ACORN urges Minneapolis City Council's support for freeze on foreclosures

The advocacy group is encouraging discussions between owner-occupants and subprime lenders to come up with alternatives to foreclosure.

By Steve Brandt, Star Tribune

Last update: October 18, 2007 - 4:04 PM

An advocacy group has started a campaign calling on the Minneapolis City Council to support a three-month voluntary freeze on foreclosures in the city to give some borrowers more breathing room.

The proposal by the local chapter of Minnesota ACORN, a community advocacy group, would target loans made by the 25 largest subprime lenders to owner-occupants. Subprime lenders typically offer less favorable terms to borrowers whose credit record disqualifies them for conventional loans.

ACORN turned to the City Council after getting turned down by the Hennepin County Board. ACORN also will talk to St. Paul officials.

Just three of the 13 council members -- Gary Schiff, Don Samuels and Cam Gordon --have spoken in support of the proposal. Council President Barb Johnson said she isn't sure how the proposal will fare in the full council.

County officials project that the number of countywide foreclosures this year will jump 60 percent over last year's 3,039, and that was an 82 percent increase from 2005. Earlier this year, foreclosures were occurring in north Minneapolis alone at a rate of more than four daily.

Advocates attribute that to booming numbers of loans with features such as built-in interest rate increases and other features that work against consumers.

"What we are asking for is conversations between lenders and borrowers on a mass scale," said ACORN spokesman Paul Dillon.

Loan counselors, including an arm of ACORN, say borrowers behind on mortgages sometimes can work with counselors and lenders to rewrite terms. Those new terms sometimes add missed payments to the back end of the mortgage, fold them into upcoming payments or shift the loans from adjustable to fixed-rate interest.

But some people who just can't afford their mortgage are better off shedding the property rather than working out new terms, according to Cheryl Peterson, manager of the foreclosure prevention program at Twin Cities Habitat for Humanity, which specializes in Minneapolis borrowers. She said a freeze would work well only if there's an increase in mortgage counseling.

Tim Bendel, president of the Minnesota Mortgage Association, said that it welcomes any effort to diminish foreclosures, but some borrowers don't have a long-term prospect of keeping up with their loans. A freeze would only delay the inevitable, he said.

The 1980s farm crisis generated a push for a statewide moratorium on foreclosures that farmers' advocates could not persuade the Legislature to enact. Instead, the 1986 Legislature required mediation between most lenders and farmers before foreclosures.

Johnson said she's bothered that a freeze could help investors, who represent 70 percent of foreclosures in her ward. ACORN said the freeze would focus on borrowers living in homes facing foreclosure.

Although the County Board has repeatedly delayed action on the freeze proposal, it did authorize more foreclosure prevention money and a task force on the foreclosure issue that is due to report soon.

Steve Brandt • 612-673-4438

Steve Brandt • sbrandt@startribune.com