The city of Minneapolis in Minnesota has been offering financial assistance to people who want to buy bank foreclosed homes for sale in neighborhoods severely affected by the foreclosure crisis.

Minneapolis Mayor R.T. Rybak said that so far, about 100 people had become homeowners under the city’s forgivable loan initiative which aims to have people live in foreclosed houses.

Under the Minneapolis Advantage Program, a $10,000 loan is provided for people who want to buy a foreclosure home in neighborhoods severely affected by the foreclosure problem. The funds are used for paying the initial and closing costs.

Borrowers have the option not to repay the loans if they live in the properties they had purchased for not less than five years.

City leaders are hoping that the program would help homeowners reclaim and revive communities across Minneapolis that have been suffering from high repossession rates.

Foreclosure houses could greatly affect neighborhoods as they pull down prices and values of properties in surrounding areas. City officials believed that new buyers could help a lot in fixing neighborhoods devastated by foreclosures by renovating abandoned and vacant houses.

Rybak said that the program allowed the city to invest in bringing back the economic vitality and sustainability of neighborhoods destroyed by the increasing number of foreclosed houses. He added that the program is a positive measure to getting abandoned and vacant foreclosure homes return to productive use.

Minneapolis launched the program last year with about 50 loans. Because of the success of the program, Rybak and the city council have decided to fund another set of loans this year.

The city money for the program is also supported by a $1.5 million grant from the Federal Home Loan Bank of Des Moines Affordable Housing Program. This allows enough funds to provide 200 loans.

Interested buyers could still avail of the $10,000 funds by applying for the loan through their mortgage lenders.

Minneapolis foreclosure has been rising since the start of this year. In the first quarter, foreclosure filings were made on 6,800 properties, an increase of 10 percent compared with the last quarter of 2008 and 71 percent from the first quarter the previous year.

Just like other cities across the country, the growing unemployment rate is taking up all the blame for the rising foreclosures in the city.