Minneapolis to put foreclosure aid to work
- Article by: STEVE BRANDT
- Star Tribune
- March 23, 2011 - 1:11 PM
With the decline in Minneapolis foreclosures steepening, the City Council is making plans for using an initial dose of federal aid to clean up the damage.
A council committee on Tuesday approved a plan to spend an initial $5.6 million on foreclosure recovery, and the full council is expected to endorse it on Friday. That's expected to finance, purchase, rehab or demolish more than 600 properties. City officials said they expect the same amount of federal aid next year.
The debate takes place as the city's surge of foreclosures that began in 2006 is ebbing. May was the first month in several years when Minneapolis foreclosures didn't top the same month a year earlier; that's now happened for three straight months.
Minneapolis foreclosures in September were down 40 percent from the same month in 2007, while October was down 25 percent. For the past three months, Minneapolis foreclosures are down 25 percent from the same period in 2007, while they've jumped 52 percent in the rest of Hennepin County. Analysts say the city was hit by mortgage fraud before the round of mortgage-interest rate resets hit the suburbs.
Meanwhile, people from the city's North Side, the state's hardest-hit area for foreclosures, told the council Tuesday they want federal foreclosure recovery money to run through community agencies and developers.
"We're concerned that the African-American community has not gotten its fair share of the housing money," said Roger Banks, a research analyst for the Council on Black Minnesotans.
How the money will be used
The city plans to use $500,000 of its federal foreclosure response money to help low-income people buy foreclosed housing. Among the options are using contracts for deed to finance homes during the current tight credit market or providing second mortgages forgivable under certain conditions.
The biggest share of money is earmarked for demolishing some of the more than 900 vacant properties on the city's boarded-building list. Much of that $1.7 million is expected to be recovered by property assessments. City officials said blighted homes attract crime and discourage neighbors, but housing advocates urged the city to limit teardowns.
Meanwhile, the city's development agency plans to use another $1.5 million to buy vacant lots or homes and bank them to limit supply until market conditions improve. The remaining $1.5 million will support private and nonprofit developers who buy and rehab foreclosed homes, with the federal money subsidizing the gap if the developer doesn't recover costs in a down market.
Steve Brandt • 612-673-4438
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