Signs of the extent of the crisis arrived with spring as Paul Halvorson surveyed homes in the north Minneapolis neighborhood where he works.
"We identified over 30 abandoned properties in a 14 block area, and it has gone dramatically up in the last three months," he says.
Up in this case means doubled, according to Halvorson. Halvorson is executive director of Third Way Network, one of many neighborhood-based private non-profits in the Twin Cities who help families find affordable housing. Third Way works in the Hawthorne neighborhood on Minneapolis' north side.
A ride along with Halvorson shows many of the homes on Hawthorne's tree-lined streets are sturdy and well maintained. However, there are dozens where bright orange and pink city water shutoff and condemnation notices have been stapled to front doors. Foreclosure or other problems have caused owners to walk away. They locked the door as they left, but that it isn't much of an obstacle to squatters, drug dealers and thieves.
"Here's a door that's been kicked in. The notice on the door says condemned, occupancy not permitted, but the door is open," Halvorson says.
Blight is the problem the burgeoning foreclosure crisis is creating. Abandoned and boarded homes attract criminals and illegal salvagers. Paul Halvorson and Hawthorne resident Iweda Riddley, a Third Way Network staff member say foreclosures are unraveling the delicate fabric of stability painstakingly woven over the years by residents.
"The neighborhood deteriorates and that's when the crime level goes up because the drug dealers start hanging out on the corner. Families don't get involved in their neighborhood anymore and start staying indoors and they really start being secluded from everything," Riddley says.
Abandoned properties attract crime of the sort that can hinder efforts to rehab the property.
"The copper gets removed from the plumbing which is $3,000 to $5,000 of repairs and vandalism happens, washers and dryers get taken out and refrigerators and stoves get taken out for salvage. So it makes it very expensive then to rent that house out again when you're ready to do so," Halvorson says.
The foreclosure crisis is causing a snap back among lenders, according to neighborhood activists. After years of loose, some say lax, loan behavior banks and other lenders are tightening home mortgage standards.
Project for Pride in Living president and executive director Steve Cramer says the reaction causes a new problem. PPL, a Minneapolis housing and employment non-profit, has about a dozen newly built homes in north Minneapolis, ready for occupancy but sales are slow, according to Cramer. Cramer believes lenders are turning away people willing and qualified to buy homes in the neighborhoods.
"Now the pendulum is swinging perhaps too far in the other direction, credit is tightening up, and that's exacerbating the squeeze on eligible buyers and making it difficult to sell either new homes or existing homes that are in good shape," he says.
The foreclosure crisis has finally gotten the attention of federal regulators and elected officials. They're urging banks to give struggling home owners a break by reducing mortgage payments or extending repayment deadlines.
In Minnesota, homeowners having trouble making a mortgage payment may be eligible for what Minnesota Housing Finance Commissioner Tim Marx calls a bridge loan.
"An individual or a household facing foreclosure can get assistance as temporary loan to help bridge the crisis," he says.
The bridge loans are as much as $5500. So far, state officials say, they've loaned about $260,000. They have more than $300,000 still available. The loan, Marx says, doesn't have to be paid back until the house is sold.
In addition, Marx says, Minnesota lawmakers are considering proposals that will rein in the predatory lending that has fueled the foreclosure crisis and may expand the pool of money available for emergency help.
But for Third Way Network executive director Paul Halvorson, the help isn't coming fast enough. He says it can take a year to cut through all the red tape foreclosure causes before new owners, whether non-profits or individuals can buy the homes.
Halvorson grew up in Minneapolis during the l960's and remembers how poverty helped fan riots that decimated north side neighborhoods.
"I just hope we're smart enough to avoid having to have things degrade to that level before we have a community response," he says.
Mayors of both Minneapolis and St. Paul have created groups to try blunt the spread of the foreclosure crisis in their neighborhoods.