Minnesota Mortgage Defaults Racking Up at Record Pace

Home mortgage defaults in Minneapolis climbed more than 100 percent during the first three months of this year compared with the same period last year.

Between January and March, 678 homes were sold at foreclosure auctions, more than double the 319 sold at the same time last year. Of the 678, 384 are in north Minneapolis.

At the current rate, the Minneapolis housing market is on track to far surpass the 1,610 homes foreclosed last year. Nearly 900 of the foreclosures in 2006 were on the North Side - more than the 863 foreclosures the whole city had in 2005.

“It’s a bad situation,” said Elizabeth Ryan, a city planning official. She attributed the spike in foreclosures to the rise of abusive lending practices such as bad credit home loans, typically offered to borrowers with poor or little credit histories.

Subprime mortgages have increased tenfold in the past decade, and today account for nearly one-fifth of all home loans in the United States, according to the Mortgage Bankers Association. Nationally, the delinquency rate on subprime loans is almost 13 percent.

Minneapolis City Council President Barbara Johnson, whose Fourth Ward has a high number of foreclosures, said subprime lenders commit “white-collar crime.”We try to attack crime by hiring more police officers and address housing issues with tougher inspections,” she said Monday. “But to have our neighborhoods targeted by these criminals on this scale is overwhelming.

They’re ruining our neighborhoods.”

Ryan said many homeowners also fall prey to “teaser rates” on adjustable-rate mortgages and then can’t keep up with the payments when the artificially low opening rate is no longer in effect.

“In some cases, there was a loosening of credit standards and what happens is homeowners end up with products that in the short term looked like a good deal, but in the long run were unsustainable,” she said. “When the adjustable [home loan rate] changed, they often have a hard time paying the higher rate.”

Experts say other causes of foreclosures include job loss, divorce, medical crises and financial mismanagement.

While Minnesota has the nation’s highest home ownership rate at 78 percent, its foreclosure rate jumped 46 percent last year, according to RealtyTrac, an online data provider that tracks foreclosed properties nationwide.

Not just a Minneapolis issue
More than 2,000 owners in Minneapolis and St. Paul went into foreclosure last year when their Minnesota mortgage defaulted, according to sheriff’s records. Other areas statewide also are seeing record numbers of foreclosures.

Minneapolis Mayor R.T. Rybak on Monday called the foreclosure rise a “troubling trend.” Among the 384 foreclosed homes on the North Side, the Jordan neighborhood had the most: 74.

Jason Little, treasurer of the Jordan Area Community Council, said Monday that prospective mortgage borrowers need to do more homework before signing any paperwork.

“Education is the only way we can get people who are being inundated with letters and phone calls from predatory lenders,” he said. “For whatever reason, a lot of people don’t realize they can get help through legitimate, reputable resources.”

Ryan said that Minneapolis homeowners who are facing possible foreclosure can call the city’s 311 information line to be put in touch with housing experts.

SOURCE: The Star Tribune