It’s estimated that 33,000 Minnesotans could face foreclosure during 2008. Soon, there may be help for many of them.
Sen. Ellen Anderson, DFL-St. Paul, and Rep. Jim Davnie, DFL-Minneapolis, have jointly introduced the Minnesota Subprime Foreclosure Deferment Act of 2008 to the Senate. The bill would halt foreclosures of subprime or exotic "negative amortization" loans closed after Jan. 1, 2001, and prior to Aug. 1, 2007, for one year.
The proposal would require mortgage lenders to cancel sheriff's foreclosure home
auctions for eligible homeowners. The Minnesota Subprime Foreclosure Deferment Act of 2008 does not financially unburden homeowners, however. They would still be responsible for their debt. Under the legislation, homeowners with subprime loans would still be required to continue paying either 65 percent of the payments they were making when they defaulted or the minimum monthly payment they were making when they first took out the loan. If the homeowner misses a payment, foreclosure proceedings start again.
The deferment is meant to offer cash-strapped homeowners more time to catch up on their payments and to work with their lenders. It is also hoped that the federal government will have addressed the mortgage crisis by the end of the moratorium.
Great pains were taken in order to distinguish the proposed deferment from a flat-out moratorium, such as the one Minnesota enacted in 1933 to avert foreclosures during the Great Depression. It also has distinct differences from the Minnesota Farmer-Lender Mediation Act from the 1980s, which deferred farm foreclosures until mediation took place.
Sen. Ellen Anderson says the new subprime foreclosure-deferment proposal is moderate and targeted, emphasizing a shared responsibility between lenders and homeowners. It is expected that the proposal would impact 15,000 families who qualify for the program.
It’s not the only attempt at helping to stall the increase in foreclosures within Minnesota. So far, the State Senate has given preliminary approval to three foreclosure bills. Another bill would erase eviction notices from the records of renters removed from foreclosed properties. The third bill would help authorities to declare vacant properties abandoned so new owners could take over and move in faster.