Local housing agencies ready for flood of calls about relief plan

  • Article by: SUZANNE ZIEGLER , Star Tribune
  • Updated: February 18, 2009 - 10:21 PM

Minnesota experts weigh in on plan to address the mortgage foreclosure crisis.

Minnesota nonprofit housing agencies are geared up for a flood of calls about the $75 billion mortgage relief plan, which local real estate agents and foreclosure and finance experts said Wednesday was a step in the right direction.

"Any additional help for Minnesota homeowners is welcome," said Ed Nelson, spokesman for the Minnesota Home Ownership Center, a nonprofit that helps people buy and keep their homes. "It's one more tool in the toolbox."

The plan focuses on helping homeowners still current on their payments but at risk for default by reducing their monthly payments either through refinancing the mortgages or modifying their loans. By providing incentives for homeowners and service providers, it also appears to be trying to avoid the problems of previous voluntary loan-modification programs that made no dent in the flood of foreclosures that began in 2007.

Cherie Shoquist, foreclosure project coordinator for the city of Minneapolis, said the plan "is just what we at the city have been waiting for" because it will target people who can make their payments for now and keep them in their neighborhoods.

Nelson and others said it's hard to say how many people in Minnesota will be helped. They're awaiting details that will be released March 4.

"I think it will help some of the people but I don't think it will be the panacea some people believe," said Chris Galler, head of the Minnesota Association of Realtors. "For the people that have been making payments, having the interest rate reduced by a little bit will help. But for the people with incomes of $30,000 who needed to be making $70,000 to afford their houses, I don't think there is any way to help them. They shouldn't have been homeowners to begin with."

The number of foreclosed properties flooding the market is dragging down home values across the country, a process that could lead to even more home foreclosures.

Getting buyers off the fence

In Minnesota, research agency HousingLink is still tallying final numbers for 2008, but it estimated there were about 28,000 foreclosures last year, more than four times 2005 levels. Last year about 18,000 of the state's foreclosures were in the Twin Cities.

Mark Allen, chief executive officer of the Minneapolis Area Association of Realtors, said the plan's tax credit -- up to $8,000 -- for first-time home buyers is "one piece of the puzzle" that will be enough to encourage some buyers to take the plunge and buy. "It's one aspect of a number of events that are going to work to further motivate buyers to get off the fence and get into the market," he said.

Bob Schnell, a partner at the Faegre & Benson law firm in Minneapolis and one of two leaders of a TARP (Troubled Asset Relief Program) working group there, said the plan has "shared responsibility, or pain if you will, among all three groups of people who have an interest: the government, the lenders or investors, and the homeowners."

Schnell acknowledged the frustration many taxpayers may be feeling about bailing out people who borrowed more than they could afford.

"There is a social need here to address the foreclosure problem," he said. "People who have been responsible and have lived within their means have an incentive in making sure that neighborhoods stay strong and that, generally speaking, the foreclosure problem is brought under control."

Nelson said they are prepared for a flood of calls as homeowners begin to wonder whether they are eligible. He cautioned homeowners to be careful about who they go to for help. "I would say as a general rule of thumb: If someone is charging for the services they are offering, the homeowner should be very, very careful."

Suzanne Ziegler • 612-673-1707

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    Nonprofits that can help direct you to a mortgage counselor at no cost:

    The Minnesota Home Ownership Center: www.hocmn.org, 651-659-9336. If you live outstate, call toll-free 866-462-6466.

    HUD: A list of HUD-approved counseling agencies in Minnesota is available at www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.

    Lutheran Social Services in Minneapolis: 612-879-5266.

    Habitat for Humanity: 612-331-4090 or go to www.tchabitat.org.

    ACORN: 651-642-9639 or go to www.acornhousing.org for help finding a counselor.

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