Minnesota Rural Homes Getting Added to Foreclosure Listings

by Simon Lindsay on States

Rural homes, usually immune to the problems of urban and suburban homes, are now following their city counterparts to foreclosure listings.

Based on data from the Greater Minnesota Housing Fund, the number of properties added to foreclosure listings in rural areas outside the Twin Cities region has soared by 232 percent since 2005. Economists say that foreclosures could wipe out entire rural communities hit by foreclosure listings because homeowners in smaller rural neighborhoods not only leave their homes, they also leave their communities.

In the Minnesota town of McGregor, the Sundbergs first refinanced their house bought at $24,000 when they had only $2,000 more to pay on their mortgage. They again later refinanced to pay hospital bills and then years later to pay auto loans. The Sundbergs now regret making too many loans. Their house has been added to foreclosure listings as their loan soared to $98,000 which they could no longer afford to pay.

The Perrines bought their house for only $30,000 in 1994, but they were able to refinance many times because home values in their lakefront area increased. When the economy declined, they could no longer afford to pay their loan which soared to $255,000 in 2007. They left McGregor as their house was added to foreclosure listings and moved to Iowa.

According to executives at the Federal Reserve Bank of Minneapolis, high-cost mortgage loans, which are mostly subprime loans, comprised almost 40 percent of all home refinance loans from 2004 to 2007 in McGregor and in other parts of Aitkin County. Total Minnesota foreclosures, meanwhile, increased by 8 percent in the first quarter from total foreclosures in the fourth quarter of 2008.

Dan Williams, a counselor working for Lutheran Services in Duluth, said there is danger that a town like McGregor would become a deserted town as delinquent homeowners abandon properties added to foreclosure listings.

Nevertheless, larger farms in rural Minnesota appear to be riding out the foreclosure storm, as record high farm prices gave them some financial cushion. One significant factor also has been the smart decision of many farm mortgage lenders to maintain their strict lending practices despite the availability of easy loans offered by residential lenders.

In the town of Faribault, Jennifer Wicks and her husband took out two adjustable rate mortgage loans to finance their $184,000 home on a farm in 2006. When her husband lost his job, their house was added to foreclosure listings because they could no longer afford to pay the monthly payment which had soared from $1,200 to $2,000.