In its pilot period, Minneapolis Advantage gave out approximately 50 grants to low-income, first-time home buyers in foreclosure-impacted neighborhoods in the North, Northeast and South Minneapolis neighborhoods. Buyers receive up to $10,000 to help with down payment and closing costs so long as they buy a home on the same block as a foreclosed or vacant home.

In its pilot period, 62 percent of the properties purchased were foreclosures and 9 percent were boarded up and vacant. The program encouraged more owner-occupied homes, as 62 percent that were rental units became homestead properties. The majority of the new home owners bought in North Minneapolis, had incomes under the median and bought homes priced under $150,000.

Seventy-eight percent where first-time home buyers.

The FHLB of Des Moines grant will triple the amount of grant awards for the program.

“The key to rebuilding neighborhoods overwhelmed by foreclosures is to get solid, responsible homeowners into these neighborhoods,” Mayor R.T. Rybak said in a statement Wednesday. “The success of the Minneapolis Advantage program has shown us that there are great homes to be had and that people are ready to move into these neighborhoods. Our job is to help make that happen and this funding just made our job a whole lot easier.”

So there is a circumstantial link between the payments and the house costs, a potential motive for Kazeminy to steer a sum like that to the Colemans, as two lawsuits allege and the FBI is now looking into. (The Republican senator has denied the charge and welcomed the investigation.) But it’s not yet a “gotcha” — as Lyden admits in a blog post. Like MnIndy, Fox 9 had been sniffing around Colemans’ remodeling project in relation to the Texas charges since before Election Day. Video, transcript and property tax record after the jump.

Another interesting tidbit: The Colemans paid a campaign donor $33,000 for design services on the project.

Here’s the Colemans’ property tax statement.

Here’s a link to the Fox 9 video report.

Here’s video released by the Minnesota DFL Party showing Fox 9 reporter Lyden trying to ask Coleman about the remodeling and Texas lawsuits after a press conference in Monticello, Minn.

And here’s a transcript of the Fox 9 report, which the Al Franken for Senate distributed by e-mail without comment this morning.

JEFF PASSOLT: Tonight, a federal investigation into an extreme home makeover. The home belongs to Senator Norm Coleman and his wife.

ROBYN ROBINSON: The timing and the cost of their home renovation raises new questions about an allegation a wealthy businessmen tried funneling money to the senator. Fox 9 investigator Tom Lyden has been digging deep into this and he joins us now with what he’s found.

TOM LYDEN: The FBI is now reportedly investigating these allegations that Edina businessman Nasser Kazeminy tried to funnel $75,000 to the U.S. Senator through the Senator’s wife, Laurie. But we couldn’t help wondering why a U.S. Senator, who makes about $180,000 a year, actually need the money? That’s what the Fox 9 investigators began looking about a month ago, and it lead us right to the Senator’s doorstep.

[BEGIN VIDEO]

LYDEN: Norm Coleman’s home in Saint Paul’s Crocus Hill neighborhood is not lavish, but it’s a lot nicer than it used to be, thanks in part to contractor Jim Taylor, who helped remodel the senator’s home two years ago.

JIM TAYLOR: Actually put a second floor master bedroom bathroom - the bedroom was there, we just added the bedroom with a closet and a kitchen remodeling, turned into half the house remodeled by the time we painted and we finished the floors and did the landscape work.

LYDEN: The remodeled kitchen was even the backdrop for some of the senator’s campaign commercials.

LAURIE COLEMAN: Hey Norm, will you take out the trash?

NORM COLEMAN: I got it, honey.

LYDEN: The Fox 9 investigators learned the woman in charge of the project was Sherry Wilsey, an interior designer and along with her husband Roger longtime friends of the Colemans’ and financial contributors to the Senator’s campaigns.

The Wilseys’ even hosted a fundraiser for Senator Coleman during the Republican National Convention at their Summit Avenue mention just a few blocks from the Colemans’.

TAYLOR: She’s a designer, and she got us in contact with Norm. Pretty much we were done by the end of the year; there were a few things that lingered on into the spring.

LYDEN: The spring of 2007. That’s when, according to two lawsuits, Edina businessman Nasser Kazeminy began a series of three $25,000 payments to Coleman from Deep Marine Technology, a company he controlled in Texas, to Hays Company, a Minnesota insurance company where Laurie Coleman works.

