State uses $97.2 million from settlement with bank mortgage services to create fund
By Steve Thorpe
Legal News
Two bills signed into law Wednesday by Gov. Rick Snyder are intended to provide financial relief for Michigan residents who have lost their homes to foreclosure and also to pursue individuals and companies who have preyed on homeowners in trouble. In addition, the bills provide assistance to communities affected by the aftermath, like urban blight, caused by the foreclosure tidal wave.
The fund will be used to help avoid preventable foreclosures, alleviate the effects of the foreclosure crisis, support law enforcement activities to prevent or prosecute financial fraud or deceptive practices, and to compensate the state for costs resulting from unlawful conduct of the defendants in the lawsuit.
“I am very pleased that Michigan citizens affected by the foreclosure crisis will finally begin to see some relief,” State Attorney General Bill Schuette said in a prepared statement. “Part of my job is to fight for and help people scammed and victimized by this crisis. This fund is part of a team effort to assist citizens throughout Michigan.”
Schuette and 48 other state attorney generals entered into a settlement earlier this year with five leading bank mortgage servicers to address allegations of faulty foreclosure processes and poor servicing of mortgages.
The banks faced allegations of mishandling millions of foreclosures and loan modifications nationwide. It was the largest consumer financial protection settlement in U.S. history, according to the Justice Department, and involved Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial.
Schuette recommended that the legislature use the $97.2 million paid directly to the state to create the Homeowner Protection Fund, to provide families affected by the foreclosure crisis with the most benefit.
The new “Homeowner Protection Fund” was created by House Bill 5015 and Senate Bill 1160.
The fund provides for eight initiatives:
• Foreclosure Rescue Scam Victim Restitution - Will provide restitution payments of up to $3,000 per person for victims of foreclosure scams. Eligibility will be determined at a later date.
• Assistance for Veterans - Creates targeted relief for military service members unable to qualify for existing programs.
• Michigan Attorney General Home Protection Unit - Allows the attorney general to increase investigation and prosecution of foreclosure-related crimes. The funds will allow for additional investigators and prosecutors for the effort.
• Blight Elimination - Detroit will receive $10 million for blight elimination and $15 million will be allocated for use in the rest of the state.
• Foreclosure Counseling for Homeowners - The Michigan State Housing and Development Authority (MSHDA) and Michigan State University Extension Offices will expand their free homeowner counseling services for citizens seeking to avoid foreclosure.
• Housing and Community Development Programs - Supports the Michigan Housing and Community Development Fund, which develops and coordinates public and private resources to meet the affordable housing needs of low- income households and to revitalize downtown areas and neighborhoods.
• Grants to Help Homeowners Refinance - Funds will help MSHDA provide grants to assist with the closing costs of citizens who use the Home Affordable Refinance Program.
• Assistance to Homebuyers - Grants will be provided to offset the purchase price of a home. Service members may be eligible for grants up to $5,000 and non-service members up to $3,000. Eligibility will be determined at a later date.
According to the Michigan Foreclosure Task Force, Michigan ranks among the top five states in the country for mortgage fraud and foreclosure scams. Examples of scams include:
• A professional-seeming “Foreclosure Prevention Specialist” who takes a homeowner’s money and does little or nothing to save the home.
• Lease/buyback scammers who trick homeowners into signing over their deed on the premise that they can continue to live in the home.
• Bait and switch scam in which the homeowner, who often owns the home outright, is tricked into signing over their deed thinking that they’re refinancing to provide new income.
Schuette also warned homeowners to avoid new scams associated with the foreclosure settlement. The law guarantees citizens the right to speak with their mortgage lender or servicer free of charge and citizens are never required to pay for outside assistance with foreclosure issues. Free local assistance with foreclosure is available from the Michigan State Housing Development Authority at (866) 946-7432.
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