Editorial: Should Minneapolis freeze foreclosures?

City government can help, but not through a foreclosure ban.

Last update: October 19, 2007 - 6:36 PM

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WHAT CITIES CAN DO

"A ban on foreclosures would unfortunately only be a temporary Band-Aid for a longer-term problem. It is not the best of solutions. Cities need to help with foreclosure prevention and focus on filling those vacant properties with responsible homeowners.''

R.T. Rybak, Minneapolis mayor

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Minnesota ACORN, a community advocacy group, is asking the Minneapolis City Council to endorse a three-month voluntary freeze on home foreclosures to help stop home losses. Hennepin County commissioners wisely rejected the idea. Now the group has turned to the city.

Though it is a well-intentioned attempt to help homeowners hard hit by the current subprime mortgage crisis, an across-the-board foreclosure ban isn't the answer. Council members should also vote against the idea.

Circumstances for each mortgage company and buyer vary too widely for a one-size-fits-all solution. Some homeowners were truly caught up in predatory lending schemes. They either were purposefully misled or innocently misunderstood the terms and conditions of their mortgages. As victims of fraud, they should have legal options to resolve their cases.

Other property buyers were speculators who took on mortgages they hoped to flip rapidly. Like playing the stock market, they took risks. According to city officials, about half of Minneapolis foreclosures have been among investor/speculators -- some of whom have been problem landlords. In those situations, it's not up to government to save them, even temporarily, from a shaky business deal.

For yet another category of borrowers, a moratorium would simply delay the inevitable. Some buyers knowingly got in over their heads and would be in foreclosure regardless of the current subprime crisis.

The enormity of the problem has led to a record high number of foreclosures, according to the national Mortgage Bankers Association. Locally, Hennepin County officials predict that 3,039 foreclosures will take place county wide this year, an increase of 60 percent over the previous year. Earlier this year in north Minneapolis alone, there were four foreclosures per day.

A temporary moratorium is not the answer, but there are ways for local government to help. St. Paul and Minneapolis have foreclosure prevention programs that provide counseling to help struggling homeowners reorganize debt and negotiate with lenders.

And city, county and state government can take lessons from the Minnesota farm mortgage crisis of the 1980s. When hundreds of farmers were in danger of losing their land, the Legislature required mediation between the land owners and lenders.

As Minneapolis Mayor R.T. Rybak points out, one of the most important things that cities can do is get control of vacant properties and fill them with quality owners. It is critical to develop a plan to quickly inventory, maintain and reuse abandoned homes. To that end, with support from the state Minnesota Family Housing Fund, the city has established an $11 million fund to strategically acquire properties.

That kind of program makes a lot of sense. A moratorium does not.

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