Senator Coleman is not a party to the lawsuits, but he’s denied any wrongdoing, claiming it’s all politics.

NORM COLEMAN: The allegations regarding me and my wife in this suit are false and defamatory.

DAVID SCHULTZ: There’s no question about the fact that it doesn’t look good.

LYDEN: But government ethics professor David Schultz says tough questions are fair game when serious financial allegations are made which involve a U.S. Senator.

SCHULTZ: It speaks to, first in terms of credibility, in terms of what Norm Coleman has to say in terms of responding to allegations. Second, it speaks to also sort of the whole sense of motive, motive in terms of why he might at this point going, trying to get money through his wife from an individual in Texas.

LYDEN: We tried to talk to Senator Coleman about the home renovation project three weeks ago when he visited the Monticello nuclear plant. You would have thought we were radioactive.

Senator Coleman never did agree to sit for an interview, but his campaign did agree to share billing records of the remodeling project. Originally projected to cost $328,000, four months later it was up to $414,000, overbudget by $86,000.

[OVERLAY: ESTIMATE, OCT. '06
$326,000

ESTIMATE, FEB. 28, '07
$414,000

OVER BUDGET
$86,000]

LYDEN: Similar to the amount, and at the same time, the lawsuit alleges Kazeminy was trying to get money to Coleman.

According to the lawsuits, in March of 2007, Kazeminy said “U.S. Senators don’t make [s--t]” and he was going to try to find a way to get money to U.S. Senator Norm Coleman.

SCHULTZ: On the one level, it could just be a coincidence. On the other level, it could be that one of the reasons why he’s getting this money from elsewhere is to try to basically make up for his - to be able to pay off a loan, to be able to pay off a line of credit.

LYDEN: Records provided by the campaign showed Coleman paid his friend Wilsey, the general contractor, in full for the renovation, $414,000. And he did it in part by refinancing his home in March 2007, for $775,000. The Senator acknowledges that, like a lot of people in America, he now owes more on his home than it’s actually worth.

That isn’t a crime. What we know is this: the senator had costly and overbudget renovations to his home at the same time a contributor was allegedly trying to funnel him money. We don’t know if the Colemans’ really needed the money, or if the Kazeminy allegations are even true.

REPORTER: Why won’t the senator answer the question?

LYDEN: But on at least two occasions now, the senator has walked away from reporters claiming their motives are political. And yet the questions aren’t going away. [END VIDEO]

LYDEN: Couple of footnotes - the interior designer and general contractor, Sherry Wilsey, was paid $33,000 for her work. That’s important because, as a friend and a Coleman contributor, if she wasn’t paid for her services that would be a gift and would have to be reported to the Senate Ethics Committee.

Also want to clarify something Jeff said, the FBI investigation concerns the Kazeminy allegations and not the home renovations - at this point.

John Dugan (Photo: Harry Connolly)

… [C]urrent market disruptions have clouded the accomplishments that CRA has generated, many of which we recognized last year during its 30th anniversary. There are even some who suggest that CRA is responsible for the binge of irresponsible subprime lending that ignited the credit crisis we now face. Let me squarely respond to this suggestion: I categorically disagree. While not perfect, CRA has made a positive contribution to community revitalization across the country and has generally encouraged sound community development lending, investment, and service initiatives by regulated banking organizations. CRA is not the culprit behind the subprime mortgage lending abuses, or the broader credit quality issues in the marketplace. Indeed, the lenders most prominently associated with subprime mortgage lending abuses and high rates of foreclosure are lenders not subject to CRA.

Dugan, a 2005 Bush appointee, also served the Department of Treasury under the first President Bush, and was Republican general counsel to the U.S. Senate Committee on Banking, Housing, and Urban Affairs. His remarks (full transcript) came during the Economic Community Partners annual meeting in Baltimore.

Home values fell 9.7 percent year-over-year in the third quarter to a Zillow Home Value Index of $202,966, according to the third quarter Zillow Real Estate Market Reports, which encompass 163 metropolitan areas.

Home values have dropped a total 12.8 percent since the market peaked in 2006.

Year-over-year declines in the second quarter were 8.8 percent, indicating that price drops continued to accelerate in the third quarter, the reports showed….

Over the past 12 months, 30.2 percent of homes sold were sold for a loss, up from 23.7 percent at the end of the second quarter.

