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Community Banks in Minnesota Laden with Bank Owned Homes

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By : John Cutts    99 or more times read
Community banks in Minnesota are saddled with bank owned homes and distressed commercial properties, putting them at risk of following the fate of the 13 banks that had already gone under since the start of the downturn in 2008.

In the first quarter, a total of 5,373 Minnesota foreclosed homes were in bank owned lists, making up 58.3 percent of the 9,214 total filings in the state. Foreclosure postings increased only by 0.1 percent compared to the previous quarter, but jumped up by 28.4 percent from the first quarter last year.

In March, the number of units in foreclosure home listings was 2,205, accounting for 58.6 percent of total filings during the month.

In another report, the foreclosure count in the state also increased. There were 6,716 foreclosures in the first quarter, posting a jump of 28 percent from the same quarter last year. Among the counties tracked, Anoka and Dakota posted the highest numbers, with a combined total of 1,141 distressed homes.

The latest Minnesota bank that failed due largely to the weight of bank owned homes and commercial foreclosures was Pinehurst Bank in Saint Paul. Before it was acquired by Coulee Bank of Wisconsin, it had $119.5 million in total deposits and assets.

Over the past years, loans for land development and construction were the poorest performing mortgage segments for banks in Minnesota. Delinquent loans accounted for 13 to 16 percent of total loans in these segments. Other segments had a default rate of around 6 percent.

As the number of distressed projects and foreclosed homes for sale in Minneapolis, MN was lower than in most parts of the suburbs, community banks outside the Twin Cities suffered more severe loan problems.

Based on data from the Minnesota Department of Commerce, record numbers of bank owned homes and troubled commercial properties continue to weigh down on community banks. Currently, a total of 98 troubled banks are on the watch list of the department.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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