Minnesota Attorney General Lori Swanson today called for the state to require banks to negotiate with homeowners before foreclosing on properties.
Swanson said her office has had some success with voluntary mediation in a number of cases, and she was joined by several people who said the attorney general's intervention saved their homes.
But Swanson said the complex nature of modern mortgages has made it difficult to sort out who has the authority to renegotiate troubled home loans. She said Minnesota needs to shift some of that burden to lenders.
"If you're going to take the home away from people and use the foreclosure process, you gotta show up at the mediation and negotiate in good faith. And that you, the lender, are going to have to figure out what that means," said Swanson. "If you truly don't own it, you're going to have to get authority from someone, whether it's the secondary investors or somebody calling the shots."
Lisa Hemberger, a hair stylist from Cottage Grove, said voluntary mediation helped save her family's home after her husband lost his construction job. She said without help from the attorney general's office, she couldn't get her lender's attention when she fell behind on her mortgage.
"Every time you would call them, you'd talk to a different person, and they wouldn't know what was going on," said Hemberger. "They'd say, 'Talk here or go here, or do this.' A normal person doesn't know who to talk to to get anywhere."
Attorney General Swanson said Minnesota needs a mediation process modeled after the state's Farmer-Lender Mediation Act, which helped as many as 14,000 farmers during the farm crisis 20 years ago.
She said nearly three times that many homeowners may face similar financial problems next year alone.