Giving into corporate efforts to protect banking interests, Minnesota Governor Tim Pawlenty vetoed SF 3396 [1], 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 [2] 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 [3] both chambers of the Minnesota Legislature with a wide margin, only to be vetoed (part of Pawlenty's record [4] number of vetoes for a single session). In the meantime, home foreclosures are projected to increase [5] 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 [6] the ways in which states have taken action to protect their citizens against the sub-prime crisis, including passing moratoriums [7]. The Brookings Institution recently released a new report [8] 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 [9]. Last May, Massachusetts became the first state [10] to pass a de-facto moratorium on foreclosures with a law requiring a 90-day notice of intent to foreclose [11] 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 [12] 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 [13] died in committee. Indiana couldn't even pass a non-binding resolution [14] urging Congress to impose a moratorium on foreclosures.
Other state bills are still moving forward: New York's AB 9695 [15] 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 [16] 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.
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