There's no end in sight to Minn. foreclosure mess

71,665 Minnesota homeowners got pre-foreclosure notices last year, meaning an end to the crisis isn't in sight.

More than 70,000 Minnesota homeowners were behind on their mortgages and received pre-foreclosure notices last year, a warning that the housing market still faces serious hurdles in 2011.

About 71,665 struggling homeowners got the notices in 2010, up 8 percent from 2009, according to the Minnesota Home Ownership Center, which released the numbers Thursday. The number of notices rose 3 percent in the Twin Cities metro area, but 15 percent elsewhere in Minnesota.

The numbers suggest that despite glimmers of hope in the job market, the state could see more people lose homes this year than they did last year, said Ed Nelson of the St. Paul-based Home Ownership Center.

"There is still a large number of Minnesota families that are facing their own personal mortgage crisis and are struggling with payments," he said.

Seemingly endless waves of foreclosures in recent years have taken a human toll, flooded the housing market and dragged prices down. Foreclosures, short sales and other lender-mediated sales made up about 36 percent of all Twin Cities home sales at the end of 2009. In December, they accounted for nearly 48 percent of all homes sold.

Thursday's report is further evidence that housing will trail the economic recovery, not lead it. On the bright side, Nelson said, when the totals of pre-foreclosure notices are lined up quarter by quarter, they appear to be leveling somewhat from when the practice of sending them first began in 2009.

The total number of 2010 foreclosures in Minnesota won't be out until next month. But in the first three quarters of last year, there were 20,347 foreclosures statewide, according to HousingLink, a Minneapolis nonprofit housing group that tracks them. The 2010 total could rival that of 2009, when 23,092 homes were lost statewide.

Nelson said he doesn't think the state will reach its 2008 foreclosure record, when 26,251 people lost their homes.

"Hopefully, we will never see that number again," he said.

While the rise in notices may come as a shock to members of the general public who figure the years-long mortgage crisis must be waning, it's not so surprising to those who track housings twists and turns.

Julie Gugin, head of the Home Ownership Center, blames the tough economy for the mortgage anguish.

Pat Paulson, past president of the Minneapolis Area Association of Realtors, said the high level of pre-foreclosure notices didn't surprise him.

"We have to admit that foreclosures continuing at these high levels is a concern, but it's not unexpected," Paulson said.

Paulson noted that the numbers might have risen in 2010 because people got better at tracking the notices themselves. He also said that because homeowners behind on their mortgages often try to sell their homes to fix the problem, "a significant percentage" of people who got the notices may already have placed their homes on the market.

The local foreclosure numbers focus on actual sheriff's foreclosure auction sales, and differ from the broader counts released by California-based RealtyTrac Inc., which include auctions but also include foreclosure-related actions such as default notices before auctions. According to RealtyTrac, which has already released 2010 totals, Minnesota's foreclosure activity fell by 1.2 percent in 2010.

Pre-foreclosure notices are a relatively new thing. In Minnesota, since the fall of 2008 lenders or anyone planning to foreclose on a home are required to send the homeowner information about the availability of housing counseling and to also send the homeowner's contact information to the counseling agency. The timing of these notices varies by lender, but the vast majority go out around the time of the third to sixth missed mortgage payment, Nelson said.

Not everyone who gets a notice, of course, loses their home. Nelson said his group is studying the percentage that do.

Jennifer Bjorhus • 612-673-4683

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