If most of the homes on Minneapolis' Fairview Park aren't vacant, it's hard to tell.
"It feels very desolate out there most days," said real estate agent Connie Nompelis.
Nompelis stands on a corner, just off Lyndale Ave. in the Hawthorne neighborhood. There are "For Sale" signs in every direction.
In the last five months, the average sale price of a home here was just over $16,000. Many sold for thousands of dollars less than that.
Nompelis said prices are being held down by all the foreclosures, and the problems that often go along with that. It's a downward spiral.
"The number of people that are just walking away from properties, and then vandalism takes place, and that further decreases the value of the house," said Nompelis. "Then you get clusters in neighborhoods like Hawthorne, where there are people that won't even consider looking at homes in this neighborhood, because they drive down the street and all they see are boarded homes."
Outside one large vacant duplex selling for just $8,000, activist Jeff Skrenes says what's happened to his neighborhood could have been prevented.
"What would this have done to property values in Hawthorne," he asked, "if the lender and the owner-occupant were at the table together trying to figure it out? Well, maybe the loan is $200,000, and maybe we can reduce the principal down and the interest rate down to 5 percent, and that will make it affordable."
State lawmakers are asking the same question. They are considering a bill that would force lenders to negotiate loan terms with homeowners before they foreclose.
The Homeowner-Lender Mediation Act is modeled after a bill passed in the 1980s to help struggling farmers. A similar measure was vetoed last year by Gov. Tim Pawlenty.
State Rep. Jim Davnie, DFL-Minneapolis, says this bill is long overdue.
"I've just never understood why, if you are a farmer and you go into foreclosure, you have guaranteed access to mediation. But if you are the hired hand who works on the farm but lives in town, and you go into foreclosure, you have no access to the same mediation process," said Davine.
According to a survey by the U.S. Mortgage Bankers Association, the percentage of people across the country who are at least one month behind in the mortgage payments rose to nearly 8 percent at the end of last year. That is the highest delinquency rate ever recorded by the survey, which began in 1972.
In Minnesota, 6 percent of all mortgages were past due in December. With the housing market at rock bottom, it's tough to refinance or sell, because many people now owe more than their homes are worth.
To help more people avoid foreclosure, many lenders have already begun reducing principal and interest rates. The HOPE NOW Alliance, a mortgage industry group, says lenders modified or initiated payment plans on almost 250,000 loans in the U.S. in January.
"There are people that won't even consider looking at homes in this neighborhood, because they drive down the street and all they see are boarded homes."
HOPE NOW's Executive Director Faith Schwartz says foreclosures are expensive for lenders and their investors. If it costs less to help homeowners stay in their homes, it's in the best interest of the lender, too. But, she said, banks ultimately have to do what makes the most financial sense.
"If a foreclosure is cheaper -- and that sounds kind of hard -- then you should do that versus modify a loan that would cost me more than a foreclosure. That's kind of always been the case," Schwartz said. "In this market it's very costly to have foreclosures, so that is helpful to the borrowers."
Schwartz says most lenders support President Barack Obama's new housing rescue plan, which offers modifications or refinancing to up to nine million struggling homeowners.
The federal plan doesn't force lenders to participate, but it does offer incentives for them to do so, and any bank that receives additional bailout funds is required to participate.
As Jeff Skrenes from the Hawthorne Neighborhood Council walks through one vacant foreclosed home for sale in Hawthorne, the smoke alarm is still beeping.
He says the state's bill would fill the gap left by Obama's plan by forcing lenders to come to the table.
Skrenes, a former mortgage broker, says there is a time and place for foreclosure, because some homeowners just won't be able to afford their homes even with a modification.
But Skrenes says it's time to do whatever it takes to stabilize the housing market and help the economy. That means modifying more loans to help more people stay in their homes.
"We can't just say no foreclosures, period, because that really would make lenders say, 'Why should I do loans in this area where we can't go through some kind of foreclosure process?' But at this point we really do have to stop the foreclosures to the best that we can, and if this bill does that, I'm happy," Skrenes said.
The legislation has support among Minnesota House and Senate leaders. The bill is expected to come before lawmakers this week.