, 37 additional counselors are being added to the statewide counseling network, for a total of 76 counselors.

Department of Commerce establishes Minnesota Foreclosure Hotline for counselors

At Governor Pawlenty's direction, the Minnesota Department of Commerce has established a hotline for loan counselors if they experience problems contacting or negotiating with lenders.  The department will then be able to contact the lender or servicers to ensure they are responding and acting in good faith.

The counselor hotline number is (651) 296-2569.  This number should only be used by counselors and mediators, not individual homeowners.

Homeowners facing foreclosure are encouraged to call the Minnesota Foreclosure Hotline   toll-free at 1-866-462-6466 for information on counseling and other resources.

"The last thing your lender wants is for you to fall into foreclosure," said Minnesota Commerce Commissioner Glenn Wilson. "If you are behind on your mortgage and fear foreclosure, call your lender immediately for help or call the Minnesota Foreclosure Hotline."

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:

  • Earlier this month, Governor Pawlenty announced a $4.3 million federal grant, the second-largest such grant made to any state, to expand foreclosure prevention counseling in the state. With this funding, 37 additional counselors are being 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.

  • Also this month, Governor Pawlenty announced that Marquette Financial Companies provided 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.

  • 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. For FY07 and the first half of FY08, the Minnesota Department of Commerce has taken 220 enforcement actions and imposed $678,850 in civil penalties in real estate or mortgage related cases.

  • Minnesota's ongoing commitment to foreclosure prevention includes a broad partnership that provides funding for a statewide network of counselors and state funding for foreclosure prevention loans of up to $5,500. Governor Pawlenty has proposed this year to increase the maximum size of these loans to $10,000 each.  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.