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Borrower Relief Act vetoed

Published (5/30/2008)
By Craig Green
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One of the last major bills of the session to address mortgage foreclosures was the Minnesota Subprime Borrower Relief Act of 2008.

The proposal would have provided a one-year deferment before a foreclosed property would be put up for sale. Sponsored by Rep. Jim Davnie (DFL-Mpls) and Sen. Ellen Anderson (DFL-St. Paul), it was vetoed by the governor.

Though he agreed with the intent of the bill, and has signed 11 bills this session addressing the issues resulting from mortgage foreclosures, Gov. Tim Pawlenty said this bill would have added additional business risk and could make mortgages in the state more expensive. “This will negatively impact the credit market in Minnesota by increasing interest rates for Minnesotans who are trying to refinance or purchase a new home,” he wrote in his veto letter.

Under the bill, to qualify for the program, the borrower would have resided at the location for the past six months; committed to stay at the location for at least one year; made less than $250,000 a year; have proven U.S. citizenship; agreed to work with a mortgage foreclosure counselor; and agreed to deal in good faith with the mortgage lender to work out terms of the loan.

If an agreement was reached, for one year the borrower would have paid the lesser of the monthly principal and interest when the original deal was signed or 65 percent of the monthly principal and interest at the time of default. If the borrower missed a payment, or moved from the location, the deferment period would have ended and the lender could have continued the foreclosure process.

Pawlenty said the bill “raises significant legal and philosophical concerns” and was critical of the process the bill took to passage. “It is unfortunate this bill did not go through the bipartisan foreclosure study committee as did the 11 other mortgage foreclosure bills. A more rigorous review may have eliminated this bill’s technical, constitutional problems and policy flaws.”


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