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On some streets in north Minneapolis, vacant homes almost outnumber occupied ones. But now, many of the foreclosed houses in the area are in some stage of renovation. 


Bill Buelow, director of construction at the Greater Metropolitan Housing Corporation (GMHC),  explained what the houses were like before he started fixing them up. 


"All the copper was vandalized and taken, and holes in the walls, and the cabinets trashed," Buelow said.  


The GMHC is one of the main non-profit groups helping the city in its effort to reclaim, rehab and resell foreclosed homes. 


Buelow showed off a renovated two-story stucco house on Russell Ave. It has beautiful hardwood floors and a brand new kitchen. When Buelow first got it, there was no kitchen.


"Literally, the cabinets were gone. It was just a couple of pipes sticking out of the wall, and the same with the bathrooms," Buelow said. "A lot of the fixtures were removed. It was almost depressing, and it's like, where do you begin?"


This house is one of more than 140 properties in north Minneapolis seized by authorities more than a year ago after an investigation uncovered a massive mortgage fraud scheme. The fraud involved $35 million in mortgages across the metro area. 


The scam landed the owners of real estate firm TJ Waconia in federal prison for using inflated appraisals to buy and resell the homes to investors for a profit. 


The scope of the mortgage fraud scheme left a trail of destruction in its wake, according to Tom Streitz, Minneapolis housing director. 


"From the neighbors' perspective it was the worst of all possible worlds, because you often had a house that was unmanaged with renters, and then you also had the equity leaving the neighborhood," Streitz said. 


The vacant TJ Waconia homes added to an already bleak housing picture in north Minneapolis, where a 

 continues to keep home values way down. 


Advocates fear the low prices could make the neighborhood vulnerable to another wave of shady investors looking to score cheap houses to flip for profit. 


Streitz said it's critical to get the houses off the market and into the hands of responsible owners. 


"Bringing a family in who can afford their mortgage payment, so we don't repeat the cycle of disinvestment that we have seen happen here over and over and again," Streitz said. 


To help lure potential homebuyers to distressed neighborhoods like north Minneapolis, the city has offered down payment and closing cost assistance through a program called Minneapolis Advantage. 


The program is widely seen as a success. But last week, the City Council moved to cut the program's funding in half.  If approved, the cuts mean the city will have to make up the difference if it wants to keep the incentive program going. 


But city housing officials say they don't just want to continue the program. They say that together, the wide array of foreclosure prevention and property improvement programs put in place to stem the foreclosure crisis has been so successful they want to expand it. 


Along with Brooklyn Park and Hennepin County, Minneapolis has applied for another nearly $40 million in federal Neighborhood Stabilization Program funds for next year. 


They hope $2 million of that would go straight to Minneapolis Advantage, which would nearly quadruple the size of the program. 


So far, the city has used federal stimulus funds to purchase, demolish or renovate several hundred homes. 


That may not seem like much, considering Minneapolis has had an average of about 3,000 foreclosures a year for the past three years. 
But every foreclosure they can rescue benefits the whole community, Streitz said. 


"That ripple effect is extraordinary, so to me it's not a drop in the bucket," Streitz said. "It's a multiplier effect. One house, one block makes a huge difference."


Officials say they expect to hear about the next round of federal foreclosure recovery funds sometime early next year.

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A Minneapolis program designed to fix up and resell foreclosed properties has been so successful, officials hope to expand it.

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