Sub-Prime As Well As Other Factors Behind Foreclosure Crisis

Posted in Foreclosure, March 19th, 2008 |

All of Minnesota is affected by foreclosures in a very bad way but the situation outside the Twin Cities is different. The picture here is mixed. Iron Range communities in north eastern Minnesota is bursting with economic activity and this has resulted in a robust housing market. The risky loans have not played a dominant role here. It is mainly because, unlike the Twin Cities, the housing prices in the last few years had not been artificially inflated. The other causes behind foreclosure have been unemployment, rising costs, medical bills and break up of families.
The sub-prime loans however played around in the Twin Cities and its suburbs. In 2005 the distribution of these loans had peaked with 47,122 persons availing of this loan. The housing boom started off in 2000 and in that year sub-prime loan takers had been only 8,347.

The law makers are coming forward with various measures to mitigate the crisis. It includes delaying foreclosures and allowing for more accessibility of data. The state housing agency has also been sanctioned funds from the federal kitty to hire more counselors across the state to tackle the growing menace. The effort has been paying dividends, as per reports from a recent survey. The legal fraternity is acquiring a better understanding of loopholes in the law that might check foreclosures.

In 2007 there were 2007 foreclosures right across Minnesota touching 20,573. It meant a 84% increase over the previous year when the number was 11,207. In the seven county Twin Cities there were 7,039 foreclosures in 2006. In 2007 the number nearly doubled to 12,885. In other parts of Minnesota the foreclosure number was 4,168 in 2006. In 2007 it jumped 84% to 7,688.
The study analyzes that the foreclosure number in greater Minnesota is double than that what the analysts had previously predicted. Thus the foreclosure rate is now growing more speedily in some greater Minnesota counties than in the Twin Cities. The so called ‘collar counties’ have been worst hit outside the Twin Cities – including Isanti, Chisago, Sherburne and McLeod counties.

The project director of Greater Minnesota Housing Fund, Stephanie Vergin opined that most of the foreclosure blight was on those collar-counties that had seen frenetic housing activity in the recent past. People moved out in the suburbs to avail for more affordable houses. But fuel prices and other factors mired the situation leading to foreclosures.