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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

Edina Realty – Behind the Red Curtain

Star Tribune had a good article today about the successes and struggles of Edina Realty and of our fearless leader, Bob Peltier, who suffered a severe stroke last year and has fought back every day since.

This story does not even scratch the surface on what both Bob and Edina Realty have done and are doing in the face of challenging times.  There are many stories I can tell you of both first-hand experiences and those of my fellow agents that demonstrate the character of our leadership.  Times are harder today but there are still so many opportunities too.  I bleed Edina Realty Red because both the company and its leaders continue to demonstrate strength and fortitude in the face of ever-changing challenges.

Looking for Guest Bloggers

I’m looking for guest bloggers for this site and www.TwinCitiesRealEstateBlog.com.  I’m looking for original topical posts regarding the real estate market here (or comparisons to other cities).  Beyond that, there will be almost nothing off-limits.  If you disagree with my opinions and want to blog about it, that’s ok… though I will post a rebuttal!

If you have interest, give me a call: 612-251-5599

Edina Realty Mortgage Speaks About Mortgage Market

An Important Message from Todd Johnson,
President and CEO of Edina Realty Mortgage

To Our Customers,

The dramatic events taking place in the financial services industry and economy are historic in scope and proportion. You may be asking yourself, “What does this mean for me as a home buyer or home seller? When I want to obtain a mortgage, will there be funds available?” The answer is simple: at Edina Realty Mortgage, it’s business as usual. Yes, we continue to originate mortgages for home purchases and refinances. Our wide product range features FHA, VA, MHFA, Conventional, Jumbo, Relocation, Renovation, and Reverse Mortgages. We are committed to helping as many customers as possible enjoy the personal and financial benefits of homeownership. We provide competitive, fully disclosed, and responsible and fair pricing for all borrowers.

A Solid, Stable and Secure Lender

We want to assure you that we remain a solid, stable, and secure mortgage lender. We are a well-capitalized company, and we hold fast to our long-standing responsible lending principles. Edina Realty was one of the first real estate companies to offer integrated mortgage services more than twenty-five years ago. For over ten years, Edina Realty Mortgage has been a joint venture between Wells Fargo Home Mortgage (a division of Wells Fargo Bank, N.A.) and HomeServices of America, a Berkshire Hathaway Affiliate. Wells Fargo Bank, N.A., is the only bank in the United States, and one of only two banks worldwide, to have the highest credit rating from both Moody’s Investors Services “AAA,” and Standard & Poor’s Rating Services, “AAA.”

We Are Committed to Your Successful Closing

We stand by our word. Our exclusive On-time Closing Guarantee (1) ensures that you will close on time AND for the amount quoted on the Good Faith Estimate, or you will get money back. Are you already working with another lender? We will be happy to review your Good Faith Estimate and Truth-in-Lending Disclosure Statement. This no-obligation second opinion from us takes just few minutes, and we may be able to provide reductions in interest and/or closing costs. (2)

As a responsible lending leader, we work closely with our customers to help you reach your personal and financial goals through homeownership. Our team works hard to know you, understand your needs, and listen to you. We put you at the center of everything we do.

Thank you for trusting us with your business.

Todd Johnson
President and CEO
October 2008

1. Available on all qualified purchase transactions. Other terms and conditions apply. See a Home Mortgage Consultant for details.
2. If you have a current lock-in agreement with another lender, this is not an inducement to transfer your loan.

All first mortgage products are provided by Homeservices Lending, LLC Series A dba Edina Realty Mortgage. Edina Realty Mortgage may not be available in your area. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. ©2008 Edina Realty Mortgage. All Rights Reserved.

Edina Realty is the Best

I apologize that I have not been posting lately… things have been very busy indeed!  In this market today I am so thankful to be at Edina Realty.  Edina provides great management, the best networking opportunities, a fun office environment, and all the tools I need to succeed in my business.  I’ve been working for the last 3 months to get a large loan servicer as a client and finally have the first 4 listings coming up now and without Edina Realty’s support and capabilities, there would be no way that I could have earned this client.  Foreclosure listing agents be warned: I’m going to be setting a new Gold Standard in REOs.

In short:

Edina Realty is the Best

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.

Short Sales are Locking Up Minneapolis/St. Paul Buyers

With so many short sale listings on the MLS in the Twin Cities right now, there are a lot of buyers that are “locked up” in offers on these properties for weeks… and months… with the high probability that they will ultimately not be able to purchase the house at the price they offered.  See my previous article for more background on my short sale experiences.

Since many times the eventual response from the bank is a no or “you need to bring your offer up x%” or the buyer gets outbid by a later offer, these properties could be tying up significant numbers of buyers who would otherwise be purchasing (and closing!) on another property.  This weekend I was told there were 4 offers on a short sale I was showing to my buyer.  That means 4 houses with ready, willing and able sellers (“traditional sellers”) are stuck waiting for the bank to reject 3 or all 4 offers sometime in the next 30 – 75 days before they’ll get their chance at those buyers.