Minnesota home values are expected to plummet more than $7 billion by 2010, while 30,000 additional home foreclosures are predicted this year, Rep. Debra Hilstrom (DFL- Brooklyn Center) told the House Labor and Consumer Protection Division Feb. 13.
Hilstrom sponsors HF354, the Homestead-Lender Mediation Act, modeled after the 1986 Farmer-Lender Mediation Act, which she said has helped 14,000 farmers avoid foreclosure. The bill would require mortgage lenders to send homeowners who have defaulted on mortgage payments a mediation notice before initiating foreclosure proceedings.
The bill was approved and referred to the House Commerce and Labor Committee.
Banker, credit union and real estate associations applaud the bill’s intent, but said the requirement would, in effect, duplicate state and federal measures already helping some homeowners avoid foreclosure and could delay foreclosure proceedings by as much as 180 days.
“For us the time delay is a huge concern because you’re losing value on the property. And I think everyone loses out, not just the financial institution but also communities, cities — the houses deteriorate the longer it’s just sitting there,” said Mara Humphrey, Minnesota Credit Union Network’s vice president for government relations.
For example, Hilstrom said a vacant home in her neighborhood, with many updated features, is listed for sale at $60,000, far below its original value. “Try to get a loan for a house valued at $200,000 in my neighborhood; I don’t think you could do it,” she said.
Rep. Steve Simon (DFL-St. Louis Park) suggested the bill provides leeway for adjusting the timing to better suit lenders’ needs to move properties through foreclosure and back on the market as soon as possible, if homeowners are unwilling or unable to renegotiate payments.
A companion bill, SF340, sponsored by Sen. Linda Scheid (DFL-Brooklyn Park), is scheduled to be heard Feb. 24 by the Senate Commerce and Consumer Protection Committee.