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Minnesota Housing eNews Alert


April 15, 2009


Homeownership Assistance Funding Cut –
Immediate Response Needed!

Today, the House Housing Policy and Finance and Public Health Finance Division adopted an amendment to the budget bill that reduces the funding for the Minnesota Housing Homeownership Assistance Fund (HAF) by approximately two-thirds over the next two years to only $300,000 per year.  Currently, the program appropriation is $885,000 per year. 

HAF is an essential part of the first-time homebuyer programs offered at Minnesota Housing and provides the opportunity for eligible homebuyers who qualify for a Minnesota Housing loan to receive an interest-free, deferred loan to help with down payment and closing costs.  HAF has a long history of providing and promoting successful homeownership to low and moderate income households, serving a typical household income of $35,000 which is 50% of the statewide median income.  The program is also an integral tool in working towards increasing emerging market homeownership, with a high percentage of emerging market borrowers receiving this assistance.

We need your help!  We urge our housing partners to please take a moment and send an email to each member of the House Housing Policy and Finance and Public Health Finance Division, asking for the immediate reinstatement of this appropriation to the House Budget, especially if you live in one of the communities represented by a committee member.  Members of the committee and their contact information are listed below.

We need as many individuals as possible to respond immediately, ensuring that HAF continues to support the recovery of the housing market.

Thank you.


Minnesota Housing
400 Sibley Street, Suite 300 | Saint Paul, MN 55101
http://www.mnhousing.gov/contact/enews/ | 651.296.7608 or 1.800.657.3769 | mn.housing@state.mn.us

Builders Association of the Twin Cities (BATC) Releases December Stats


Builder's Association of the Twin Cities Stats

Roseville, MN (January 12, 2009) – December permit statistics are a clear indication that regional builders were more than ready to close the books on 2008. Planned units dropped to just six more than the year’s monthly

low in February, and and down 60 percent compared to December 2007. Multi-family units made up just 36 percent of the month’s total, a drop from the 50 to 70 percent each month since July.

According to statistics compiled by the Keystone Report for the Builders Association of the Twin Cities (BATC), there were 223 units permitted during the month of December 2008, down from the 420 units permitted in November 2008. Housing activity ended the year 40 percent below 2007. A total of 5,397 units were permitted in 2008, compared to 8,961 units permitted last year.

The housing sector has borne the brunt of this economic downturn, losing an estimated three million jobs since the peak of housing expansion in 2005.

“Housing traditionally accounts for 15 cents of every dollar spent in the United States,” says BATC President Mike Swanson. “Therefore housing must be a centerpiece of any recovery plan.”

“The housing industry, spearheaded by the National Assocition of Home Builders’ Fix Housing First Coalition, is urging Congress to take action that includes ensuring below-market mortgage rates and expanded home buyer tax credits,” explains Swanson. “These measures will help to stablize home prices, prevent future foreclosures, restore consumer confidence and start creating jobs.”

Hudson, WI led the metro in building activity for the month with 29 units permitted in December. Woodbury followed with 19 units permitted, Maple Grove was next with 18 units permitted, followed by Blaine with 15 and Hugo at 12. 


The Builders Association of the Twin Cities has contracted with Keystone Report, a local research firm, to maintain a database with information about new residential construction permits around the metropolitan area. After a builder has picked up the permit from a city, Keystone Report compiles and updates weekly residential housing permits by city for 70 percent of the metropolitan- area municipalities in the greater 13-county region. Planned units are the total number of housing units planned to be built under the permits issued (one permits is issued per building which may include more than one housing unit). Permit value does not include the land/lot costs.

Minneapolis Foreclosures Falling?

Star Tribune has an article discussing how Sheriff’s Sales in Minneapolis might be peaking. The article gives several possible reasons for the peak in activity and discusses some of the things that are being done to help address the problem.

We’re far from through this crisis, but it seems like every few weeks there is a new data point that shows we’re finding fundamental levels and once we know where are boundaries are, I believe we’ll all feel more comfortable with the future of the housing markt.

