Faith Burns once ran a family construction company out of her south Minneapolis home.
There was never a lot of money but it was a job for her and a couple of family members. But after construction activity started to wane, Burns refinanced her house to pull out some equity to prop up the business.
Then one day in 2007, without warning Burns received a letter from JPMorgan Chase notifying her that she was six months behind on her mortgage payments and that the bank was taking her house.
Burns said the bank was wrong; she was up to date on her payments. "I sent them a letter and the details of our payments to them, and they still foreclosed," she said.
An attorney who works for a housing non-profit helped Burns sue JPMorgan Chase. She won a $20,000 cash settlement. Still, she lost her home and her family had to move, as have more than 150,000 other Minnesotans.
By then the enormity of the nation's mortgage meltdown was becoming apparent. Millions of Americans were already behind or on the edge of falling behind on their house payments -- a crisis that eventually spurred federal and state lawmakers to take action.
Starting in 2007, Minnesota Legal Aid attorney Ron Elwood, supervising attorney for the Legal Services Advocacy Project, joined with other public and private sector lawyers to prod the Legislature to enact consumer protections.
That effort continued through every legislative session until this year, when the Legislature passed a law -- that provided homeowners with some protection from lenders. The law gives homeowners facing foreclosure a chance to confront lenders and halt the process, Elwood said.
"Just stop the train," he said, "and say, 'Look you didn't do what you should have done under these things and let's just go back and do it and do everything so that I can stay in my home.'"
The new state law mirrors federal regulations that won't take effect until next year. Both provisions ease the process of loan modifications for borrowers and create a way for homeowners to collect legal fees if a lender has acted in bad faith. Also, lenders will no longer be able sell a home while a borrower is still trying to work out a new agreement, an action called dual tracking.
Despite such protections, foreclosures in Minnesota are down but are still more than twice the rate before 2005.
There were 2,972 foreclosures in Minnesota from June through September of this year, according to the Minnesota Homeownership Center. That's the first time in six years the number has been below the 3,000 mark.
Although the foreclosure rate has been declining for more than a year, the third-quarter foreclosure total is still roughly twice that of pre-crisis levels.
State officials say there are still thousands of homeowners behind on payments or with more complicated problems.
Nearly everyone -- lenders, regulators, elected officials and consumers -- has been blamed for the mortgage meltdown.
But actions by the lenders were at the center of the problem, Minnesota Housing Finance Commissioner Mary Tingerthall said.
"Extremely bad and fraudulent practices in the mortgage banking industry did trigger the foreclosure crisis and the financial crisis," she said.
Toxic loans by lenders, the avalanche of loan delinquencies, and the flood of foreclosures created chaos for banks and borrowers. Lenders lost paperwork, falsified documents, didn't return calls from borrowers seeking help or information. Leaders watched with growing alarm as the country's financial system teetered on the brink of insolvency.
Tingerthall said many people have no idea how close the nation came to a horrible financial outcome. The federal response was creation of an alphabet soup of remedies, including the Troubled Asset Relief Program to help lenders, the Hope for Homeowners Program to help mortgage holders and the Home Affordable Modification Program. In Minnesota those programs, work by public sector foreclosure counselors and actions by lenders helped 430,000 state residents stay in their homes with refinanced loans, she said.
Tingerthall is confident that new protections for borrowers, additional rules for lenders and the creation of the Consumer Financial Protection Bureau will help prevent another financial meltdown like the one that started in 2007.
Still missing is a way to let people in financial trouble know they can find help and protection from foreclosure, said Elwood, the legal aid attorney.
"If anybody has like lots of money to do a tremendous public relations campaign and donate like millions and millions that would be really awesome," he said.
When Burns received the letter from JPMorgan Chase mistakenly claiming she was behind on her mortgage payments she had the presence of mind to seek help.
Despite losing their home, she and her husband were able to obtain financing to buy another home in south Minneapolis.
However the emotional wounds from the foreclosure are still fresh, and she's not convinced that all the remedies and protections put in place will work.
"If they did it to me then what's to prevent them from doing it now? I was paying my mortgage like I'm doing then," she said. "What prevents this company from just walking in and taking my home? I'm very, very curious about what's going on to enforce as far as the laws concerned."
A HISTORY OF FORECLOSURE LEGISLATION IN MINNESOTA - 2004 - 2013
|2004||EQUITY STRIPPING BILL|
• Protects homeowners from "equity stripping" or "foreclosure rescue"
|2007||ANTI-PREDATORY MORTGAGE LENDING BILL|
• Creates the strongest anti-predatory mortgage lending bill in the country
|EQUITY STRIPPING LAW|
• Amendments to the law
|2008||PROTECTIONS FOR OWNERS OF MANUFACTURED HOMES|
• Gives owners of manufactured homes more time to reinstate mortgage
MORTGAGE FORECLOSURE RELIEF
Twelve bills representing approximately 30 legislative proposals enacted to:
• make it easier for municipalities to address abandoned properties.
• help homeowners reinstate loans in default
• facilitate short sales
• clarify and reduce foreclosure costs
• better facilitate communication among borrowers, lenders, and foreclosure counselors
• require a Pre-Foreclosure Notice to homeowners in default
• revise existing foreclosure advice notice to homeowners
• require a new foreclosure advice notice to tenants caught up in a foreclosure
• require these notices as a prerequisite to foreclosure
|2009||ADDITIONAL PROTECTIONS FOR HOMEOWNERS IN FORECLOSURE|
PROTECTION OF ABANDONED PROPERTY
• allows for a faster transfer of the property
BETTER NOTICE TO HOMEOWNERS IN FORECLOSURE
• notice of foreclosure sale to specify the exact date and time the homeowner must vacate
PROTECTION AGAINST LOAN MODIFICATION SCAMS
• Equity stripping law amended to prohibit for-profit loan modification services to take money prior to performing the promised services
|2010||REVERSE MORTGAGE PROTECTIONS|
• Changes to the reverse mortgage law made to protect seniors
NOTICE TO HOMEOWNERS OF REDEMPTION RIGHTS
• lenders must inform homeowners of their rights to redeem their homes after the sheriff's sale
EXTENSION OF RIGHT TO POSTPONE FORECLOSURE SALE
• Extends the right to postpone the sale to mortgages subject to judicial foreclosure
|2013||FORECLOSURE RELIEF ACT OF 2013|
• Requirements prerequisites before foreclosure
• Requires servicers to: (1) notify homeowners of available loss mitigation options (including loan modifications); (2) help homeowners submit the right paperwork; and (3) offer any option for which the homeowner is eligible
• Prohibits dual tracking (i.e., simultaneously working with a homeowner on a loan modification application and proceeding with the foreclosure sale)
• Gives homeowners the right to go to court to stop or set aside the sale if there is a violation
|Legal Services Advocacy Project (an office of Mid-Minnesota Legal Aid).|