Money Does Matter

On June 15, 2009, the rules on Minnesota foreclosures were changed. Today, homeowners looking down the barrel of a sale forced by the lender after the homeowner has fallen into arrears on their mortgage payments have the option of postponing the date of sale by five months. Before the changes it was only the lender who had the ability to set the forced sale to a later date.

The length of the foreclosure process in unaffected by a homeowner obtaining a postponement. The redemption period, which allows a mortgagee to avoid forced personal bankruptcy by making good on the outstanding balance due on the mortgage after it has been sold. To keep the foreclosure process from dragging out, the redemption period for homeowners who get a postponement has been lowered to 35 days from the six months that is allowed in cases where no postponement is requested,

Homeowners may only seek a postponement once. Even if the homeowner brings the mortgage up to date and keeps it up to date for an extended period, should they fall in arrears at some later date the option of postponing a forced date of sale is no longer available to them.

There is no extra paperwork for the lender in a homeowner-generated postponement. Assuming all steps were done properly, the lender does not have to re-publish date of sales, re-file notices of sale or re-serve property owners.

Mortgage holders do have additional duties under the new Minnesota foreclosures rules and regulations. Previous to these statutory changes, protecting abandoned properties from trespass and damage were optional for lenders. Now this protection is required. Additional maintenance on properties that have been abandoned are also added. The cost of fulfilling these obligations can technically be added to mortgage principal.

Once a sheriffs certificate has been issued and evidence sufficient for a court to find that a property is abandoned has been established, lenders must enter the premises, change or install locks on all exterior doors and all windows, and commit to undertake periodic inspections. Mortgage holders also have the option of boarding up windows and doors and installing alarm or security systems.

Monies put out by the lender to fulfill these obligations may be added to the principal the homeowner owes on the mortgage. If new locks are put in, keys to the locks must be given to the titular homeowner, if they can be found. The chance of recovering these costs are, of course, small, given that personal bankruptcy on the part of the homeowner is the most likely result of a completed residential foreclosure.

Cities are granted certain new rights under the terms of the amended Minnesota foreclosures process. Chief among these rights are the ability to force lenders to tend to their abandoned properties. Cities may also reduce the allowable redemption period in order to permit municipal workers to access deteriorating properties without needing to locate the person who owns the the abandoned residence.

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Under Minnesota Chapter 7 Bankruptcy laws, the individual has more rights than under the Minnesota Foreclosures procedure. If a foreclosure is pending, then consult an attorney and discuss the best ways to deal with the situation. It is important before instigating any proceedings that you assess your financial needs.

Chapter 7 rules are ideal for those people who have low income. To qualify for a Chapter 7 liquidation, the debtor must earn income within certain limitations. The home owner must tell the court judge the final figure of the yearly income. If you are one person, it is $47,592.00, for couples it is $62,073.00 and $87,630.00 for three persons, a child and the parents. Additional family member credit is $6,900.00 per person. When the liquidation process is filed, ownership and deeds to the home and car are put in the care of a court trustee.

In the worst case scenario, a creditor could lodge a motion for a foreclosure. To get around this charge, debtors have to apply for bankruptcy so that they can regain possession of the homestead. As they could easily lose it if they do not react quickly enough.

The Chapter 7 suit will give a debtor some leverage and prevent creditors from motioning a foreclosure. But the homeowner cannot stop forfeiture if a creditor wants it to happen.

Once the judge accepts the bankruptcy, the debtor can remain in the house. This will also prevent any unnecessary duress on the part of any creditors wanting their money.

Also, if a creditor effectively argues in court that the home’s value is considerably lower now, the forfeiture can still go ahead.

Under the state of Minnesota, debtors can go for exemptions under two separate laws. The first is through state exemptions and Federal supplementary law. The second, the Federal exemption rules only.

A Chapter 7 bankruptcy will dispose of credit card debt and utility bill debts. It could forfeit those assets that were used as a deposit. The basic reason is to see what can be done with the assets. If something can be saved through the liquidation suit then the judge will direct the matter in that way. A monthly payment plan, reduced installments is a probability. The debtor must change earlier terms in the home mortgage contract.

