$4.3 million federal grant could help 7,000 avoid foreclosure

With a record number of Minnesotans facing foreclosure, help is coming in the form of a $4.3 million federal grant that could prevent more than 7,000 foreclosures across the state.

Gov. Tim Pawlenty said Tuesday that the grant, the second-largest awarded in the country, will be used to hire additional foreclosure counselors who could help homeowners navigate the thicket of lender bureaucracy. "We want to do everything we can to reach homeowners before they end up in foreclosure," Pawlenty said.

But, he cautioned, that does not extend to a controversial foreclosure-deferment bill working its way through the Minnesota House and Senate. That bill would make Minnesota the first state to declare a moratorium on some foreclosures, allowing borrowers to make reduced payments for up to one year.

Pawlenty said Tuesday that he is likely to veto the bill if it crosses his desk.

The measure, he said, could have serious unintended consequences and drive up credit costs for Minnesotans across the board. "There's a reason why no one else has done that," he said.

In addition to the federal grant, Marquette Financial Companies will provide the state with $500,000 to aid homeowners who need small bridge loans to avoid foreclosure.

Under the program, homeowners could get up to a $5,000 loan to help them prevent foreclosure.

Minnesota hit hard

The national mortgage meltdown has hit Minnesota particularly hard, with as many as 37,000 foreclosures anticipated this year.

More than 20,000 properties went to the sheriff's auction block last year.

Legislators here and nationally have scrambled to come up with ways to ease the pain.

On Tuesday, Minnesota House members passed a variety of smaller foreclosure-related bills that would increase financial assistance and offer some protection for renters and mobile home owners.

Foreclosure assistance packages are moving through Congress as well, with the Senate voting Tuesday to push ahead on legislation that would give local governments funds to buy foreclosed properties, expand mortgage assistance and even allow bankruptcy judges to change the terms of home loans.

At the State Capitol, Sen. Ellen Anderson, DFL-St. Paul, has said her foreclosure deferment bill is needed to buy time while Congress figures out a longer-term solution to the mortgage crisis that now threatens the U.S. economy.

While the 37 additional counselors hired through the federal grant "is an excellent use of federal funding," she said, "we still need a new law to give homeowners some breathing room before foreclosure."

Pawlenty said the grant would allow the state to nearly double the number of counselors, but he acknowledged that their reach is limited, particularly with out-of-state lenders.

Finding owner a challenge

Because mortgage loans are often bundled, repackaged and sold to investors around the world, he said, even determining who owns a mortgage can be challenging.

Pawlenty said he is in talks with lenders and considering a proposal that would require mortgage holders to readily identify a contact person authorized to renegotiate loan terms.

Julie Gugin, executive director of the Minnesota Home Ownership Center, which is coordinating the federal grant, said counselors are organizing workshops across the metro area where borrowers can get advice and even meet with lenders.

Interested homeowners can call the center at 1-866-462-6466 or go to www.hocmn.org for more information.

Patricia Lopez • 651-222-1288