City program helps prevent foreclosure

As home-foreclosure rates rise, Minneapolis has launched a 311 helpline to give advice.

Vadim Lavrusik

Dial 911 for emergency, 411 for information and 311 for help with paying a mortgage.

Foreclosure – when a bank seeks to repossess a home after homeowners don’t make payments on a mortgage for an extended period of time – has steadily been rising in Minneapolis.

According to the Hennepin County sheriff’s records, the total number of foreclosures as of the end of the third quarter in 2006 reached 1,134. Although numbers for the fourth quarter have not yet been released, the rate of foreclosures is expected to rise.

Minneapolis is part of a national trend of mounting home-foreclosures and declining home-ownership rates, especially in North Minneapolis, Minneapolis Mayor R.T. Rybak said.

According to the same figures, 47 percent of foreclosures were located in north Minneapolis.

Rybak said the city has increased its funding for foreclosure-prevention programs in recent years in order to address the rising rates. The 311 foreclosure helpline was developed from these initiatives.

The helpline allows struggling homeowners to find resources that educate them on ways to help keep their homes.

“Responding to this growing problem has driven the city’s housing work in recent years,” Rybak said. “It’s clear that we need more education and financial tools to keep residents out of foreclosure.”

Rybak said the 311 program will help keep homeowners in their homes and educate them on foreclosure scams.

Dial 311 for foreclosure

Although neighborhood officials have criticized the 311 program as a means to lower foreclosure rates, 311 agents have received 120 calls from homeowners struggling to pay their mortgages since the program’s launch on Nov. 15.

The city has begun using posters in English, Hmong, Spanish and Somali to make homeowners aware of the 311 foreclosure helpline.

Elizabeth Ryan, director of housing policy and development for Minneapolis, said that because the program is still in its infancy, they don’t know the success rate of the program.

Ryan said homeowners should call 311 if they think they are going to miss or have missed a mortgage payment.

“The earlier you call, the more options there are available,” she said.

The 311 agents direct many of the calls to Habitat for Humanity, Minnesota Homeownership Center, and other local and national services. The agents also provide homeowners with information on mortgage education classes.

Homeowners making unwise decisions has contributed to the influx of foreclosures, Ryan said. But there are many other reasons for the increasing foreclosure rates.

Student landlords

Because housing is in high demand around campus, many student landlords rely on their tenants’ rent to cover the mortgage.

Jeremiah Peterson, a student landlord in the Como neighborhood, said he has never had trouble paying his mortgage.

Peterson, who lives in the house he owns, rents out the rest of the rooms to students. The rent, along with funds he receives from the government for being in the military, covers his monthly mortgage of about $1,200, he said.

But relying on renters to cover mortgage payments can be risky when renters suddenly choose to bail, he said.

“You have to have enough money to back the mortgage up,” he said.

Peterson said most students can run to their parents when they are in a financial crunch, but he has to take extra precautions because his parents aren’t in the picture.

“It’s easy (to own a home as a student) as long as you’re not an idiot or have some sense of responsibility,” he said.

‘Don’t borrow trouble’

Desperate homeowners who lose their homes because they don’t read the fine print also contribute to the growing numbers of foreclosures.

Homeowners choosing to refinance their homes in an attempt to lower monthly mortgage payments and avoid foreclosure are sometimes scammed into signing over their properties to the lender without knowing it.

The aim of the 311 program is not only to prevent foreclosure, Ryan said, but also to make homeowners aware of refinancing scams.

“Don’t borrow trouble,” she said. “If a deal sounds too good to be true, it probably is.”

University Legal Services staff attorney Bill Dane said one of the more popular scams happens when speculators go to homeowners who are struggling to pay their mortgages and convince them to refinance.

Dane said in the course of the refinancing, homeowners sign something they don’t read and lose their home and equity to the firm.

Attorneys and city officials say this type of refinancing scam has become more popular in the past couple of months.

David Galle, an attorney who works at the Oppenheimer Wolff and Donnelly LLP law firm, has represented three victims of such scams.

He said in his cases, the clients signed over the property to the firm with which they refinanced, and the firm then leased out the property at a higher cost than the mortgage. The former homeowner was evicted for not being able to pay rent.

During the process they lose their equity and their home, he said.

Galle said a couple of his cases are still pending, but in one case his client was able to recover the equity from his home.

Student Legal Services has not yet had to deal with such scams, Dane said.

Not many students own homes, Dane said, so the office rarely deals with foreclosures.