It’s become a broken record of late: Home-price declines breaking records. With the economy on the skids and the subprime crisis still unfolding, home values are getting devoured first. This morning the S&P/Case-Shiller home-price index was released, revealing that the trend doesn’t show any signs of slowing down. The 20-city index showed year-to-year August price declines of 16.6 percent. Minneapolis saw a drop of 13.3 percent over the year period, with a 1 percent decline from July to August.

Recent reports indicate that home sales are up, a possible sign of a turnaround, some analysts say. But trusting in that marker is like Greenspan relying on capitalism or ghosts relying on astrology–it’s meaningless and totally futile. Home sales are up as a result of the sharp increase in foreclosures and short sales, a bad sign for homeowners and an already shaky economy. In fact, according to the most recent report from the Minneapolis Area Association of Realtors, the inventory of foreclosures and short sales–property sold for below its current loan value– has increased more than 64 percent of the past year. Of the current homes for sale in the Twin Cities, nearly 30 percent are foreclosures or short sales.

The hardest hit neighborhood in Minneapolis is on the Northside, where lender-mediated sales (short sales and foreclosures) account for 69 percent of the inventory of homes for sale in October. Powderhorn is a close second with nearly 52 percent. And the suburbs aren’t immune to the growing problem. Foreclosures and short sales make up more than 63 percent of all the October homes sales in Brooklyn Center.

In St. Paul, the Central neighborhood’s current home sales are more than 63 percent lender-mediated, while Phalen’s foreclosures and short sales have risen to 60 percent this month.

As foreclosures spike in Minnesota, Joe the Plumber-types are going into vacant homes to ensure pipes don’t freeze and burst and cause tens of thousands of dollars in damage to a home that’s already a victim of major price plummets. 1st Class Plumbing says it received more than 100 calls last year to winterize foreclosed homes, and the small company expects many more this year.

As KAAL notes, Minnesota has a six-month redemption period, which means a homeowner who is foreclosed on has six months to buy back the property. And while that also means homes can sit vacant before a bank sells the home, the redemption period isn’t the primary culprit causing the increased number of empty homes and neighborhoods. With subrime loans still working themselves out of the system, Alt-A loans beginning to reset, and the loss of equity affecting prime borrowers, foreclosures are expected to rise 39 percent in Minnesota this year, according to a report by Housing Link.

And given the poor craftsmanship inherent in a number of slap-it-up McMansions that are now dusty and unoccupied, Joe the Plumbers should expect to get more jobs winterizing empty homes vulnerable to Minnesota’s tough winters. Poor average-Joe-Six-Pack-Plumber and his burgeoning career.

The good news? The Twin Cities actually fell in the nationwide rankings for foreclosure filings during the third quarter. Out of 100 metro-area foreclosures, Minneapolis-St. Paul ranks 61st. During that period the Twin Cities saw nearly 5,000 foreclosure filings, or about 0.38 percent of total households went into foreclosure.

However September numbers spotlight a growing problem in Minnesota. Nationwide, foreclosure numbers increased by 21 percent compared to September of 2007, while Minnesota’s rise doubled that. As we reported earlier, Housing Link projects that foreclosures will continue to rise into 2010 in Minnesota.

“I have a very grave concern about that,” Preston said, according to the Seattle Post-Intelligencer.

Preston said that the plan would put the onus on the taxpayers when it was the financial institutions that took the risk. Preston told the group that the housing crisis is the fault of predatory lenders, irresponsible buyers, and careless Wall Street investors.

Some consumer groups and Senate Democrats favor what are called “cram-downs,” where a judge has the power to reduce the loan value on the primary residence for homeowners filing for bankruptcy. Yet McCain isn’t talking about cram-downs with his buying up of failing mortgages; he’s talking about the taxpayers paying the banks for the full value of the loans, and Preston says such rules would hurt taxpayers, financial markets, and the nation’s court system.

Preston was confirmed as HUD secretary in July by unanimous vote, after serving for two years as administrator of the Small Business Association. He replaced Bush-appointee Alphonso Jackson who resigned amid controversy that included allegations of awarding questionable contracts.

Other critics of McCain’s housing plan agree with Preston’s assessment of McCain’s weak safety net. Instead of having the mortgage lenders– those responsible for creating the specious loans in the first place–renegotiate loan terms, McCain’s plan would have the government, or the taxpayers, buy up the troubled loans at face value and put more money directly into the pockets of those who caused the crisis. Brad DeLong, a blogger and professor of economics at the University of California, Berkeley, also shares Preston’s concern. He notes:

The McCain plan is:

• Take $300 billion.
• Pay double current market value to banks that have troubled mortgages on their books, thus:
  • Give a present of $100 billion to the bankers who made the loans.
  • Acquire and regularize the mortgages of only two-thirds as many homeowners as could have been accomplished if the $300 billion were invested wisely.

