Foreclosure Moratorium in Minnesota?

Disaster Areas in Minnesota Affected

On Tuesday May 11th, the Federal Government announced that federal disaster aid had been made available to Minnesota to assist with the state and local recovery areas from the spring storms and flooding that started back in mid-March and continues through today. While this means that Federal funding is available to state and local governments to help with protection and recovery efforts, there is also a housing-related issue that this National Disaster declaration puts into place: a 90 day moratorium on any foreclosure action on any FHA backed loans for consumers affected by the storms/flooding. (Fannie Mae and Freddie Mac and a handful of private lenders/servicers also have standing policies about halting foreclosures in Disaster Areas.)

The counties affected by the National Disaster declaration are: Big Stone, Blue Earth, Brown, Carver, Chippewa, Clay, Grant, Lac qui Parle, Le Sueur, Lyon, McLeod, Nicollet, Redwood, Renville, Scott, Sibley, Stevens, Traverse, Wilkin, and Yellow Medicine counties.

Remember, the moratorium and other tools that HUD has put in place for lenders (mortgagees) to use are only available to homeowners that have been DIRECTLY affected by the disaster.

In a clarification conversation the MN Home Ownership Center had with local HUD representatives in Minnesota, the word AFFECTED can mean:

• Either the property itself was damaged or destroyed by the storms/flooding,

or

• The homeowner’s income was affected by the flooding (their place of work or business is flooded, for example)

Affected homeowners who have an FHA-backed mortgage are instructed to call their lender to see what tools FHA has in place for helping with foreclosure avoidance following the disaster declaration.

In addition, the Homeownership Advisors Network is ready to assist ANY homeowner that is struggling with mortgage payments, especially those homeowners that have been affected by the spring storms.

Don’t delay, contact a foreclosure counselor that is a member of the Homeownership Advisors Network TODAY to see if there’s help available for YOU to avoid foreclosure. Even if you’re not yet behind, now is the time to call. To find your local foreclosure counselor, click here.

FHA Debating Higher Down-Payment Requrement

The Washington Post has a story regarding the fact that FHA is debating increasing the minimum down-payment on FHA Loans (currently as low as 3.5%) as their cash reserves have shrunk due to increases in defaults in the past few years.

One of the lines that caught my attention was from the FHA:

The Federal Housing Administration has concluded that its loan volume would have dipped by 40 percent in the next fiscal year and that 300,000 first-time home buyers would have been shut out of the housing market if it had raised its down payment requirements...

Here are a few questions:

• Would those homeowners truly have been "Shut Out" of the housing market... or would they have been "postponed out" of the housing market for now until they could save the additional amount for down payment?
• Is being "postponed" a bad thing?  Is requiring a higher down payment (10% for borrowers with a FICO score below 580) truly a barrier to homeownership?
• Should efforts be made to get people with 580 credit scores into homes now... or better preparing them (Home Buyer workshops, financial literacy, credit repair, etc.) for FUTURE homeownership?

Just some thoughts.

I love saying this... but Minnesota is UNIQUE.  Thanks to the efforts of the MN Home Ownership Center and our partners, we are the only State that has a complete matrix of available down payment and entry cost assistance programs.  The Center's Entry Cost Assistance Matrix is available here.

If you're thinking about purchasing your first home... and are wondering about down payment requirements or any of the other steps involved in becoming a SUCCESSFUL homeowner... visit the Center's website here.