by T.W. Budig
ECM Capitol reporter

Minnesotans holding subprime or negative amortization home loans facing foreclosure could gain a year's respite.

The Minnesota Subprime Foreclosure Deferment Act of 2008 - carried in the Senate by Sen, Ellen Anderson, DFL-St. Paul - does not financially unburden homeowners.

Sen. Ellen Anderson, DFL-St. Paul, is carrying the Minnesota Subprime Foreclosure Deferment Act of 2008 in the Senate. She is peeking out from a large chart in a Senate committee room.

But it does seek to give them a year's deferment from foreclosure with the idea the federal government will meaningfully address the mortgage crisis in the near future.

"It doesn't solve the problem permanently, that's right," said Anderson to the Senate Committee of Commerce and Consumer Protection on Monday (March 10).

But it buys time for people to look for solutions, she argued.

"At a minimum they'll (strapped homeowners) be no worse off a year from now they are now," said Anderson.

33,000 face foreclosure

It's estimated that 33,000 Minnesotans could face foreclosure during 2008, she said.

Such foreclosure rates have not been seen since the Great Depression, she said.

"These are extraordinary times," said Committee Chairwoman Sen. Linda Scheid, DFL-Brooklyn Park "We have a crisis," she said, explaining her support for the legislation.

The foreclosure deferment legislation would apply to subprime or negative amortization loans closed after Jan. 1, 2001, and prior to Aug. 1, 2007.

Homeowners must make house payments under the bill, but payments could be lowered.

Still, homeowners would be responsible for all of their contractual debt - it still must be paid.

"I think we have to make it clear to borrowers and lenders that the money (debt) isn't going away," said Sen. Mary Olson, DFL-Bemidji.

"To me it's really a close call," she said of supporting the bill.

League supports legislation

Although the League of Minnesota Cities expressed support for the legislation, finance industry representatives spoke out against it.

Steven Johnson, of the Minnesota Bankers Association, said bankers are working with homeowners facing mortgage problems, because "it's the last resort of last resorts," he said of foreclosures.

Indeed, the actual foreclosure process takes months, he added.

Johnson expressed concern the legislation, rather than being a temporary measure, would remain indefinitely.

Patrick Martyn, of the Minnesota Mortgage Association, opined that a mortgage "stutter step" in Minnesota could alarm national lenders and make getting a loan in the state tougher.

Finance industry representatives said while they support other mortgage relief efforts they do not support Anderson's bill.

Rep. Chris DeLaForest, R-Andover, House Commerce and Labor Committee member, echoed the concerns of the business community. "Obviously the real estate market is hurting significantly," said DeLaForest. "I'm not convinced at the outset that government has the right answers on this," he said. "Banks also have an interest in working with people in financial distress," said DeLaForest.

Scheid agreed, calling foreclosed homes "alligators" - liabilities on individuals and community eating money.

Sen. Linda Scheid, DFL-Brooklyn Park, Senate Committee of Commerce and Consumer Protection chairman, heard a foreclosure protection bill in her committee on Monday (March 10).

Foreclosures properties - standing empty - are a problem in many communities, she explained.

Advances in committee

The Senate Minnesota Subprime Foreclosure Deferment Act of 2008 advanced in committee, while the House companion bill awaits a hearing.

House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, supports the House bill.

Pawlenty Administration Spokesman Brian McClung explained the administration has been actively working on the foreclosure issue.

"We are looking at the various legislative proposals in order to better understand their possible impacts on private contracts, the credit market, future precedents and whether they get appropriate assistance to those who need it," said McClung.

"We look forward to working with the legislature on this issue," he said.

There are perhaps a dozen mortgage related bills afoot at the Capitol.

(Photos by T.W. Budig, ECM Capitol Reporter)