Minnesota Eyes Moratorium on Foreclosures
STEVEN INSKEEP, host:
Minnesota could try to address a fundamental problem. It could become home to the most sweeping foreclosure-related measure in the nation. State lawmakers there will introduce a bill today that would block foreclosures for a full year to give people more time to save their homes.
NPR's Chris Arnold reports.
CHRIS ARNOLD: Legislators in Minnesota say they've been hearing a lot of talk in Washington about how best to deal with the mortgage crisis, but so far the action at the federal level has fallen short. Meanwhile, across the state, more than 1,500 people a month are losing their homes.
State Representative JIM DAVNIE (Democrat, Minnesota): Over this year, we've seen it spread from the city to the suburbs and across rural Minnesota.
ARNOLD: State Representative Jim Davnie is the bill's co-author. He says a 12-month breather is needed because the industry's been steamrolling ahead with foreclosures in a way that doesn't make sense. He says modifying a loan to make it more affordable can often be best for both the homeowner and the investors who own the loan. Davnie says, though, the bill would not help speculators or investors.
State Rep. DAVNIE: This is not a bail out. What this is is an opportunity for the borrower and the lender to both work to an agreement that is in their mutual financial best interest.
ARNOLD: Borrowers would have to keep making payments. Those would be reduced to 65 percent of their payment at the time they defaulted or to the initial interest rate, whichever is lower.
Floyd Stoner is a vice president with the American Bankers Association. He says case by case loan workouts are fine, but a blanket moratorium goes too far.
Mr. FLOYD STONER: (Vice president, American Bankers Association): You are retroactively changing the terms of contracts. You call into question investor's confidence.
ARNOLD: Stoner worries that could drive up interest rates for all borrowers. Backers of the Minnesota bill disagree, and they estimate it would help more than 15,000 homeowners. Other states are considering similar measures.
Chris Arnold, NPR News.