There’s a big difference here: Democrats want to prevent depression and support the financial markets by investing taxpayer money in banks with troubled assets. Republicans want to give taxpayers money away to the shareholders and managers of banks with troubled assets.

I would say that this is unbelievable, but I do believe it.

Yet a story in Monday’s Washington Post reveals that the recent economic downturn, particularly in the suburbs  and exurbs, could spell trouble for Republican incumbents like Kline.

For one thing, the story notes, the housing collapse has been most acute in the suburban fringe. That much is true here in Minnesota, where the outer-ring suburbs, particularly in the districts of Michele Bachmann and Kline, have a higher rate of foreclosures than Hennepin County, which has been decimated by the housing collapse. In Minneapolis, for example, more than 1,000 homes are on the city’s vacant-properties list. Yet because of subprime and Alt-A loans, higher gas prices and a community literally living on the edge of debt, the outer-ring suburbs are surpassing the Twin Cities in foreclosures per housing units.

Nationally, the foreclosure rate hovers at about 1 percent, that is, one in every 100 mortgages results in foreclosures. In Kline’s district, which includes Carver, Scott, Le Sueur, Dakota, Rice and Goodhue counties, all but Goodhue and Carver are experiencing above-average foreclosures. In fact, for Scott and Le Sueur, foreclosure rates are expected to spike to more than 2 percent this year, according to a report by Minnesota’s Housing Link. And Dakota County will see foreclosure rates rise to more than 1.5 percent.

To put it into perspective, Le Sueur and Carver each saw foreclosures spike by more than 140 percent last year. Hennepin County, which suffered from more than 5,000 foreclosures last year, saw its foreclosures rise by 83 percent. In other words, while 2nd District voters might be wealthier, they aren’t immune to the crash and are in fact living close to the edge with expensive Alt-A mortgages (no-doc loans) they can’t afford.

The outer-ring suburbs are also hardest hit by the spike in gas prices. A majority of the voters in the 2nd District are commuters, some of whom travel 50 miles and more into the city. The increase at the pump affects their pocketbooks more than than any other voter in Minnesota. As the Washington Post notes, despite their predominantly conservative bent, voters in these afflicted regions might be so fed up with years of a declining economy and stagnant wages they vote out the incumbent.

As an added obstacle for Kline, the three-term Republican hasn’t been a defender of the strapped homeowner, despite the abundance of foreclosures in his district. In July, along with Bachmann, Kline voted against the American Housing Rescue and Foreclosure Prevention Act, which was created to, among other things, help 400,000 homeowners in crisis and enhance mortgage disclosure requirements. He also voted against the Neighborhood Stabalization Act, which would supply funds to states like Minnesota to purchase and rehab foreclosed and abandoned homes adding to blight, crime and plummeting home values across the country.

MiddleClass.org, a nonpartisan organization tracking and rating congressional votes and their support for the middle class, has given Kline an “F” since his first term in office in 2003. He currently has a 41 percent, according to the web site, or a low “F” in his support of the middle class.

Following Michele Bachmann’s already notorious “anti-Americans” turn on Hardball last Friday –  and the news that her main 6th District opponent, Elwyn Tinklenberg, raised more than $600,000 over the weekend — the conventional wisdom about Bachmann’s re-election prospects has turned on a dime. Or, as this morning’s Strib puts it: “Suddenly, Bachmann race looks different.”

But even before that debacle, Bachmann faced a challenge back home that’s been little-noted but may pose difficulties for the first-term incumbent: the impact of the mortgage crisis in her suburban and rural district.

As the foreclosure crisis spreads and Alt-A loans start to reset, an issue that was once confined mostly to the city is starting to unravel. Foreclosures are turning toney and leafy neighborhoods into ghost towns. Entire neighborhoods are free of kids and cars, and half-built homes look like bombed-out mausoleums on sprawling lots.

The no-doc pick-a-payment loans that were popular for suburban McMansions won’t actually hit their reset peak until 2010. Yet not only are many of these suburban homes going into foreclosure prematurely; the increasing foreclosures are the first wave of more problems to come for the outer rings.

