The Foreclosure Report

'Minnesota Won't Be Immune' From Defaults

The Pioneer Press reports on the Twin Cities. "A record number of Twin Cities-area homeowners lost their homes to foreclosure last year. If trends so far this year continue, hundreds more will see their homes slip away."

"In 2005, sheriff's departments in the seven-county metro area sold 3,743 homes at foreclosure sales, up from 2,850 in 2004; a 31 percent increase. And data compiled by the Pioneer Press reveals that the tide of foreclosures shows no signs of abating: By mid-May, there had been 2,169 sheriff's sales in those counties, well ahead of 1,300 or so that had taken place by the same time last year."

"Rising interest rates, coupled with the growing popularity of some riskier types of mortgages, probably play a part. In Minnesota, 3.91 percent of subprime loans were in foreclosure in the fourth quarter of 2005, up from 3.62 percent a year earlier. And delinquency rates for prime loans, though still well under 1 percent, are creeping upward."

"'"I think (foreclosures) are at a level where we have to pay serious attention,' said Richard Todd, a vice president at the Minneapolis Federal Reserve Bank who works on foreclosure issues. 'I don't see an overall time bomb here. I do see that there are certain segments of the market that are probably stretched.'"

"City housing counselor Celeste Tometz said many of the people calling hold adjustable-rate subprime mortgage loans, which they're finding harder to pay as interest rates rise. Many of them refinanced their mortgages, tapping out the equity in their homes, and lost a job or faced some other crisis that leaves them unable to make their payments."

"Tometz said that in her experience, subprime lenders are less likely to revise a mortgage to help a struggling homeowner. 'The subprime mortgages are easy to get into, tough to deal with it,' Tometz said."

"Assistant commissioner Mike Haley said he suspects the profusion of riskier exotic mortgages, such as adjustable-rate products, interest-only loans and negative-amortization mortgages (where buyers make minimal payments that do not even pay all the interest due on the mortgage, driving the principal balance up) are beginning to take a toll on homeowners here."

"'This is kind of what folks have feared, as the impact of some of these instruments start rippling through the system,' Haley said. 'Minnesota won't be immune.'"

posted by Ben Jones @ 11:10 AM