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Published June 01, 2009, 12:00 AM

Rural Minnesota foreclosure rates swell

Borrowers with traditional mortgages now struggling
ST. PAUL – Minnesota’s soaring home foreclosure rate has eased in the Twin Cities, but not in other parts of the state.

By: Don Davis, Forum News Service, INFORUM

Borrowers with traditional mortgages now struggling

ST. PAUL – Minnesota’s soaring home foreclosure rate has eased in the Twin Cities, but not in other parts of the state.

And options are scarce as foreclosure problems swell, especially in rural Minnesota.

Residents outside of the Twin Cities are more likely to find fewer options because they often did everything right when picking their mortgages, said Ed Nelson of the Minnesota Home Ownership Center.

The housing crisis began when subprime mortgages were issued without enough collateral. Problems with these so-called exotic mortgages also included payments that ballooned beyond the reach of the homebuyers, Nelson said.

Homebuyers with exotic mortgages were the first ones hurt by the foreclosure crisis, which affected 26,265 Minnesota families last year and another 5,157 in the first three months of 2009.

The international recession is now taking its toll on those who had safe, traditional mortgages. Those homebuyers are in trouble because more and more are losing their jobs.

“They may be prime borrowers with good, affordable mortgages, but whose income is causing them to fall behind,” Nelson said.

The Home Ownership Center offers a gateway to people who are facing or may face foreclosure. The center puts homebuyers in touch with counselors from nonprofit agencies – often Lutheran Social Services in rural Minnesota – that offer free help.

While the center connects homebuyers with free help, for-profit counselors often charge $3,000 to $11,000.

Minnesota Attorney General Lori Swanson has taken a dozen for-profit foreclosure counseling companies to court, claiming they improperly demanded money before providing any service.

The 2009 Legislature tightened state law in an attempt to ban upfront payments to companies that promise to help negotiate or modify terms of a home mortgage.

The bill was the only one of three major mortgage-related measures to get signed into law this year.

“In these difficult economic times, we must protect homeowners from scam artists who seek to take advantage of a bad situation,” said Sen. Lisa Fobbe, DFL-Zimmerman.


Davis works for Forum Communications Co., which owns The Forum. He can be reached at (651) 290-0707 or ddavis@forumcomm.com

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