Today, for example, Michele Bachmann’s district is turning a deep shade of red. The color saturation isn’t associated with the exurbs’ GOP leanings. Instead, Bachmann’s district, which includes Stearns, Benton, Sherburne, Wright, Anoka, and Washington counties, is being hit hard with foreclosures, so heavily that the most recent foreclosure data map provided by the New York Federal Reserve has all of the counties, with the exception of Stearns, bleeding a shade of red that’s as deep or deeper than the one that colors Hennepin County.

Housing Link: Foreclosures by county in Minnesota (from PDF linked in story)

That’s because, according to the most recent study released by Housing Link in Minnesota, Bachmann’s district has a higher foreclosure rate than the rest of Minnesota and the rest of the country. While in 2007 the national average hovered at around one percent, or one out of every 100 mortgages went into foreclosure, Sherburne and Wright were actually at 1.5 to 2 percent that year, and the rest of her district was between 1.01 and 1.5 percent.  What’s more, Housing Link’s numbers represent only the total foreclosure sheriff sales and don’t include the high number of foreclosure filings and notices of default that are pervasive throughout the suburbs right now, numbers often cited by many housing analysts as actual foreclosures.

To put it into perspective, compare this to Hennepin County, which is suffering from the highest number of foreclosures in the state and serious blight as a result of it. The foreclosure rate in 2007 was between 1.01 and 1.5 percent, and is expected to increase to 1.51 to 2 percent this year. But that’s a lower rate of foreclosure than the outer ring is presently seeing.

“The problem in that area is really two-fold,” says Mark Ireland, attorney for the Housing Preservation Project and the Foreclosure Relief Law project in Minnesota.  “One big bubble of subprime is crashing right now. There were subprimes in the suburbs too, mostly originated in 2004 and 2005. And there were a bunch of Alt-As originated in 2005 and 2006 that are just starting to reset. But the problem is accelerated by the energy crisis. People who are commuting 60 to 70 miles to work each day cannot afford the gas, or the payments on their home.”

In Bachmann’s district, foreclosures in Sherburne rose by 97 percent last year. Hennepin County, which suffered from more than 5,000 foreclosures last year, saw its foreclosures rise by 83 percent.

“It’s a huge issue out there,” Ireland says.  “And I don’t think anyone was willing to believe it, partly because these folks made poor financial decisions, getting into homes that were $300,000 and more. They’re not going to have the blight that city’s have out there, because it’s a little more spread out. A house every acre. But you are going to have issues of houses that were just slopped up with pretty low quality materials,” he says.

And he adds that ignoring the problem will only increase the spread. “The problem with ignoring it is twofold. You are not only punishing them for making a bad decision, you are punishing an entire community. People are under water. Home values are declining 10 to 20 percent. It will become a problem that affects everyone.”

Ireland adds that neighbors, and in particular policy makers, have been less sympathetic to the plight of those living in giant brand-new homes they can’t afford. For the most part, they weren’t victims of predatory lending or mortgage fraud that’s so prevalent in the cities.

“It gets into some sort of weird college ethics question about is it the drunk or the bartender to blame?” Ireland says. “I guess where I come down, and I am biased, the person who is the most culpable is the person who is in the best position to say ‘no.’ And to me, that is the banks. They knew the risks of originating these loans. They knew what the default rate was going to be. And they were in a position to stop it.”

And so far, Bachmann’s allegiances have been clear. She’s voted against any help for homeowners and continually sides with banks and the financial services industry as member of the House Financial Services Committee. Her number one campaign contributor is TCF Bank, which is also one of the top-ten mortgage lenders in the state.

If there is any good news for Bachmann in all this, it’s that voters in her district aren’t likely to inject any Obama coattails effect into the race even if Obama does win by double digits in the state at large, as some recent polls have suggested he might.

The 6th District has long been deemed the most conservative in the state, observes political analyst David Schultz. “The main races in which you could see Obama’s coattails playing out are the US Senate and the 3rd Congressional District,” he says. “I don’t see it playing much of a role in Bachmann’s district, though I suppose voters in the Stillwater area and at St. Cloud State could have some impact in that regard.”

Still, says Schultz, “In light of Bachmann’s meltdown in recent days, it’s possible to see her as vulnerable now, which would have been hard to imagine not very long ago.”

Steve Perry contributed reporting to this story.