Foreclosure moratorium gets OK

A two-year moratorium on residential foreclosures could give struggling homeowners a better shot at keeping their property.

Rep. Jeff Hayden (DFL-Mpls) sponsors HF2604, which would allow people facing foreclosure to stay in their homes as they attempt to negotiate with lenders. Hayden said the legislation is targeted at Minnesotans hit hard by the subprime loan crisis.

“Now, because of that process and the continuing destabilization of the economy, people are now losing their jobs and are unable to make the payments,” he said.

Another part of the bill offers protection to renters living in a building under foreclosure. Landlords would need to inform renters of continued utility services and new owners would need to offer fair market rent to existing tenants.

Hayden’s bill is unpopular with some banks and other financial institutions that see the legislation as interfering with private contracts between lenders and borrowers. There’s also a concern that efforts to underwrite outstanding loans would dry up credit.

That could be especially harmful to small, family-owned banks that already work closely with borrowers, said David Skilbred, vice president of government relations for Independent Community Bankers of Minnesota.

“They are available to their customers in all situations and foreclosure is an absolute last resort in any time, but especially in these times,” he said.

The House Housing Finance and Policy and Public Health Finance Division approved the bill Feb. 9 and sent it to the House Commerce and Labor Committee. Some members said they believed the group did not have adequate time to discuss the legislation, and an amendment to forward the bill without a recommendation was approved by a 7-5 roll-call vote.

Hayden pledged to work with those in the banking and real estate industries as the bill moves forward.

“This bill has a long ways to go yet. … There is still a lot of room for negotiation,” he said.

A companion, SF2242, sponsored by Sen. D. Scott Dibble (DFL-Mpls), awaits action by the Senate Health, Housing and Family Security Committee.