Minnesota Foreclosure Prevention Options

The Minnesota Home Ownership Center publishes a regular newsletter on foreclosure prevention and I wanted to share the latest version with you:


June 24, 2008
Foreclosure Prevention Resources Newsletter

Legislative Update on Foreclosures
New legislation provides early notice of available help for distressed homeowners  Last month, the Governor signed a bill that ensures distressed homeowners will learn of available help before it is too late. The new law requires lenders to provide homeowners with information about availability of non-profit foreclosure counseling agencies before starting the foreclosure process. It also requires the lenders to provide local counseling agencies with the contact information for borrowers entering foreclosure, which will allow counselors to reach out to distressed homeowners. Prior to this legislation, homeowners were notified about foreclosure counseling services when given notice of the Sheriff&r squo;s Sale – a time in which few option are left for most homeowners.  Legislation also changes information given to homeowners with along with the Sheriff’s sale notice. New language encourages the person to contact a foreclosure prevention counselor for help in answering questions, getting advice, and creating a plan for their situation.  The revised notice also gives additional information about the foreclosure process, including that the occupant does not need to move at the time of the Sheriff’s sale.  The new law applies to properties with one to four units, one of which is owner-occupied.  

Workshops for Homeowners
Free, confidential foreclosure informationThe Minnesota Home Ownership Center continues to offer free workshops for homeowners who are worried about making upcoming mortgage payments, are already facing foreclosure or for anyone interested in learning more about foreclosure. These are open-house events. Participants are encouraged to come any time that is convenient during the workshop hours. The workshop will provide information on what happens during foreclosures, homeowners’ rights, and solutions for long-term housing needs. Participants will be able to ask questions and get free advice – confidentially – from mortgage lending and foreclosure specialists. No RSVP is needed. For more information call the Minnesota Home Ownership Center at (651) 659-9336.  Upcoming workshops:

  • Duluth– Tuesday, July 15th
       First Lutheran Church
       1100 East Superior Street
       4:30 to 7:30pm 
  •  Minneapolis – Tuesday, August 5th
       Park Avenue United Methodist Church
       3400 Park Avenue South

       4:30 to 7:30pm 
  •  St. Cloud – Tuesday, August 19th
       St. Cloud Civic Center – Opportunity Suite
       10 South Fourth Avenue
       4:30 to 7:30pm 

 In addition there are a number of workshops being held in Hennepin County at local libraries, and other partner organizations are also holding events.  For additional information, visit www.hocmn.org/HomeownerResources.cfm. If you would like to receive an electronic version of a flyer you can use to advertise these workshops to your clients, feel free to contact Ed Nelson at the MN Home Ownership Center.  

Workshops for Professionals
Information and Referral Workshops

The Minnesota Home Ownership Center is offering a series of free training workshops to provide information on how to help distressed homeowners. The trainings will provide an overview of the foreclosure process, where to refer homeowners and how to prepare them to talk with a housing counselor or loan servicer. The training is specifically designed for staff from public, private, and non-profit organizations that come in contact with distressed homeowners – but who do not normally work with mortgage foreclosure as part of their job. Upcoming training workshops: Shoreview– June 26th, 9:00 – 10:30amShoreview City Council ChambersFor more information or to RSVP for this free workshop visit http://shoreviewtrainingworkshop.eventbrite.com/  

St. Paul – July 16th,  10:30am – NoonRondo Community Outreach LibraryFor more information or to RSVP for this free workshop visit http://www.rondotrainingworkshop.eventbrite.com/  

Minneapolis – July 31st, 9:00 – 10:30amEspecially For Churches and Faith-Based Initiatives Park Avenue United Methodist ChurchFor more information or to RSVP for this free workshop visit http://parkaveumctrainingworkshop.eventbrite.com/ 

A New Way to Handle Foreclosures


The foreclosure process in Minnesota is a long one… often consuming an entire year from when the borrower first misses a payment until the time that the bank assumes control of the home. The Minnesota Home Ownership Center has put together a great flyer on the process and an average timeline.

