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Minnesota attempts to pass a foreclosure mediation bill again

Senate committee has again given its approval to legislation that would require homeowner-lender mediation as part of the foreclosure process.

The bill, known as the Homeowner-Lender Mediation Act, was referred Tuesday by the Senate Committee on Commerce and Consumer Protection to the Senate Judiciary Committee with a recommendation to pass. If approved by the Judiciary Committee, the bill will continue on to the Senate Finance Committee.

The 2009 Legislature approved similar legislation, which was vetoed by Gov. Tim Pawlenty.

In his veto message, the governor said he supports mediation in some foreclosure cases, but he disagreed with last year’s bill because it specified that mediators, rather than mortgage counselors, would determine who was eligible for the process.

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The governor also didn’t like the legislation’s provision that the Minnesota attorney general’s office appoint mediators, and he disapproved of the plan to levy a $125 fee on every foreclosure filing, which would pay for the mediation program.

Sen. Linda Scheid, DFL-Brooklyn Park, who also sponsored last year’s legislation, told the committee Tuesday that she and others have spent time fine-tuning the bill with the hope that Pawlenty will sign it this year.

“I’m in no position to speak for the governor, but I sincerely believe that he would like to sign a bill that offers mediation,” Scheid said.

She offered legislators a map of the city of Brooklyn Park, which highlighted 2009 foreclosures and currently vacant properties. There were 983 foreclosures in the city in 2008 and 725 in 2009.

“When I sit at my kitchen table, I can look out and see two empty, foreclosed homes,” she said. “If I stand up and look out the kitchen’s west window, I see four empty, foreclosed homes.

“I’m sure you’ve all seen driveways that haven’t been plowed since the Christmas storm; that’s happened eight or 10 times in my immediate neighborhood. I think we should be trying to do what we can to save some of these homes.”

Two south Minneapolis residents told the committee about the difficulties they had in attempting to work with their mortgage companies when they received foreclosure notices

Antoinetta Giovanni testified that she was notified a year and a half ago that her mortgage payments would be going from $1,300 a month to $1,900 under the terms of her adjustable-rate mortgage. She tried repeatedly to get her lender to modify her loan or go through mediation, but was unsuccessful.

“I want to stay in my home, but I can’t afford to stay there,” Giovanni said. “I believe there are many families like me.”

Dorette Beckford lost part of her salary in 2008, and she called her mortgage company to request a loan modification. She worked with the company on the modification for six months and said she was asked to send in numerous documents.

“I did everything they told me to,” she said. “They sent the final papers for me to sign to complete the modification, and I signed everything except for one sheet – an oversight on my part.”

Her mortgage payment was due on Dec. 1, 2009, and the money was due to be automatically withdrawn from her bank account. That same day, she received a letter telling her that her home was in foreclosure; she called the mortgage company and was told that because she hadn’t signed that single document, they assumed that she had changed her mind about the modification.

Minnesota banking groups speak out

Representatives of Minnesota banking groups were quick to testify that they shouldn’t be lumped among those mortgage companies and banks that have their headquarters elsewhere and are unresponsive to their mortgage clients’ requests for assistance and loan modifications.

“We know that counseling works,” Joe Witt, president and CEO of the Minnesota Bankers Association, told the committee. “We’ve seen that here in Minnesota.

“In Minnesota, we have a high percentage of loans that get modified and that get paid off. … It’s a different situation when you’re dealing with a local bank than with a monster company in New York. Our group believes very strongly in good communication with our customers and working out situations where they can.”

Three foreclosure bills under consideration by legislative committee

The latest Homeowner-Lender Mediation Act, SF 2170, was one of three bills related to the ongoing foreclosure crisis considered Tuesday by the panel. The committee also heard testimony on Scheid’s SF 2501, which would streamline the process of notification of homeowners when an initial foreclosure notice is sent, along with information on mediation counseling; lawmakers also approved that bill and sent it on to the Judiciary Committee.

The committee heard testimony on one other bill authored by Scheid: SF 2430, which would require homeowners to be notified of the results of a sheriff’s foreclosure sale and would advise them of their right to redeem the property for the amount for which it sold at the sale. It would also prohibit a practice known as “foreclosure procurement,” in which a foreclosed homeowner sells his or her legal right to redeem a home within 21 days after the sheriff’s sale.

St. Paul attorney Jerome Ritter testified about a client whose home was sold in a sheriff’s sale last October to the lender for $15,000 — $161,000 less than the amount of the client’s original mortgage.

By law, the client had 21 days to redeem the property for the sheriff’s sale amount, but because she didn’t know about the provision, she ended up signing a quit-claim deed on the property to a speculator for $400.

“There’s a growing cottage industry of people doing this,” Ritter said. “It’s extremely predatory; there is no effort being made to educate homeowners on how much their homes are being sold for (at sheriff’s sales), and these scam artists are snapping up deals that are too good to be true.”

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