Local foreclosures increase

Brown County foreclosure rates are consistent with population of its cities, recorder says

By KURT NESBITT Journal Staff Writer
NEW ULM — Locally, foreclosures have increased in the past year but not to the extent that they took place in other communities in greater Minnesota during the same time frame.

With the first fiscal quarter of 2008 finished, foreclosures are already outpacing 2007, which many say was one of the worst years for foreclosures on record.

Brown County Recorder Betty Kamolz said 33 foreclosures happened in 2007. To date, 16 have taken place - more than twice as many as this time last year.

Foreclosures affect the property values in the surrounding area, especially if the properties are not resold, Kamolz said.

Mortgages with adjustable interest rates are responsible for the trend, Kamolz said. People buying homes would take an attractive offer and when a balloon payment would come, the rate would increase and go up and up and up, making house payments difficult and ultimately putting a property into foreclosure.

Half of the homes that have been foreclosed on this year are in New Ulm. Hanska has had two this year. Sleepy Eye, Springfield and rural Brown County have seen one foreclosure each this year.

Kamolz thinks that the rates are “consistent with the population” of the respective cities.

Warren Hanson, president of the non-profit Greater Minnesota Housing Fund, said the problem in greater Minnesota has deepened.

“It’s worse (than 2007),” Hanson said.

He said 20,000 foreclosures happened across the state in 2007. GMHF projects 28,000 foreclosures will happen this year, based on first-quarter statistics, in which 6,000 foreclosures took place between January and April.

That project does not take into account the likelihood that the economy will deteriorate, he said.

“One thing that’s very startling is that one in 31 households will have fallen into foreclosure by the end of the year,” Hanson said.

“I think what that means is every single one of us knows someone who’s had a foreclosure,” he said.

Foreclosures in Redwood and Cottonwood counties actually decreased last year. Nicollet County stayed about the same — at 49 foreclosures — in 2007. Brown, Sibley and Watonwan counties saw increases. Foreclosures in this area haven’t shot up quite as high as other housing markets across the country.

“Locally, we don’t see nearly as many as other markets see,” said New Ulm realtor Jeff Dittrich.

Foreclosures always happen, but the current trend is something Dittrich has never seen before.

Local foreclosures are happening because there are a few people “caught” in the sub-prime mortgage crisis. Dittrich said he’s not sure if the trend is over yet, because he sees foreclosure notices appearing in local newspapers constantly.

Dittrich said he doesn’t think any one community in the 20-mile area he covers stands out above the others. He also sees a silver lining to the cloud.

“Sometimes you can get a good deal. Some of them are left in rough shape and you can fix them up and have a nice property again,” he said.

According to the GMHF, Minnesota was ranked 25th in the U.S. for foreclosure filings last year. The state’s foreclosure rate was half the national average in 2007.

Last year, Sibley County had the highest number of foreclosures of the five counties in the surrounding area, followed by Nicollet County, Renville County and then Brown County. Renville County had the fewest.