Will The 2009 Decline In Minnesota Foreclosures Last

The question is: when will speculators start playing in the market for Minnesota residential real estate. It is a question for which good arguments can be made on either side of the issue. There certainly are bargains available. That does not mean, however, that the market as it stands now is one in which can expect to quickly flip properties. Yes, it is true that there was a 12 percent decrease in the number of home foreclosures last year, but the market has been in decline since 2005 and it is too soon to say the bottom has been reached and it is up from here.

There was an 1800 unit reduction in 2009 of the number of homes disposed of at sheriffs auctions. This may be a sign of good times ahead, or it may be that after five years of declines, the chaff has been removed and now even formerly solid mortgages are in dire straights. There is, on the other hand, reason to think the Minnesota foreclosures numbers may resume an upward trend as 2010 plays out. Pessimism rests in the states stubbornly high unemployment rate. Officials expect the rate will remain in 9 percent range throughout 2010 with at most a . 5 percent drop. And prospects for 2011 are about the same.

Without a significant increase in job opportunities in the state, homeowners that became unemployed in 2009 quite possibly will exhaust their unemployment benefits and go into mortgage default this year. The bleak employment forecast has continued long enough that the downward spiral may continue to play havoc for lenders and homeowners alike.

A mandated restructuring program for residential mortgages was included in some of the bail outs that the federal government extended to financial institutions. It requires certain lenders to extend mortgages in such a way as to drop monthly payments. The target figure is to get mortgage payments down to the 30 percent of income range. The problem is that the program does not apply if the homeowner is unemployed.

Under Minnesota’s amended foreclosure rules, homeowners who have been served with a forced sale date have the option of requesting a postponement in the sale of five months. While this certainly saved some dwellings, it was not as successful as had been hoped due to the ongoing lack of decent paying employment.

The foreclosure amendments, it must be noted, imposed additional burdens on lenders. Where a property has been abandoned, lenders now have a duty to protect the dwelling from the elements, vandalism and trespass. That lenders may add their expenses to the amount outstanding on the mortgage is of little comfort. In case where a homeowner has walked away from his or her home, lenders usually have to put the homeowner into bankruptcy to recover what they can.

Some analysts argue that these new liabilities may be sufficient to keep investment money that is much needed out of the real estate market in the state.

Supporters of the amended foreclosure process point out that all expenses incurred by the lender in maintaining abandoned properties may be added to the outstanding balance on the mortgage. Detractors counter with a rather tough argument to contradict. They point out that trying to recover your costs from someone you will likely force into bankruptcy is pointless.

In the long run it is the high unemployment rate that is stifling a full recovery in the Minnesota housing market. Until that changes, you should probably only speculate in the Minnesota foreclosures market if you are prepared to maintain the property for sometime or if you are looking for a rental property. That market, given the number of people who have lost their homes over the past several years, is booming.

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