Experts air foreclosure crisis solutions
- Article by: Jim Buchta
- Star Tribune
- October 4, 2007 - 11:01 PM
Minnesota's foreclosure laws need careful assessment and the massive amounts of paperwork generated by the mortgage and real estate industries needs to be recorded electronically, a Federal Reserve Bank of Minneapolis official said Thursday.
"We're very behind the curve," Dick Todd, a bank vice president, told a gathering of more than 100 housing experts and government officials.
That means converting the home buying, financing and foreclosure processes into a more streamlined electronic system that would create more transparency for buyers, lenders and others.
Such a system would have made it easier to respond more quickly to the current foreclosure crisis, which Todd said won't be going away anytime soon.
Called "Fixing the Foreclosure System," the daylong workshop included representatives from the legal system, government and home ownership counselors, who talked of increasing calls from homeowners desperately trying to avoid foreclosure.
Legal Aid workers and others talked about the frustration of trying to help homeowners struggling to understand complicated mortgages, and those who might be victims of fraud.
Prentiss Cox, associate professor at the University of Minnesota Law School and an expert on foreclosure, was even more certain than Todd about the need to reform state and national foreclosure laws.
Cox offered several ideas for making those reforms, including a rule that would create different timelines for homeowners and investors going through the foreclosure process. For example, for homeowners in trouble, he proposed replacing the current redemption period with a "reinstatement" period that gives them more time and options for saving their homes. For investors, he proposes eliminating the redemption period and shortening the foreclosure process.
Workshop experts repeatedly warned that the rising number of foreclosures present opportunities for investors who might not represent the best interests of the community or the people who become renters in those properties.
"This has profound consequences for our communities," said Hennepin County Commissioner Gail Dorfman, who says that government agencies need to join with the private sector and nonprofits to provide more money for homeownership counseling and to get properties that are in foreclosure back into the hands of owner-occupants.
She said rising foreclosure rates are a threat to the substantial public investments that have been made in communities like north Minneapolis.
Experts said that the key to saving homeowners and communities is homeownership counseling.
Tom Fulton, president of the Family Housing Fund, said studies have found that the economic cost of a single mortgage foreclosure ranges from $80,000 to $220,000. Foreclosure counseling, which is successful about 50 percent of the time, costs an average of $500.
"This is a huge crisis," he said.
Jim Buchta 612-673-7376
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