Struggling homeowners now have another chance to save their homes from foreclosure.
A new Minnesota law makes it possible to delay the sheriff's sale - giving people behind on their mortgage payments more time to pay back what they owe.
Until now, homeowners in foreclosure had one option - pay off the entire mortgage within six months or say goodbye.
The new law gives homeowners another one: to postpone the sheriff's sale by five months. The new law says homeowners who pay back what they owe during the five months can reinstate their mortgage and cancel a sheriff's sale.
A little breathing room
In this economy, Rep. Joe Mullery, DFL-Minneapolis said giving people more time just makes sense.
"People would not have time if they were living close to the line like a lot of people are now," he said. "So suddenly, they are out of work, they don't have payments to make their mortgage, it gets foreclosed, then the sheriff's sale occurs and then there is no way they can ever pay off the rest of the mortgage, so they lose the house."
Rep. Mullery pushed hard for the new law because he said it's unrealistic to expect that someone facing foreclosure will be able to pay back hundreds of thousands of dollars in one lump sum.
Mullery said most people just need a little breathing room to weather a crisis - time to deal with an unexpected health problem or find a new job and get back on their feet.
Twin Cities resident Kali, who doesn't want her last name used because her family doesn't know she's facing foreclosure, is one of these people.
She's scrambling to save her home and decided it was best not to worry her kids unless losing it was a certainty. She's hoping it won't come to that. Last week, she filed papers to take advantage of the new law and postpone her sheriff's sale.
"Right now I'm relieved in the sense that I can spend the next six months, in addition to sort of still planning to leave, also knowing that if I do find work it'll be okay and I can potentially still save my house," she said.
Kali's small business was hit hard by the recession and now she's looking for a job. Her little bit of freelance work here and there hasn't been enough and she's burned through all of her savings.
She made her last mortgage payment in December.
Because of her unstable job situation, she couldn't qualify for a loan modification. Kali said she's thankful for the new law because there is no way she could have paid off her entire mortgage to save her house.
"In my mind, I didn't look at the six month redemption period as a redemption period," she said. "In my mind, I thought if my home is sold by the sheriff I have six months to basically move. So that six month period, to me, was like the moving period. It wasn't going to benefit me at all because I was not going to come up with $261,000."
A new law for new times
About 5,200 homes were foreclosed on in Minnesota in the first four months of this year, with thousands more predicted.
If the economy worsens, experts say more people will lose their jobs and fall behind - and more foreclosures on the market will continue to depress home values.
That's why, said foreclosure attorney Amber Hawkins, the new law was overdue.
"Back in the old days, when people had equity in their property, sometimes they could refinance during the redemption period and get a new loan to pay off the old loan and redeem that way, and sometimes people could just sell their house," Hawkins said. "If the house was worth more than they owed on the mortgage they could sell the house during the redemption period, pay off the lender and still walk away with their equity."
But with so many homeowners now underwater - where they owe more on their loans than their home is worth - selling or refinancing to avoid foreclosure isn't an option.
There is one tradeoff for delaying the sale: people who don't catch up in time get just five weeks at the end of the process to redeem their house.
It's a trade off Kali is thankful to make.
"I'm happy to know that at least the six more months I'm here, there is potential for me. If the economy does improve and if I do find something to be able to stay, that is good news," she said. "It is a relief."
She's hopeful she'll find a full time job soon.