The debtor must still adhere to the original terms and conditions of the homestead mortgage and pay the installments accordingly. This does include finding the money for bringing any outstanding arrears up to date.

A homeowner can also seek a loan modification to protect their property. A loan modification requires the defaulter to talk with present lender and give them more time to pay off mortgage. This will only happen provided that the extended term is subject to certain limitation like twelve months to five years. A lender may not do this, if they are going to lose lot money in a foreclosure if homestead market value has fallen below a certain level.

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The state of Minnesota is located in the northern part of the United States, butting against Canada. It is well known for its winter sports and its tourism. Unfortunately, in these hard economic times Minnesota Foreclosures have been high as the rest of the country.

The state is one of several that have a Homeowner-Lender Mediation Act which requires the lenders to participate in mediation prior to foreclosure on any home. This law was passed in 1986 and was the first state to provide this for farmers. In 2009 it was found that mediation were up 86 percent over the past year. After undergoing financial counseling, the owner meets with the lender to try to prevent foreclosure.

Another law of this state allows the owner to give the deed to the lender in order to retain a good credit report. Unfortunately, this is not as simple as it seems. Even though the owner no longer has the property he is still responsible for the balance due. This can lead to attachment of wages, bank accounts and other assets. This does not sound like a very good idea.

Lenders, in general, simply shudder at the thought of assuming more foreclosure homes. Handling a foreclosure home is very expensive and involves a lot of legal and paper work. Many of the homes are in disrepair and needs extensive work. Most of these homes are sold “as-is” but the buyer should be wary of this type of sale.

Before purchasing a foreclosed home in Minnesota or elsewhere one should carefully research county records, state foreclosure laws, value of neighborhood homes and anything else pertinent. In some states a new owner finds that there is a lien on the property and they are responsible not only for the purchase price but for what the previous owner owed as well.

While the buyer may ask for a real estate transfer disclosure statement which supplements information regarding known problems and hazards. However the seller is not required to provide this statement. This statement would refer to any structural defects as well as mechanical, heating and other problems. In addition, even if there are problems listed the seller is not required to make the repairs.

It is always a good idea to ask for a Transfer Disclosure Statement. In this case the seller must fill out a form which lists any known defects in the building. This is very helpful, especially if the property is rodent infected, had water leaks within the walls, etc. Even with this report there can be damages that are cosmetically covered or repairs have been made by an unlicensed person. Minnesota Foreclosures, like others, needs to be carefully examined before making any purchase.

Knowing your real estate agent is vital when purchasing a Minnesota Foreclosures property. A good agent is well aware of state laws regarding these transactions and can guide one through to a satisfactory purchase. Currently there are scammers sending listings through the mail that look very official. They list foreclosures at a very low price. Unfortunately, these homes are not for sale and anyone making a deposit loses their money with no hope of getting it back.

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Are speculators about to move into the Minnesota real estate market is an excellent question. There are reasons to answer it either positively or negatively. That are bargains to be had is indisputable, but it is unlikely the market will reward speculators fast enough for hard core house flippers. Nevertheless, a 12 percent reduction in the total number of residential properties that went to auction from 2008 to 2009 is worth thinking about. It may be that the upward trend of Minnesota foreclosures is finally over.

The 2009 reduction of nearly 1800 units from sheriffs auctions maybe a hopeful sign. On the other hand, there is some reason to believe the state foreclosure figure will resume their upward trend in 2010. Perhaps the strongest argument for pessimism can be found in the number of Minnesotans that are currently unemployed. According to the president of the Minneapolis offices of the Federal Reserve, unemployment in the state will remain at 9 percent for most of 2010 and will not drop to below 8 percent through 2011.

Efforts to reduce Minnesota foreclosures in 2009 included mortgage restructurings, in response to demands from the federal government, and significant changes in Minnesota foreclosures processes courtesy of the state government. Yet, despite these efforts, less than 1800 homes were saved from foreclosures compared to the 2008 total.

