Federal relief coming soon for strapped Minnesota homeowners

Thousands of struggling Minnesota families and neighborhoods will benefit from new housing law.

By JEAN HOPFENSPERGER, Star Tribune

Last update: October 16, 2008 - 9:24 PM

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Struggling Minnesota homeowners, as well as cities grappling with abandoned properties, are about to get their biggest injection of new federal aid in decades, state housing leaders said at a St. Paul forum Thursday.

Within months, Minnesota is slated to receive $58 million to shore up blighted properties through a new "Neighborhood Stabilization Program.'' Millions more will be injected into programs to help homeowners refinance into federally insured mortgages they can afford.

That's not to mention more low-income housing tax credits and more foreclosure prevention counselling for homeowners. It's all courtesy of a sweeping federal housing bill passed last summer that attacks some of the underlying mortgage problems that provoked the nation's recent financial crisis.

"This is a massive infusion of cash; that's why so many folks are watching it,'' said Karl Batalden, a housing specialist for the city of Woodbury, who was among about 250 housing leaders who attended a forum at the Wilder Center on what the new law means to Minnesota.

"I want to know what new tools will be out there that I can guide our residents to when they call and ask, 'What can we do' about our mortgage?''

The Housing and Economic Recovery Act of 2008 has been called the most significant federal housing legislation in decades. Its provisions will make a mark on thousands of Minnesota homeowners, as well as lenders, communities, Realtors and housing developers.

One mortgage for every 54 households was foreclosed in Minnesota between 2005 and 2007, according to the Minnesota Housing Finance Agency, which sponsored the forum.

The neighborhood stabilization program is one of the new law's pillars. The federal government just released the rules for program funding, and St. Paul, Minneapolis, Anoka and Dakota counties are rushing to create plans for clearing up their boarded-up housing. The state of Minnesota also is drafting a statewide plan.

The timeline for applying for the $58 million earmarked for Minnesota is tight, said Katy Lindblad, an assistant commissioner at the Minnesota Housing Finance Agency. The state will finish its plan by mid-November; federal officials will have it by Dec. 1 and funds could be headed for Minnesota as early as February.

"We're kind of stressed-out right now,'' she joked.

Meanwhile, a Hope for Homeowners Program is aimed at preventing foreclosures by offering federal insurance to homeowners to refinance 30-year mortgages. And there's new money for mortgage holders who could stay in their homes with counselling and help refinancing their mortgages. Even without the extra money, the state organization that administers those services -- the Minnesota Home Ownership Center -- is expected to serve approximately 13,000 mortgage holders by the end of the year, said Julie Gugin, the center's executive director.

The prospects of a real dose of financial assistance was welcomed by folks such as Michael Yang, a public policy director at Project for Pride in Living, a Twin Cities human service agency. But Yang warned that all the money in the world won't help people on the brink of foreclosure if they don't know about the programs.

"How will people know they can even do this?'' asked Yang. "Making sure people know about these services is just as important as the new programs.''

For more information go to www.hud.gov.

Jean Hopfensperger • 651-298-1553

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