Right now the Minnesota Legislature is considering a bill to “defer” the foreclosure process for up to an additional year if the borrower of an owner-occupied home makes partial payments (65% of principal and interest amount due). If this bill is signed by Governor Pawlenty, Minnesota could potentially have a 24 month disposition window for some foreclosures.


A lot can happen to a home in the 12 months from the date the borrower stops making payments. In many cases, the homes fall into disrepair as the borrower knows that any investment of time or money on the property will ultimately be lost when the bank assumes possession. Property taxes and municipal bills are also often neglected… I have seen delinquent water & sewer bills for a foreclosed property above $1000 and delinquent property taxes above $5000. These are all bills that will have to be assumed/paid for by the mortgage company. Also, often times there is a significant amount of trash/debris left by the borrower… it is not uncommon to see a large dumpster in front of these properties full to the brim. Add to all of that the year of non-payment of the loan and the legal expenses to the lender to complete the foreclosure process and it is likely that a lender already has a $10,000 – $20,000+ loss at the time they repossess it.

In Minnesota, we have 5 months of average low temperatures below freezing. If a home in foreclosure is vacated during these months, often the utilities are shut off before the bank secures the property and the home’s plumbing ends up freezing and pipes burst. In good circumstances the water was shut off at the meter or the street (sometimes done by the city from non-payment of the water bill) so that only the pipes need to be repaired, which could cost as little as a few hundred dollars or climb to several thousand, depending on the location and extent of pipe damage. In bad circumstances the water can literally fill the house and cause near complete destruction of the interior of the homes, which then become great incubators for mold when they thaw in the spring. In a house profiled by the Star Tribune, one house once worth nearly $700,000 was resold at auction for only $280,000… a loss of over $400,000… about 60% of the value of the home.

Once the bank has possession of the property, the previous owner has vacated, and any debris has been removed from the property, the bank can go about listing the home for sale. Based on a sample of homes sold in Plymouth and Maple Grove in the last 10 months, when the bank resells the property they will lose 23.4% from the value at the previous sale. All told, banks lose $10’s of thousands of dollars on the average property… and on some, $100’s of thousands!

Current Actions

While the banks are already overloaded with the huge numbers of foreclosures they have been taking on and are even more buried in their short-sale departments, where responses to offers can take months, the more proactive a bank can be with their defaulted borrowers, the more likely it is that they can recover a larger share of their investment.

Regulatory and industry efforts to create work-out agreements between lenders and borrowers has met limited success and while without these programs foreclosures would be higher, the number of foreclosures today and in the near future are still substantial.

The mortgage lenders are trying to ramp-up staffing for their short sale and foreclosure departments, but these efforts are not proactive, but rather reactive.

While it is in the banks’ best interests to work with their borrowers to modify the loan terms and keep the borrower in the home, there are many circumstances where no reasonable workout can be made. Instead of the banks letting these homes go through the foreclosure process, they should attempt to work with the borrower to get the home sold directly from the borrower to a new buyer, with the bank accepting a sales price that only returns a portion of what they lent back to them, which is called a “short sale.”

The approval of a short sale is a long and difficult process that can take a lender 60-90 days to approve once an offer has been submitted. The largest problem with short sales is that many buyers simply do not have the time nor the patience to wait 2-3 months for a response. Further, the process is not the most appealing for sellers either, since they receive no monetary gain from the sale, many borrowers see little value in the enterprise. These short sales are seller-initiated and more than 1/2 of the listings never close.

A New Way to Handle Foreclosures

Lenders can be more proactive with their defaulted borrowers by initiating a short sale process when the probability of foreclosure is high and the likelihood that a lender-negotiated loan modification that will allow the borrower to become current on their mortgage is low.

Based upon my analysis of sales in Maple Grove and Plymouth in the last 10 months, bank owned properties on average sold for 23.4% less than their previous sale but short sale properties sold for only 16.4% less than their previous sale. Taking into account many of the other costs I mentioned earlier in this article, the savings to lenders could easily be in the 10’s of thousands of dollars vs. letting the home go through the standard foreclosure process.

