Hennepin and Ramsey counties brace for uptick in mortgage foreclosures after low rates during pandemic

Hennepin County set up a team to monitor the expected onslaught of foreclosures as homeowners became unemployed or ill when the pandemic hit more than two years ago.

To their surprise, a wave of foreclosures never occurred in Hennepin County or the Twin Cities. In Ramsey County, last year’s 72 foreclosures were the lowest number since 2003.

Housing officials credit the federal moratorium on foreclosures and soaring home prices for the lack of people being forced out of their homes. In some cases, the strength of the housing market has kept property values ​​high, allowing late-paying owners to sell for a profit.

Now that the moratorium has expired, interest rates are rising and economists are raising fresh concerns that a recession could trigger another round of foreclosures.

“It will be interesting to see if there will be a recovery,” Ramsey County Assessor Luis Rosario said. “I suspect there will be.”

Figures from Hennepin County for the first six months of 2022 indicate that mortgage foreclosures are on the rise. So far, the county has recorded 154 foreclosures compared to 173 for all of 2021.

“With the health of the job market and real estate values, I don’t think we’ll see foreclosure numbers like we’ve seen in the past,” said Ryan Allen, professor of urban planning at the University of Minnesota and member of the Hennepin County Seizure Team. .

Nearly 50% of this year’s foreclosures are in Hennepin County’s major cities of Minneapolis, Brooklyn Center and Bloomington. There are few towns across the county that have not had lockdowns on property, such as Mound, Dayton and Maple Grove.

Minnesota offers two ways for lenders to repossess a home. The state is one of the few that offers judicial foreclosure, which allows a lender to file a lawsuit asking a court for an order authorizing a foreclosure sale. A homeowner can defend the lawsuit, but if the lender wins, the judge will order the house sold.

The other process is the more common non-judicial foreclosure, which is usually faster and cheaper than litigating the case in court. The lender should keep the homeowner informed of the foreclosure stages and advise them of mortgage counseling options. Under federal law, lenders cannot begin foreclosure until a homeowner has missed four payments.

Both parties can continue to work out a possible mortgage payment plan to avoid foreclosure. The foreclosure notice must be published in a newspaper for six weeks, during which time the lender must again send information to the owner about stopping the process. The county sheriff’s office handles the sale of the property.

The national foreclosure rate is at its lowest in 20 years, according to CoreLogic, which tracks national housing data using public records.

Data shows that from March 2021 to March 2022, the number of homeowners who fell 30 to 90 days behind on mortgage payments decreased. The share of mortgages at some stage of foreclosure also declined during this period.

Hennepin County used federal COVID-19 relief funds to provide mortgage counseling to residents, said Mark Chapin, director of resident and real estate services for the county. Like Ramsey County, Hennepin also allowed property owners to delay paying property taxes.

Neither county has used federal pandemic relief funding to help pay mortgages, but both have allocated money to help people pay rent. The state has received more than $100 million in federal funding for its HomeHelpMN program to help tenants and landlords make payments, but it’s unclear what impact it has had on preventing foreclosures or evictions.

When the pandemic began, Allen said it was impossible to get an accurate picture of the foreclosure rate because of the many programs rolled out or considered by federal, state and local governments.

“But things have actually become more stable during the pandemic,” he said. “It wasn’t like the recession of 2008,” when financially fragile homeowners were hit with a massive increase in their adjustable rate mortgage.

In 2008, Ramsey County saw 3,023 foreclosures and home values ​​plunged, Rosario said. Entire blocks had clusters of foreclosures, and it took neighborhoods a decade or more to recoup the value wiped out during the financial crisis, he said.

Foreclosures impact households and the community, said Allen, the urban planning professor. For households, it can ruin credit ratings, lead to loss of equity and create dislocation issues for children forced to change schools.

Foreclosures can also lower the value of surrounding homes and signal to potential buyers that the neighborhood may not be healthy, Allen said.

“The effect of foreclosures is not negligible,” he said.

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