Harold and Sharon Tieden were unhappy from the outset that they would lose a 12-foot swath of their Blaine back yard and a row of mature pines to an expansion of Radisson Road. Still, they began negotiations with Anoka County, planning to use the settlement to rebuild a berm, move trees and rocks, and maybe build a fence. ¶ But like many other homeowners losing ground to eminent domain this year, they have found that they can't even count on the cold comfort of a settlement check.

When they sign the papers, the check, it turns out, will likely go instead to their mortgage holder.

In an unusual twist brought about by stressed lenders and highly leveraged real estate, homeowners across the metro who are facing the loss of land due to eminent domain projects are increasingly getting notices from banks claiming rights to the proceeds. In the past, such notices were sent so rarely that county officials never saw a need to keep track of how often it happened.

The trend is emerging across the metro area as government agencies take advantage of relatively low construction costs to prep their roads for future development. In Anoka County, right-of-way staff have seen a noticeable uptick in the number of checks going straight to lienholders. Ditto for Washington County, down the length of an expansion of S. 40th Street. In Dakota County, where Cedar Avenue is being expanded, transportation officials plan to give residents notices of the trend when they send out notifications early next year.

The Tiedens' yard is part of a planned expansion of Radisson Road, also known as County Road 52, from two lanes to four, with turning lanes and a walking trail. Officials say the expansion is needed to accommodate a predicted traffic flow of 25,000 daily trips by 2030. The county hopes to persuade 61 homeowners to surrender swaths of their yards and driveways.

As of Thursday, the county had signed agreements with 26 households; the Blaine City Council postponed to July 9 a vote on a joint powers agreement on the project. The plan is to vote after getting agreement on a $100,000 city-county matching grant for trees, fences and other projects for residents, and on a speed study to submit to the state in hopes of reducing the speed limit along the residential stretch to 45 miles per hour.

Lenders guard their interests

Most homeowners' mortgage contracts include language that allows lienholders the option to claim proceeds from a condemnation process. In an economic environment of stressed banks and highly leveraged real estate, people are finding that the banks are exercising that option.

Minnesota statute defines owner broadly, as anybody considered to have a financial interest in a property. All are entitled to notice of an eminent domain claim, and all are entitled to compensation if there's a settlement. And depending on the fine print in homeowners' mortgage contracts, sometimes the mortgage company has first dibs to part or all of a settlement intended to compensate owners for lost property values.

The trend of mortgage companies claiming settlement payments has everything to do with the economy, said real estate attorney Mark Savin, a partner at the Minneapolis law firm Faegre & Benson, adding that he's seen the same trend in commercial real estate.

"In the current environment, every lender is paying attention to every nickel," he said. "In an environment where housing prices were soaring and land prices were soaring, a bank wasn't concerned about whether its collateral was at risk. But now if you take 10,000 feet from a property that raises real concern with the banks. The banks are careful to guard their interests."

Depending on the terms of the contract, the settlement sometimes is applied to the mortgage principle, but that's scant consolation to folks who agreed to a settlement with plans for the money.

"I kind of blew a gasket, because how are you supposed to fix the existing problem?" Tieden said. "We need money to fix whatever they're going to damage because they're not going to fix it. ... They're just going to come in and destroy everything we've done."

The Tiedens' mortgage holder, Wells Fargo, said in a written statement that it could not comment on "financial information related to an individual customer's loan or property."

But Savin offers disgruntled homeowners some hope: Sometimes in commercial cases, owners have prevailed by promising to use the settlement to try to offset the loss.

"If there's one thing the bank hates is that you're going to take the money from the condemnation and use it as a windfall and use it for a trip to Florida," Savin said. "If you have the ability to negotiate with them, you want to make the argument that you'll restore the property because that restores the value of the collateral."

Maria Elena Baca • 612-673-4409