Is It Time To Take Advantage Of Minnesota Foreclosures

Minnesota foreclosures dropped to about 23,020 cases in 2009, a decline of 12 percent from 2008s 23,300 foreclosures. But the decline gives little reason to celebrate. The 23,020 Minnesota foreclosures last year constitutes 1.3 percent of the total number of residential units in the state. This is triple the historical average for foreclosures as a percentage of total residences.

The greatest cause for concern, according to real estate analysts is that there was no decline at all in the number of homeowners who fell behind on their payments. This indicates that there are thousands of homeowners who lost their jobs in 2009 but haven’t yet lost their homes. As these people exhaust their unemployment insurance benefits, the decline in the foreclosure rate could be but blip in a longer-term decline.

The increase in the Minnesota foreclosures rate actually predates the housing crisis, say housing advocates; and the figures bear them out. Foreclosures began to climb as far back 2005, three full years before the 2008 collapse of the housing bubble.

A close look at what lies behind the 12 percent drop in Minnesota foreclosures totals for 2009 gives even less cause for optimism. Interest rates are threatening to rise as the federal government struggles with the largest deficit in the history of human civilization. Once this begins, a new wave of defaults will likely engulf the system. Additionally, those homeowners who were saved by mortgage restructurings underwritten by federal guarantees may well see their restructured mortgages restructured upward when renewal time comes in an environment of higher interest and a tighter money supply.

The terms of the federal governments mortgage amendment efforts were that, where possible, financial institutions receiving federal bail out funds were to set repayment levels at or as close to 30 percent of homeowners household income. And there is certainty that these restructurings have saved some residences from foreclosure. However, where homeowners have lost their jobs and run out of unemployment benefits, such restructurings are impossible. As analysts like to point out, thirty percent of nothing is still nothing.

The changes in Minnesota foreclosures regulations, on the other hand, have shown more positive outcomes. These successful outcomes were assisted by housing advocacy groups that quickly got the word out about the changed to their clients. The changes became law in June, 2009, when the foreclosure statutes were amended to, among other things, permit homeowners to postpone a forced sale by five months. This additional time was enough for many recently unemployed homeowners to find work and get their mortgage back into good standing.

The Minnesota unemployment rate is not expected improve much in 2010. At best, analysts say, it will improve by no more than half a percentage point. This is far less than what is required to dramatically impact on foreclosure rates. As stimulus funds run out and interest rates rise, we may see foreclosures resume their upward trend, leaving 2009 as an artificial blip in a longer term negative direction. This is the nightmare scenario that the state government fears most.

On the bright side, if you are in the market for a home in Minnesota, or if you are an astute real estate investor, there are bargains the likes of which we may not see again. Sheriffs auctions of Minnesota foreclosures properties are yielding evidence that bargain hunting real estate speculators are starting move into the market.

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