Is The 2009 Decline In Minnesota Foreclosures Going To Last

Speculators are moving in to the Minnesota housing market, looking for bargains at sheriffs auctions of foreclosed properties. The rate of Minnesota foreclosures has been on the rise since well before the current housing crisis began in 2008. 2005 saw the start of the decline and Minnesota foreclosure rates continued to increase through 2008. After 4 years of increases in both the percentage and unit totals, the number of homestead classified residences that went into foreclosure declined 12 percent from approximately 24,800 properties foreclosed in 2008 to 23, 019 foreclosures in 2009.

There was an 1800 unit reduction in 2009 of the number of homes disposed of at sheriffs auctions. This may be a sign of good times ahead, or it may be that after five years of declines, the chaff has been removed and now even formerly solid mortgages are in dire straights. There is, on the other hand, reason to think the Minnesota foreclosures numbers may resume an upward trend as 2010 plays out. Pessimism rests in the states stubbornly high unemployment rate. Officials expect the rate will remain in 9 percent range throughout 2010 with at most a . 5 percent drop. And prospects for 2011 are about the same.

Efforts to reduce Minnesota foreclosures in 2009 included mortgage restructurings, in response to demands from the federal government, and significant changes in Minnesota foreclosures processes courtesy of the state government. Yet, despite these efforts, less than 1800 homes were saved from foreclosures compared to the 2008 total.

The mortgage restructuring efforts had the goal of lowering monthly payments for homeowners to no more than 30 percent of household income. While this was successful where there was an income, it was frequently only a temporary stop gap. Homeowners who had gotten behind in their payments due to losing their jobs and then failed to find new work before running out of unemployment benefits found themselves unable to afford even the restructured payment scheme.

Under Minnesota’s amended foreclosure rules, homeowners who have been served with a forced sale date have the option of requesting a postponement in the sale of five months. While this certainly saved some dwellings, it was not as successful as had been hoped due to the ongoing lack of decent paying employment.

The foreclosure amendments, it must be noted, imposed additional burdens on lenders. Where a property has been abandoned, lenders now have a duty to protect the dwelling from the elements, vandalism and trespass. That lenders may add their expenses to the amount outstanding on the mortgage is of little comfort. In case where a homeowner has walked away from his or her home, lenders usually have to put the homeowner into bankruptcy to recover what they can.

Some analysts argue that these new liabilities may be sufficient to keep investment money that is much needed out of the real estate market in the state.

Supporters of the amended foreclosure process point out that all expenses incurred by the lender in maintaining abandoned properties may be added to the outstanding balance on the mortgage. Detractors counter with a rather tough argument to contradict. They point out that trying to recover your costs from someone you will likely force into bankruptcy is pointless.

Analysts are agreed that recovery for residential real estate in Minnesota real estate will not take place until there is a substantial improvement in the unemployment picture. When and if that occurs is anyone’s guess. There are certainly deals to be had at Minnesota foreclosures auctions. But it is clear that the house flipping days of the past have yet to appear on the horizon.

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