Gary Heinlein / Detroit News Lansing Bureau
LANSING –The State House passed a package of bills Wednesday to give homeowners facing foreclosure a 90-day reprieve to seek loan modifications with the firms that hold their mortgages.
The three bills, passed by margins of more than two-thirds, represent a top priority for lawmakers because of Michigan’s foreclosure crisis. The state had 145,000 foreclosures last year–seventh most in the nation–and 11,000 more of them in January alone.
The bills now go to the Republican-led Senate, which approved foreclosure relief measures that filed to win legislative approval late last year.
The legislation would permit those facing foreclosure to ask for loan-modification discussions with officials of the companies that hold their mortgages. A borrower, who formally asked for a meeting with the mortgage holder, or loan servicer, would get three months to work out a new agreement.
If negotiations didn’t result in a loan modification, the legislation would require a modified mortgage payment amount based on a Federal Deposit Insurance Corp. “workout program.”
If the FDIC calculation showed the borrower was eligible for a loan modification, the lending institution would be barred from going ahead with a non-judicial foreclosure. But it could take the foreclosure to court.
“This is a huge step forward for Michigan’s families,” said Rep. Andy Coulouris, D-Saginaw, who helped craft the package of bills as head of the House Banking and Financial Services Committee. “Every time a home is foreclosed, everyone is hurt.”
The legislation is opposed by bankers and lenders, who object to mandated judicial proceedings when a lending institution and borrower can’t agree to new terms.
Rep. Darwin Booher, R-Evart, a former banker, said while he generally supports the bills, such a provision could balloon costs associated with foreclosures, and courts would be jammed if even as many as one-fourth of last year’s foreclosures ended up in judicial proceedings.
Most foreclosures currently are carried out without court proceedings.
“It’s economic stimulus to the trial lawyers,” Booher said.
The legislation would apply to foreclosures under Chapter 32–foreclosure by advertisement–in which the first notice had been published in a newspaper after the legislation had gone into effect. Once signed into law, the legislation would remain in effect for two years.
You can reach Gary Heinlein at (517) 371-3660 or gheinlein@detnews.com.
