Foreclosure Reform Amid Mortgage Lending Turmoil: A Public Purpose Approach

Irene Thomas was twenty-one years old when she met a man outside of a nightclub who convinced her that she could make money in real estate. 1 A mortgage broker and others used her credit rating to obtain ten residential properties within a ninety-day period with no money down. 2 Ms. Thomas incurred $ 2.4 million in mortgage debt for these home purchases. 3 Just over a year later, all the properties were in foreclosure after Ms. Thomas failed to make the mortgage payments. 4 The neighborhood on the north side of Minneapolis where these ten properties are located has been wracked by an approximately five-fold increase in foreclosures that has led to abandoned homes and neighborhood deterioration. 5 In north Minneapolis alone there have been 1,400 houses sold through foreclosure auctions. 6 Much of the problem in north Minneapolis involves foreclosure of rental investment property, 7 which resulted in deteriorated housing quality in the neighborhood. Ms. Thomas now has ruined credit because she was duped by those who sold her homes at inflated prices.