Minnesota legislature passes Subprime Borrower Relief Act

The Subprime Borrower Relief Act gives borrowers with subprime loans the right to defer a foreclosure sale of their residence for one year after the bill becomes law.

During the deferment period, the borrower will have to make reduced monthly payments, and a borrower who does not pay will lose the right to deferment. If that happens, the lender could go ahead and foreclose. Lenders may not charge borrowers for exercising the deferment right (no late or underpayment fees, in other words).

If enacted, the law would give borrowers valuable time to sell their home or refinance their loan. This is not a bailout, just a little encouragement for homeowners and lenders to get out of the loan gracefully. Both borrowers and lenders would benefit from this bill, although lawmakers fear a veto from Governor Pawlenty.

Foreclosure Deferment Bill Passes Minnesota House and Senate [Consumer Rights Watch]