Here’s the overview of the concept:

  • For loans in default where the borrow and lender are unable to provide a viable loan modification program, the lender refers the loan to their short sale department.
  • The short sale department immediately initiates the approval process for a short sale, including reviewing the borrower’s financials (which they have updated copies due to the failed loan modification program), get BPO’s (Broker Price Opinions) of the property, and send a letter to the borrower detailing this new option.
  • The borrower is presented the option to basically do nothing and let the home eventually go through foreclosure or work with the lender to get the home sold via a short sale.
  • If the home is successfully sold via a short sale and the foreclosure process is averted, the lender would offer the borrower monetary compensation for their participation and their assurance to maintain the property and leave it in good condition when they vacate.
  • If the borrower agrees to the terms, the lender sends out one of their pre-approved real estate agents for a more in-depth valuation, lists the home for sale and actively markets the property.
  • There is no cost to the in-default borrower for participation in the program… all costs are borne by the lender.
  • When an offer comes in, review and negotiation of the offer can occur quickly since the lender has been working on the file for some time already and can better rely on the advice of the listing agent as it is someone whom they have an existing relationship with and knows their processes.
  • The home is sold directly from the in-default borrower to the buyer, giving the defaulted borrower some money to walk away and the lender with substantially fewer expenses, return of more of the original investment, and substantially less risk of damage to the property in the meantime.


To discuss a new way to handle foreclosures is not helpful if it ignores the realities in the market. Here are the biggest hurdles (as I see them) that could make such a plan difficult to implement:

  • Banks can’t sell real estate
  • 80/20 loans where the 20% 2nd lien is not held by the same bank… much harder to coordinate but quite often the 2nd lien holder gets NOTHING from a foreclosure so it is in their best interests to cooperate.
  • Mortgage insurance companies that don’t want to get with the program
  • Investors/CDOs/etc that add so much complexity and/or bureaucracy that makes it a logistical nightmare
  • Already overburdened Short Sale Departments that simply cannot handle more files
  • Simple inertia: with so much of this problem centered in large banks, it is likely that only smaller, more nimble banks could
  • As Minnesota has one of the longest (if not the longest) timeframes from default to end of redemption, banks may not understand the true consequences of a 12 month process.
  • No one to champion the cause. Someone would have to step up and try this as a “guinea pig” before it is likely any other banks would adopt it.


Until these properties cycle through the system and are resold to new buyers they cast a negative effect on neighborhoods, other homes for sale, and other foreclosures too. Waiting for defaulted borrowers to complete the foreclosure cycle when it is all but a sure-thing earlier on in the process is not the best way to protect the investment but rather employing a proactive approach is something can benefit all parties involved and the housing market in general.

Foreclosures and Short Sales are Comparables

A debate recently in my office between another agent and I focused on whether foreclosures and short sale properties really should be used for comparables for “normal” sales.

My esteemed colleague believes that since foreclosures and short sales are sold under “distressed” situations, they are not good comparables for other homes for sale.  My counter is that many foreclosures and short sale properties are not in bad condition and so they should sell at a fair market price regardless of their “distressed” situation.

When it comes down to it, foreclosure and short sale listings most often do sell at a discount to regular listings and should have that taken into consideration, but even in a slow market houses priced appropriately are selling quickly, so those are market prices.

What we do find is a substantial disparity on how much of an impact those foreclosures have on the houses around them.  In areas with low numbers of foreclosure and short sale properties, we find that those properties have little effect on the market as a whole.  Where there are a high number of these properties in a single area, we find the the impact is more like an exponential impact: the higher the number, the more substantial the impact each additional listing has.

Train Information on Rail Lines in Minnesota

A client of mine found information via MNDOT regarding the traffic levels of train tracks throughout Minnesota, including the Twin Cities.  Unfortunately it does not show the train times but it does give an approximate count of the number of trains per day and the speed at which they travel:  http://www.dot.state.mn.us/ofrw/freightData.html

Pretty cool information… thanks Lisa & Jason!