Wednesday, November 12, 2008

Michigan State Legislature works on Home Foreclosure Prevention Act

Are they trying to force lenders to do loan mods?

November 12, 2008 -- BLOOMFIELD, MI

Elections are over and the Michigan legislative "lame duck" session begins in earnest in Lansing.

The House legislature is expected to start working on establishing the Home Foreclosure Prevention Act, which would establish a state database on mortgage foreclosures and allow a state commissioner to mediate foreclosure matters.

Lawmakers are off today, for Veterans' Day, but will be in session Wednesday and Thursday. Then the Legislature will be on a two-week break before returning to work in December.

A bill concerning foreclosures, HB 6615, is before the House Banking and Financial Services Committee for a hearing on Wednesday. The bill would affect foreclosures on primary residences secured by a subprime loan.

You can read an outline of the bill below, but my take on it is that the legislature is trying to force lenders to consider more loan modifications by extending the time before starting foreclosure or by requiring mediation to do so. I think it’s a great start in the right direction, especially given the bailout money the Feds have committed to the banking industry.

More of the bailout money needs to trickle down to homeowners instead of winding up as bonuses in the pockets of those that ran the banks and got us all into this mess.

An outline of the bill’s provisions:

1. Require a foreclosing party to notify the borrower 45 days prior to starting the foreclosure process that they may be eligible for a loan modification or other solutions.

2. The notice must also include:
i. an itemization of all past due amounts
ii. an itemization of any and all charges to bring the loan current.
iii. The earliest date foreclosure proceedings may commence.
iv. A statement that the borrower may have options to avoid foreclosure.
v. The address, phone number and other contact information for the lender or their agent authorized to discuss other solutions.
vi. The name, address & telephone number of HUD or MSHDA approved counselors.
vii. The address and phone number for the consumer complaint area of the Office of Financial and Insurance Regulation.

3. Within 3 days of sending this information to a borrower, the foreclosing party must file this information with the state court administration office.

4. By January 1, 2009, the state court administration office shall design a database to hold this info. This info shall not be available to the public.

5. The commissioner of the program shall solicit solutions other than foreclosure from all sources.

6. If, after review of a foreclosure case, the commissioner decides there is merit to avoid foreclosure, they can either delay the start of foreclosure proceedings by up to 90 days or require the borrower and lender to pursue mediation.

7. After December 14, 2008 lenders are required to file a certification that all the above is true BEFORE commencing to foreclose on a primary residence secured with a subprime mortgage.

8. A subprime mortgage is defined as a mortgage originated after December 31, 2001 and prior to January 1, 2008 with an APR that exceeds the comparable US Treasury yield by 3% for a 1st mortgage or 5% for a 2nd mortgage. A loan will also be considered subprime if it’s APR exceeds the mortgage rates published by the Federal Reserve by 1.75% for a 1st mortgage and 3.75% for a 2nd mortgage.

Read the entire bill at

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