Package of four bills is backed by Michigan banks
By Alanna Durkin
Associated Press
LANSING, Mich. (AP) — Michigan lawmakers are considering changes to the state’s foreclosure law, including a measure that would significantly shorten the period homeowners have to sell or save their foreclosed property.
Legislation recently approved by the Senate Banking and Financial Institutions Committee includes a provision that would shorten the foreclosure redemption period, the time when homeowners can challenge a foreclosure’s legality, sell their home or find a new one. In most cases, that period would be reduced from six months to 60 days.
The package of four bills is backed by Michigan’s banks, which say that the longer redemption period leads to abandoned homes and blight, and that new federal regulations will help people avoid foreclosure. But critics of the measures say the changes will be devastating for Michigan homeowners struggling to save their property.
“I don’t understand why this Legislature ... instead of giving due process to people, would pass a law that would make it easier for the banks to take people’s homes,” said Curtis Hertel Jr., register of deeds for Ingham County.
Sen. Darwin Booher, an Evart Republican and a sponsor of the legislation, said a sunset provision in Michigan’s pre-foreclosure process law means it will phase out at the end of June. Under that law, Michigan residents get 90 days before a foreclosure to work with counselors to pursue things like a loan modification. The legislation would extend that law until January, when federal regulations kick in mandating that lenders wait 120 days before making the first notice or filing in the foreclosure process.
But more time to avoid a foreclosure would mean less time to get it back once it’s already been foreclosed.
Opponents to the legislation say maintaining a longer redemption period is crucial to preventing foreclosures in Michigan’s still-fragile economy. While foreclosures are down considerably from the height of the housing crisis, in April there were more than 53,000 Michigan homes at some point of the foreclosure process, according to RealtyTrac, a group that tracks national foreclosure figures.
Neeta Delaney, director of the Michigan Foreclosure Task Force, said the six-month redemption window allows people who are unemployed to get a new job and begin making payments again or, if that fails, sell their home on a short sale.
“Every time you prevent a foreclosure, it’s not only saving the homeowner from credit damage, it’s also saving the neighborhood and community from a vacant home,” which “lowers the property values of all the houses in the neighborhood,” she said.
An amendment added in committee would make the redemption period four months if a person has proof of a listing. Real estate agents had raised concerns that two months wasn’t enough time to conduct a short sale.
Delaney said the six-month redemption period is also essential to give people enough time to challenge fraudulent foreclosures. In Michigan, unlike many states where lenders have to go through the courts to foreclose, the process begins when a lender puts a foreclosure notice in the newspaper.
“There are no checks and balances to actually review those documents,” opening up the system to fraud and human error, Hertel said.
Banks and credit unions said few people take advantage of the redemption process anyway. Patricia Herndon, advocacy director for the Michigan Bankers Association, said only about 20 percent to 30 percent of delinquent borrowers use the state’s 90-day process to avoid foreclosure.
“We’re finding that when we have that six-month redemption period, we’re showing around 1 percent or less of people that are actually able to redeem,” she said.
That means during the redemption period that homes are often abandoned, exposed to criminal elements and destroyed, said Kieran Marion, vice president of governmental affairs for the Michigan Credit Union League.
Booher said the new federal regulations will improve the system by increasing the time people have before they get to the point of foreclosure when they would need to redeem their property.
“My belief is that the best time to keep people from losing their homes is up front,” Booher said.
But Delaney argues that the new federal regulations won’t actually extend the time frame. In practice, most lenders already wait up to 120 days before they notify Michigan homeowners of a foreclosure and then residents have up 90 days on top of that to try to work out a loan modification, she said.
Booher said he expects the Senate to vote on the legislation as early as this week.
Democratic Sen. Jim Ananich of Flint, who opposes the legislation, said the bills’ sponsors are using the artificial deadline of the sunset provision to rush through the legislation without considering the implications.
“I don’t think that’s good for Michigan,” he said. “I don’t think it is good policy.”
Booher downplayed the loss of some homes.
“Do we leave all those other properties that were having the blight issues and rats in the houses and that kind of stuff for the one or two (houses) that may be saved out of it?”
––––––––––––––––––––
Subscribe to the Legal News!
http://legalnews.com/Home/Subscription
Full access to public notices, articles, columns, archives, statistics, calendar and more
Day Pass Only $4.95!
One-County $80/year
Three-County & Full Pass also available
