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By Marisa Helms
Keith Franke was excited to take part in his first St. Paul Park Heritage Days parade last year as the city’s new mayor. But the parade turned out to be quite a wake-up call. As he waved to proud city residents, he also found staring back at him an unacceptable number of unkempt homes, broken windows, and straggly lawns along the parade route.
That is the stark reality of a community weathering the ongoing foreclosure crisis. And St. Paul Park (population 5,300) is not alone. Far from it.
From 2005 to the end of 2012, nearly two (1.7) out of every 20 households in Minnesota went into foreclosure. That’s equivalent to 153,000 homes, or 8.5 percent of all homes in the state.
Though much of the devastation has been concentrated in the Twin Cities metro area, the foreclosure crisis has touched down in every corner of Minnesota.
“It has been a difficult time to work in the industry,” says Dan Hylton, research manager at HousingLink, a nonprofit affordable housing research and resource clearinghouse based in Minneapolis.
HousingLink helps people with low to moderate incomes find affordable housing. It also publishes data on foreclosures statewide, based on county sheriff’s sales. Hylton says the foreclosure numbers are finally starting to head in the right direction.
“Foreclosures have been going down significantly since 2010,” Hylton says. “But even so, rates for foreclosures are exceeding pre-crisis numbers. There’s still a big need out there.”
Insisting on accountability
Some municipalities, dealing with “foreclosure fatigue,” are just now beginning to create proactive policies that can address how best to handle the vacant properties in their communities.
Before the crisis hit St. Paul Park in 2009, the city might have seen five vacant homes a year. Then, as the recession plodded along, the number of foreclosures in St. Paul Park ballooned to about 50-60 vacant homes per year from 2009 to 2011. The city reached its highest level in 2012 when approximately 70 homes were foreclosed upon.
That’s about the time Mayor Franke had his eye-opening experience at the Heritage Days parade. He took action that very day, and proposed a new vacant property registration ordinance, which just became law in St. Paul Park on April 1, 2013. The ordinance requires property owners holding vacant homes to register with the city and pay a $100 fee.
“We wanted a database so we could know who to contact and to track progress,” says City Administrator Kevin Walsh. “It’s a small fee. We didn’t want it to be punitive; we just wanted quick access to resolve problem properties.” Walsh said even though the ordinance hasn’t been in effect long, homeowners—especially banks—are starting to sign up for the program.
The adage, “knowledge is power,” could not be more true for cities like St. Paul Park that have developed tools to obtain the information they need to identify vacant properties. It’s the first step to holding owners accountable, tracking a property’s condition, and then finding ways to resell the property to a new buyer.
Some cities, like Coon Rapids (population 62,000), are using sophisticated geographic information system (GIS) mapping software to track foreclosed and vacant properties.
“We use [the software program] every day,” says Kristin DeGrande, Coon Rapids neighborhood coordinator. “It is the place where we put all of our information. The history of a property and all the activity there is documented in one place. If somebody talks to a property owner, that is documented. If the water is turned off, or the house is flooded, or a rental license issued, or a violation of junk and debris in the yard, every point of contact is tracked in [the program].”
DeGrande explained that the software’s GIS feature is especially useful for reporting to the public and to city councilmembers. For example, every spring and fall, inspectors verify all properties on Coon Rapids’ vacant list. Before the inspectors head out into the community, they print out a report and large map from the program with pinpoints indicating where the vacant properties are located.
“Inspectors can more efficiently go from property to property since they’re able to map them out,” DeGrande says. “And for councilmembers, it gives them a visual concept of where those properties are. They can see if some areas are more concentrated than others.”
Money speeds recovery
Managing the foreclosure crisis has been a financial drain on cities, putting them in a double bind of lost revenue and cost increases. Some federal and state programs have helped ease the pressure.
A few of the state’s larger, hardest hit cities and counties qualified for competitive and formula-based grants from the federal Neighborhood Stabilization Program (NSP). Among the cities that have received federal funds was Brooklyn Park (population 76,000).
Over a five-year period (2007-2011), nearly 20 percent of Brooklyn Park’s 19,000 owner-occupied housing units went into foreclosure, mainly because of predatory lending and risky mortgages.
Brooklyn Park received $7.2 million in NSP funding over three years (2009-2011). That money, combined with another $2.2 million in city and state resources, has allowed Brooklyn Park to establish a roadmap to recover, rehabilitate, and resell foreclosed homes. So far, Brooklyn Park has been able to resell 144 properties (with 32 more in the pipeline), and it still has nearly $2 million left to spend.
“We’ve been really excited by the outcomes,” says Brooklyn Park Development and Housing Manager Kim Berggren. “The rehabbed houses look really good and we hear that people feel better about the neighborhood, saying that some of the worst homes changed into the best homes on the block. It gives people a sense of stability in their neighborhood.”
The City of Minneapolis has also benefited from the NSP and other federal resources, receiving $35 million to aid in its stabilization and recovery efforts.
With those funds, the city targeted neighborhoods in the north and south central areas of the city that were hardest hit by predatory lending and bad mortgage products.
Minneapolis has leveraged the federal money to take part in or establish these innovative programs:
Cherie Shoquist, a principal project coordinator in the Minneapolis Community Planning and Economic Development Department, says the city has been able to help more than 1,000 properties through these and other programs.
Next step: access to credit
Cities realize that just rehabilitating foreclosed homes isn’t enough to restore a community back to health. The homes need buyers, and experts say there are not enough qualified buyers today to purchase many of the vacant and foreclosed properties that cities are investing in. At least one city, Woodbury, is making it easier for prospective homebuyers to access credit.
Woodbury has several lending programs, including a successful down-payment financing tool called the Foreclosure Purchase Program. Qualified first-time buyers are eligible for low-interest loans up to $25,000 when they buy homes that have been in foreclosure.
Since 2009, Woodbury has issued 52 of these loans totaling nearly $1.3 million. The program is funded through some federal dollars, but is chiefly supported by a local property tax levy.
“It was a decision to reinvest in our community, to ensure our neighborhoods continue to be strong and vibrant places to live,” says Woodbury Housing and Redevelopment Coordinator Karl Batalden. “We’re investing local money in a smart and strategic way, and our conservative underwriting has limited our risk. We have a 0 percent delinquency rate.”
Marisa Helms is a freelance writer based in Minneapolis.
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While some Minnesota cities have begun the process of stabilizing and preserving the quality of life in their neighborhoods, foreclosures continue to be a very real problem across the state.
Last year, foreclosed properties in Minnesota totaled 17,895, an uncomfortably high number that speaks to the importance of prevention. Comparatively, the number of foreclosures in Minnesota pre-crisis in 2005 was just 6,472 (see graph at left).
Prevention services for all cities and residents across Minnesota are available from the Minnesota Homeownership Center, a statewide network of agencies that are certified to provide standardized counseling services in every county.
Additionally, dozens of other nonprofit agencies, including HousingLink, the Greater Minnesota Housing Fund, the Minnesota Foreclosure Partners Council, and the Twin Cities Community Land Bank, continue to provide education and assistance, ranging from data collection to acquiring, rehabilitating, and reselling distressed properties.
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