Pawlenty Vetoes Foreclosure Bill

Posted in Foreclosures, June 3rd, 2008 |

On Thursday 29th May Minnesota Governor Tim Pawlenty gave his veto to a bill that would have frozen for the time being thousands of foreclosures to the relief of the people struggling with it.

The freeze was the pivotal issue to a controversy included in a package of bills that has recently been sent to the governor in an attempt to mitigate the foreclosure crisis. Eleven of these bills were allowed to become law without difficulty.

Included in the bills are clauses to give protection to renters who become unwary victims of foreclosures, management of vacant abandoned properties, increasing financial help to the house owners at risk and spreading an awareness campaign about foreclosure prevention.

Pawlenty argued that if foreclosures were kept on freeze, lenders would use this as an excuse to hike credit charges for other residents of the city seeking loans. Also the bill would raise questions of legality as the constitution of the country forbids the states from framing laws that would cancel contracts that existed.

Reacting quickly to the veto of Pawlenty, The American Securitization Forum, comprising of prominent Wall Street investment houses, applauded the veto. They felt that if such a law had been allowed to be pushed through it would have harmed the relationship of confidence existing between lenders and investors. The very stability of contracts would have come under a cloud. The net result would have been the squeezing of credit.

However not many bought this argument. Senator Ellen Anderson who had co-sponsored the bill, charged Pawlenty for miming the sophisticated arguments of big financial houses. They did not see the reality of the families trying to keep their homes warm from the cold fingers for foreclosures. The veto amounted to letting down thousands of Minnesotans. Anderson protested that that the temporary freeze tantamounted basically to a breach of contract. In 1980 the Minnesota Farmer-Lender Mediation Act had put on hold farm foreclosures until completion of the mediation process. The latter bill was much stronger in tone than the one recently vetoed. At that time nobody had dropped a word against it and neither has it been once branded since then for harming lending activities in Minnesota.

If the bill had received the governor’s signature it would have put on hold foreclosures of sub-crime mortgages of a particular category (that was doing the most harm) for a year for those borrowers who were residential occupants of the houses and were not investors.