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J. Mijin Cha on June 5, 2008 - 7:35am
Giving into corporate efforts to protect banking interests, Minnesota Governor Tim Pawlenty vetoed SF 3396, which would have put a temporary hold on foreclosures while still requiring borrowers to make payments on their loans. The bill would have required homeowners with a sub-prime or negative amortization loan to pay either 65 percent of the payment owed when the loan defaulted, or the minimum monthly payment when the mortgage was first created, whichever is less, for a one-year foreclosure deferment period. The bill passed both chambers of the Minnesota Legislature with a wide margin, only to be vetoed (part of Pawlenty's record number of vetoes for a single session). In the meantime, home foreclosures are projected to increase 39 percent this year in Minnesota, with one out of every 31 Minnesota households experiencing a foreclosure between 2005 and the end of this year.
We've highlighted the ways in which states have taken action to protect their citizens against the sub-prime crisis, including passing moratoriums. The Brookings Institution recently released a new report listing 10 action steps that states can take to stem the sub-prime crisis. Many of the steps focus on preventing foreclosures and vacant properties, re-emphasizing the importance of keeping people in their homes and allowing a fair restructuring of the mortgage.
Progress and Setbacks in the States: Earlier this year, Maryland passed a de facto moratorium of 45 days for foreclosures through HB 365. Last May, Massachusetts became the first state to pass a de-facto moratorium on foreclosures with a law requiring a 90-day notice of intent to foreclose that must be filed with the Division of Banks before a home can be foreclosed.
Other states, however, have had more of an uphill battle trying to fight the foreclosure crisis in the face of financial interests' lobbying. Connecticut SB 347 would have provided protections for newly unemployed homeowners facing foreclosure. The bill passed both House and Senate committees but didn't pass either chamber. Florida's effort to provide a Foreclosure Relief Act died in committee. Indiana couldn't even pass a non-binding resolution urging Congress to impose a moratorium on foreclosures.
Other state bills are still moving forward: New York's AB 9695 has passed the Assembly and is now before the Senate and would provide a 1-year moratorium on foreclosures for sub-prime "fundamentally unaffordable" mortgages. Michigan's SB 1305 is also active and would provide a two-year moratorium on mortgage foreclosures.
But as Pawlenty's veto shows, too many politicians are beholden to financial interests at the expense of average homeowners.