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Wednesday, July 21, 2010

Housing costs bleeding many Minnesotans

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Anonymous Tribune said...

For people in many everyday jobs, owning - or even renting - housing is out of reach.

By JIM BUCHTA and MOLLY YOUNG, Star Tribune staff writers

Last update: July 20, 2010 - 10:34 PM

Despite steady declines in housing prices and mortgage interest rates, many Minnesotans -- even those with jobs -- still face formidable challenges when it comes to paying for a home.

On Tuesday the Minnesota Housing Partnership (MHP) released a report that says low wages and too few jobs have left nearly a third of all homeowners and nearly half of all renters in the state paying more than 30 percent of their gross income on housing.

Separately, the Treasury Department said only 30 percent of troubled homeowners nationwide who were able to modify the terms of their mortgage have stuck with the program. More troubling, 40 percent of those seeking help didn't complete the program. Together, the reports paint a grim picture of the challenges that face working Americans as they struggle to find and pay for housing, even as economists claim the economy is recovering.

Business has picked up recently for Ruth MacAllister, a house painter from Linwood Township, but it may be too late to save her home. The single mother of two teenagers signed up for the federal loan modification program in September but was stunned to learn a few months later her bank had no record she had ever been part of it.

Now her three-bedroom, two-bathroom house will be foreclosed this fall. "I'm just trying to stay in the home that my kids have lived in for 17 years," MacAllister said.

As late as 2008, one in eight Minnesota households spent at least half its income on housing, according to the MHP, up from 1 in 15 in 2000, the fastest increase of any state in the nation during that time.

Chip Halbach, MHP's executive director, said in the early part of the decade home prices and rents in Minnesota were relatively low but climbed dramatically as buyers stretched to buy as much house as possible. Incomes, however, didn't keep pace.

At Aeon, a Twin Cities-based affordable housing developer, the problem is getting worse as job losses mount and homeowners who have been through foreclosure become renters.

"This is the world that I work in everyday," said Gina Ciganik, vice president for housing development, who says almost all the residents who live in the organization's housing have jobs and defy stereotypes about who needs affordable housing. "It's really our bus driver, teachers, police officers, janitors and people who collect tickets at baseball games," she said.

To illustrate the point, MHP examined wages for five occupations, including teacher, registered nurse and retail salesperson, and found that for full-time workers, owning a median-priced home is affordable to all these occupations in only nine Minnesota counties, most of them in rural areas in the western part of the state. In none of the counties is renting a typical two-bedroom apartment affordable to all five occupations.

10:38 AM  
Anonymous story continued said...

In the most extreme cases, MHP researcher Leigh Rosenberg said, lack of affordable housing has left thousands of Minnesotans without housing. The report shows more than 13,000 people are homeless in the state, a number that's increased more than 25 percent since 2006.

Kris Jacobs, director of the St. Paul-based Jobs Now Coalition that works toward better wages, said a large percentage of all jobs available pay wages that can't support a family, making it difficult for some families to meet basic needs like housing.
Such shortfalls are why developers of nonprofit housing will meet this week in the Twin Cities with architects, planners and designers from around the country as part of the Affordable Housing Design Leadership Institute, sponsored by Enterprise Community Partners.
Aeon, for example, will discuss its plans to add another 120 units of affordable housing to the hundreds it has already built in its Franklin-Portland Gateway project in south Minneapolis. The focus of the event, which will be in a different city next year and is funded in part by the McKnight Foundation, will be on creating rental housing that's sustainable, affordable and accessible to jobs and transit.

Aeon, in partnership with other Twin Cities non-profits, has already built new housing on three corners at the once-troubled intersection for low-income renters like Diane Lewis-Williams, who moved there three years ago with her husband, Vincent Williams, who works full time for another local nonprofit.

She knows the struggles of being a one-income family during tough economic times. She got laid off from her job as a receptionist more than a year ago and sometimes they can't come up with the $680 rent on their one-bedroom apartment, so Aeon has helped create a special payment plan.
"They've made it manageable for us," she said. "They make arrangements. That's what keeps us in."

With the foreclosure crisis humming along at full speed -- 90,000 in Minnesota in the last five years, with one-third of them in 2009 -- demand for affordable housing has never been more acute, particularly rental housing.
"We see people coming to rent because they've lost their home," Ciganik said. "So there's a new resident population that needs affordable places to stay and can't get back into homeownership, so renting is their next option."
According to federal data released Tuesday, 60.2 percent of the permanent modifications in the Making Home Affordable Program happened because of loss of income, such as reductions in hours or wages or lost jobs.