There is a mortgage restructuring program mandated by the feds as part of a number of the bail outs. This program requires many lenders to extend the length of mortgages so as to bring the payments down to a level that doesn’t consume more of household income than 30 percent. While this has no doubt saved some residences from foreclosure, it is of no help if the homeowner has become unemployed.

Last summer the Minnesota legislature cobbled together a new Minnesota Foreclosures Act. Chief among the changes is the creation of a right for homeowners to put off a forced sale for up to 150 days. If this is what lies behind the 2009 default rate reductions, then little can be said for certain at this time. The success of this amendment in reducing foreclosures will only become clear when the first wave of postponements comes to an end. Because the legislation did not go into effect until August, the success or failure of the initiative will not be known until the 2010 foreclosure numbers start to accumulate.

The new foreclosure legislation also increased the responsibility of mortgage holders to maintain abandoned properties. These responsibilities include securing the premises, changing the locks, protecting the dwelling from the elements and maintaining the surrounding land in a manner consistent with community standards.

There is some consideration that these new responsibilities have been enough to keep many investors out of either the market for foreclosed homes or out of the home mortgage sector entirely, tightening an already battened-down supply of money.

Supporters of the newly revised process defend the amendments, pointing to the 12 percent reduction 2009 foreclosures. But they, like all of us, have no choice but to wait for the date to come in on how much difference the five month grace period will make. As these result come in over the course of this year we will be better able to determine whether an extra 150 days actually changes the 5 year trend in Minnesota foreclosures. If the additional time does not assist homeowners in finding good paying employment, the question will become, what do we do now.

Analysts of all persuasions are agreed that a full recovery of the Minnesota real estate market cannot occur in the absence of a significant reduction of the states high unemployment. It is difficult to see when this might be. For bargain hunters, there are certainly deals to be under the gavel of sheriffs auctions. But the time is not yet ripe for a return to the house flipping days of yore in the Minnesota foreclosures arena.

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Looking at a challenging economy in light of Minnesota foreclosures (and nobody familiar with the nation’s economy would dispute that it’s currently in a “challenging” state) might require that one constantly see the glass as half-full. It’s true that Minnesota real estate markets are down, but it’s also true that are still opportunities for a savvy investor or prospective property owner out there.

It’s necessary, though, that anybody who might be thinking of looking at property investment or even home ownership in such a current rocky economic environment will want to understand as much as possible the specific real estate market in which a foreclosed home is sitting. Some homes will return an investment while others may never come back to the point where they can sell at a profit, sadly.

A smart thing to do, though, is to take what’s known about the specific market and the average price that homes are selling for within that market and then looking at foreclosed properties for certain characteristics. Most especially, one should consider whether the house can be bought low enough and then sold high enough and at a relatively speedy pace to ensure a decent profit.

In essence, any commodities or securities market, including markets that revolve around real estate, operate off of this principle (buying low and selling high). Right now, buying a property and then sitting on it for several or more years until it appreciates enough to return an investment in it might not be the best of strategies, unless one intends to live in the home for quite a while.

Given all this, when considering purchase of any potential investment property, one might want to look at the kinds of homes being offered by banks and lenders first of all. In the right circumstance, a bank or lender could be convinced to sell the property for far less than it once sold for. Paying $100,000 for a home that might be worse $200,000 in the right circumstance would be smart, of course.

The profit margin will depend on what one can get for the property between $100,000 and $200,000, after expenses have been rolled into improving the house so it can sell. Perhaps homes are now selling in that market and in properties similar to the one being bought for about $150,000. Sinking 10,000 additional dollars into the home to bring it up to code would mean a $40,000 potential profit before other expenses.

It’s probably smarter for most investors to stick with this formula these days rather than a long-term “buy and hold” strategy because experts aren’t exactly sure if home values will ever return to the once-stratospheric levels they attained just a few years ago. This strategy is also just as applicable elsewhere as it is in Minnesota, so always learn the market before diving into it.

In truth, there actually is a potential for nice income and even the roughest of real estate markets as long as the investor is smart and savvy enough to see the opportunities and take advantage of them when they’re presented. Minnesota foreclosures, in the right market in the state, can present a good opportunity to one who thoroughly understands the market in question, which would mean an eventual nice profit, it must be said.

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