The worst of the foreclosure crisis may be winding down, but Minnesota legislators are looking at ways to help struggling homeowners who still have a chance to stay in their homes.

Caylin Crawford is among those who might benefit.

After being sidelined by a snowboarding accident, Crawford called her bank asking about a loan modification because she might not be able to make her full mortgage payments on time. She says she was told that they weren't set up to deal with that unless she skipped a few payments.

Three months later, when she was getting back on her feet, the foreclosure notice was already in the mail.

A bill introduced by House DFLers on Wednesday could make it easier for homeowners such as Crawford to stay in their homes by prohibiting lenders from beginning foreclosure proceedings at the same time they are working with homeowners on ways to avoid foreclosure.

Sponsored by Rep. Mike Freiberg, DFL-Golden Valley, and modeled after similar legislation in California, the bill would bar the controversial practice known as "dual tracking," which led to a $25 billion settlement with some of the nation's largest banks late last year.

The housing collapse and recession sent property values tumbling several years ago and triggered a wave of foreclosures that is just beginning to ease. In 2011, some 21,000 Minnesota homes went into foreclosure, including thousands in and around the Twin Cities.

"This is a crisis that affects not only homeowners, but the whole community," said state Rep. Karen Clark, DFL-Minneapolis.

Clark, chairwoman of the Housing Finance and Policy Committee, put the foreclosure bill at the top of the committee's agenda and said she has almost a dozen more foreclosure bills lined up and ready to move this session.

Crawford, who bought and renovated a dilapidated Frogtown home for $40,000 years ago, said that if she'd known she risked foreclosure, she would have found a way to make the mortgage payments even when she was laid up.

"I never figured I would be the one in this situation. Now I'm 24 with a foreclosure on my record," said Crawford, whose neighborhood has become riddled with foreclosed and abandoned homes. "The foreclosure was not my fault. I did what the bank told me to do, and they're making money on kicking me out of my home."

Banking officials who testified at the hearing were less than thrilled by the proposed legislation.

Mara Humphrey, who represents the Minnesota Credit Union Network, warned the Finance and Policy Committee that the legislation unfairly lumps all lenders together. Small banks and credit unions have a close relationship with their customers, she said, but if they have to spend a lot of time and money drawing out negotiations with the small number of foreclosures, it could hurt "the other 99 percent" of their customers.

"It gives less flexibility to a financial institution as to what can be done" in the event of a foreclosure, Humphrey said.

Tess Rice, general counsel for the Minnesota Bankers Association, said banks would prefer to wait and see what sort of regulations come out of Congress and the new federal Consumer Financial Protection Bureau.

The more laws passed by the Legislature, she said, the more it "increases the risk to lend in Minnesota," and drives up the costs for Minnesotans to borrow money. There is already "pretty friendly foreclosure language in Minnesota," Rice said.

Both banking representatives said dual tracking is no longer a common foreclosure practice. But after several bruising years of foreclosure crises, some DFL legislators say consumers need more assurance than that.

"You wonder, where is the fairness? We've bailed out banks, we've made sure that they're whole, and yet there are homeowners who can't find the same kind of treatment, the same kind of protections," said state Rep. David Bly, DFL-Northfield. "I find it ironic that the banks that led us down this path ... can't find ways to work with people. It's very frustrating."

Jennifer Brooks • 651-925-5049