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State Representative Jim Davnie
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-0173
For more information contact: Charlene Briner 651-296-5809
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JOINT HOUSE AND SENATE PROPOSAL WOULD FORESTALL HOME FORECLOSURES Minnesota Subprime Foreclosure Deferment Act of 2008 would help homeowners avoid foreclosure
Against the backdrop of a statewide housing market suffering from record-high home foreclosures and steep declines in home values, legislators in the Minnesota House and Senate today proposed what they termed a nation-leading response to the crisis. The "Minnesota Subprime Foreclosure Deferment Act of 2008" would suspend the foreclosure process for one year for eligible homeowners with subprime mortgages.
"The high rate of home foreclosures has taken a high toll on communities throughout the state," said Representative Jim Davnie, chair of the House Labor and Consumer Protection Division and House author of the bill. "Last year, Minnesota served as a model of consumer protection with passage of nation-leading laws against predatory lenders. But the scope of the crisis clearly calls for additional measures. Yesterday we heard the Federal Reserve Chair call for more aggressive action to protect vulnerable homeowners and neighborhoods - this bill takes does that."
In 2007, 13,050 homes — a state record — were repossessed in sheriff’s auctions. As of January of this year, Hennepin and Ramsey counties had set monthly foreclosure records. HF 3612/SF 3396, the Minnesota Subprime Foreclosure Deferment Act of 2008, would suspend a home foreclosure for one year for homeowners who meet certain eligibility criteria. In order to qualify for a deferment, homeowners in default whose homes are scheduled for sale could send an affidavit of deferment to their lender to suspend the foreclosure process. Unlike a moratorium, homeowners with subprime loans would be still be required to continue payments to the lender, making either the minimum monthly payment on the date the loan was originated; or 65 percent of the minimum monthly payment at the time the borrower defaulted prior to foreclosure. Eligible foreclosed borrowers with negative amortization loans that are not subprime would be required to pay the minimum monthly payment on the date the loan was originated.
"A number of proposals have been introduced to give homeowners new tools to prevent foreclosure," said State Senator Ellen Anderson, the bills' Senate Author. "The deferment option simply allows them additional time to put those tools to good use. It offers breathing room for homeowners, alternatives to lenders who don't want to be in the real estate business, and stability to neighborhoods devastated by an avalanche of foreclosures."
Speaking about the mortgage foreclosure crisis yesterday, Federal Reserve Chair Ben Bernanke said the situation warrants a 'vigorous response,' and that 'measures to reduce preventable foreclosures could help not only stressed borrowers but also their communities and, indeed, the broader economy.'
Characterizing the proposal as both vigorous and reasonable, Davnie said the legislation offers an alternative to a flat out moratorium, which typically suspends debt repayments to lenders. Expected to impact over 15,000 families, HF 3612/SF 3396 sets strict criteria for homeowners to qualify for the program, requiring a specific notification process, continued minimum repayment schedules, and a condition that the homeowner continue to live in the home during the deferment period.
"Congress and other private, public, and non-profit sectors are working to develop new responses to this evolving crisis, but those measures will take some time to come together," said Davnie. "Most homeowners want to do the right thing. This proposal buys them some time so they can figure out how to do it."
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