The federal mortgage modification program has met with mixed success. Of the 1.3 million people who have enrolled in the program, by last month about 530,000 had dropped out, while 390,000 homeowners -- 30 percent of those enrolled -- are making payments on time. Some say that pressure on lenders to sign up borrowers without proof of income has led to the high drop-out numbers.
Some, like house painter

MacAllister, wonder whether the program is working at all. She took part in the program during a trial period in the fall, when officials at her bank, Wells Fargo, assured her she was part of the federal program, she said. Now they claim they have no record of that.

"They're schlepping hope," MacAllister said. "I'm tired of hope. I want results."

jbuchta@startribune.com • 612-673-7376 molly.young@startribune.com • 612-673-4376

10:39 AM  
Blogger Bob said...

Hi All,

Families are finding it cheaper to rent a hotel room monthly versus a 3 bedroom apartment.

10:41 AM  
Anonymous Anonymous said...

If you want a mortgage modification, here are a few tips you should follow:

1. Do not try to qualify on what is known as "verbals". This means, do not give verbal information to your lender over the phone in order to qualify for the HAMP program or another loan modification alternative.

The reason many people fail to qualify after the HAMP trial is that they gave income and expense information over the phone. The truth is, what you "think" you make and what the underwriter is going to calculate are most often two completely different things. So, based upon the verbal info you provide over the phone, you might very well qualify for a HAMP trial. So, you make three payments and then are asked to provide all required documents to see if you qualify for a permanent modification. Because most people do not understand how to properly calculate their income and expenses, many are told they do not qualify once their documents are received and reviewed. The result is that, more often than not, many homeowners find that they do not qualify once the underwriter has reviewed their documents.


2. Send in 2 most recent paystubs for each employed person who is on the mortgage. If you are retired, send your most recent Social Security benefit letter and or IRA/Pension distribution letters along with your 2009 1040.

3. Do not include health or life insurance premiums on your financial worksheet if those premiums are deducted from your payroll check. IF you do, those expenses will be counted against you twice.

4. Do NOT over inflate your monthly expenses. If you do, it might be determined that you cannot afford your home and you might not qualify for a modification. Many people make this mistake, thinking that it will increase their chances of getting a modification. Wrong...you have to be able to afford the new payment. On teh contrary, do not understate your monthly expenses. If you do, your lender will determine that you can afford your payment at the current rate and term and, in many cases...your payment might actually go up under the modifcation program.

10:37 PM  
Anonymous Anonymous said...

5. IF YOU ARE COLLECTING UNEMPLOYMENT you better be seriously looking for a job!! Unemployment income is NOT guaranteed to continue, so it cannot be and is not used as income! If you are unemployed and/or collecting unemployment, and IF you expect your financial situation to improve within the next 90 days, see if your lender offers "moratoriums" (I do not believe that Fannie Mae offers this program, though). Basically, this is a program in which your current hardship is considered and if you can explain to your lender how come you believe that your situation will improve (such as, I have several interviews lined up, I will be starting a new job in, say, September, etc.), your lender will forebear your payments for up to 90 days and will not report you as delinquent to the credit bureaus during this period. Once you have started your job and can produce paystubs reflecting at least 30 days year to date earnings, your new income will be used to see if you qualify for a long term loan modification.

6. If you apply for a loan modification, and your lender requests additional documents from you, send them in, immediately! Many lenders will remove you from the loan mod system if you fail to provide requested documents within 5 days of the request, so they can move on to other people who are in need of a modifcation. Your delay clogs the system. So, if you clog the system by failing to provide what is asked, they remove you, rightfully so.

And, last but far from the least: DO NOT PAY ANYONE WHO MAKES PROMISES TO WORK WITH YOUR LENDER ON YOUR BEHALF AND GET YOUR LOAN MODIFIED (upfront or after a loan modification)!!! These so-called loan modification organizations charge you thousands of dollars to, simply, talk to your lender on your behalf, only to get the exact same instructions that your lender would give to you. These companies are serving ONLY as a messenger between you and your lender. Contrary to what they might tell you, the guidelines are not changed any more for them than they are for you. There are no negotiations involved with a loan modification. Either you qualify, or you don't! In Minnesota, there are no closing costs, and with the exception of clearing up some title issues in some cases, there should not be title costs associated with a loan modification. All of your delinquent interest, lawyer fees, and recoverable costs are included in your modified loan balance and new monthly payment. These companies are charging you money to do for you what you can do yourself.

One more thing: Do not ask nor expect your lender to reduce your principle balance because you now owe more than your home is worth. It won't happen, because that is not what a loan modification is. A loan modification will ONLY extend your term and/or reduce your interest rate. It will NOT reduce your principle balance, period!

10:38 PM  

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