The foreclosure rate in the state of Minnesota has declined. In 2008 about 23,300 properties were involved in Minnesota foreclosures. In 2009 a total of 23,019 mortgaged homes went under the sheriffs gavel. As a percentage of total homestead-classified Minnesota residences, the foreclosure rate was 1.3. That is still three times the average on a historical basis.
Contextualized in this way, it becomes clear that celebrating a 12 percent decline in Minnesota foreclosures in 2009 compared to the previous 12 months may be premature. This is particularly the case when one considers that the number of homeowners who are currently behind on their payments but have not yet been served with a foreclosure notice did not drop at all year to year.
Under and unemployment is an ongoing problem for the state. Actually, the Minnesota foreclosures rate started to increase in 2005. It is estimated that in the five years from the start of 2005 to the end of 2009 five percent of the residential properties in the state have gone through foreclosure.
A close look at what lies behind the 12 percent drop in Minnesota foreclosures totals for 2009 gives even less cause for optimism. Interest rates are threatening to rise as the federal government struggles with the largest deficit in the history of human civilization. Once this begins, a new wave of defaults will likely engulf the system. Additionally, those homeowners who were saved by mortgage restructurings underwritten by federal guarantees may well see their restructured mortgages restructured upward when renewal time comes in an environment of higher interest and a tighter money supply.
The terms of the federal governments mortgage amendment efforts were that, where possible, financial institutions receiving federal bail out funds were to set repayment levels at or as close to 30 percent of homeowners household income. And there is certainty that these restructurings have saved some residences from foreclosure. However, where homeowners have lost their jobs and run out of unemployment benefits, such restructurings are impossible. As analysts like to point out, thirty percent of nothing is still nothing.
The changes in Minnesota foreclosures regulations, on the other hand, have shown more positive outcomes. These successful outcomes were assisted by housing advocacy groups that quickly got the word out about the changed to their clients. The changes became law in June, 2009, when the foreclosure statutes were amended to, among other things, permit homeowners to postpone a forced sale by five months. This additional time was enough for many recently unemployed homeowners to find work and get their mortgage back into good standing.
The most disturbing aspect of the Minnesota foreclosures crisis to the employment forecast looking forward. Analyst do not expect the employment rate in the state to decline by any more than half a percentage point over the course of 2010. That the rate is not expected to climb is great, but as can be seen by the foreclosure rate at current unemployment levels, flat or minimal growth in unemployment will not be enough to stop the bleeding.
On the upside, there has never been a better time to buy investment properties. In a practice that is still rare but on the upswing, speculators are approaching homeowners who have been granted a postponement of a forced sale in Minnesota foreclosures proceedings. The investors offer to buy the home for the amount owing on the mortgage and then rent the property back to the current owner at a rate they can afford. This may well be one of the few cases where predatory speculation actually works to improve a situation rather than make it worse.
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