AP File Photo
LANSING,
MI -- Michigan homeowners could have more time to avoid foreclosure but
less time to reverse it under legislation moving quickly through the
state legislature.
The Senate Banking and Financial Institutions
Committee on Thursday approved a four-bill package, introduced one day
earlier by a group of Republican lawmakers, that would extend a
pre-foreclosure negotiation period allowing residents to seek loan
modifications but shorten a post-foreclosure redemption window allowing
them to retain or short sell their homes.
The bills now head to the full Senate for consideration.
Supporters
say a quick fix is needed because the state's mandated negotiation
period is set to expire at the end of June, but critics believe reducing
the redemption period could result in more Michigan residents losing
their homes and damaging their credit as the state continues to emerge
from a prolonged foreclosure crisis.
"This is so inconsistent and
going in the wrong direction of federal policies, where the concern is
to do everything you can to keep homeowners in their homes," Lorray
Brown, a statewide foreclosure specialist with the Michigan Advocacy
Project, said in testimony before the committee on Thursday. "And here
we are in Michigan, trying to get people out of their homes quicker."
Senate Bills
380-382,
sponsored by Sens. Randy Richardville of Monroe, Mike Nofs of Battle
Creek and Jim Marleau of Lake Orion, would extend the state's 90-day
negotiation period, which is set to expire at the end of June, through
January 10. That's when new federal regulations kick in mandating a
120-day period, which would allow additional time for homeowners to seek
loan modifications or other agreements with their lender in an attempt
to avoid foreclosure.
Senate Bill
383,
sponsored by Sen. Darwin Booher of Evart, would shorten Michigan's
post-foreclosure redemption period by 120 days -- from six months to two
months -- providing residents with less time to pursue a short sale or
reclaim their home by paying off outstanding fees after it is placed in
foreclosure and sold at a sheriff's auction.
While the foreclosure crisis hit Michigan early and hard, numbers are now trending in the right direction. The state saw
fewer than half as many foreclosures in March of 2013 than it did in March of 2012. Still, Michigan totaled roughly
70,000 foreclosures during that 12-month period, more than all but two other states.
Booher,
who chairs the committee and worked in Michigan banks before entering
politics, said the proposal is appropriate because the state's
foreclosure rate is slowing, and with federal regulations mandating a
longer negotiation period, it makes sense to shorten the redemption
period. All told, he pointed out the entire process -- from a missed
mortgage payment to loss of a home -- could still take more than 200
days to complete.
"I believe this is the right time and the right
policy for Michigan," Booher said. "I believe that this really isn't a
shortening of the foreclosure process, but rather a shift in our time
frame."
The bills are tie-barred together, meaning that none will
take effect unless all four are approved by the legislature and signed
by the governor, frustrating some who would support the pre-foreclosure
provisions but strongly oppose the shortened redemption period.
"This
is really a sad situation," Neeta Delaney, head of the Michigan
Foreclosure Task Force, told MLive earlier Thursday. "It was a very
political, strategic move on the part of the legislators who are pushing
it. It's frustrating to tie those three bills to something else that is
so drastic."
Booher said it is important to move quickly on the
bills because state law mandating the 90-day negotiation period expires
in June but the federal regulations do not take effect until early
January. Michigan lawmakers are expected to begin their summer break on
June 13, he said, meaning the bills would have to move through both
chambers in the next few weeks.
Michigan banks and credit unions
widely support the package, pointing to the wide scope of pending
federal regulations and their own pro-active efforts to work with
borrowers.
"We have little to no redemptions during the redemption
period," said Kieran Marion, vice president of governmental affairs for
the Michigan Credit Union League. "We have very little people taking
advantage of the 90-day process on the front end. We do a lot of work
with our borrowers to try to keep them in their homes, and that's
probably a result of that."
Local lenders aren't the problem,
according to Democratic Sen. Jim Ananich of Flint, who said that
Michigan banks and credit unions are generally willing to work with
owners to keep them in their homes.
"My problem is with the
bigger folks that it's impossible to get on the phone," said Ananich,
who cast the lone "no" vote against SB 383. "When I had a Bank of
America loan -- I was trying to pay if off, I wasn't even in the
foreclosure process -- it took me three weeks to get someone on the
phone.
"I feel like we're dealing with folks that are doing the
right thing, and we're letting off the folks that are hurting a lot of
citizens across the state and across the country."
Booher,
pointing to his own experience in the profession, said banks that do
everything right during the pre-foreclosure negotiation period, which
would be extended to 120 days, should not be "penalized" by having to
wait another six months to take possession of a property after they have
foreclosed. During that window, he argued, some residents neglect or
damage homes they are not intending to fight for.
"People tear up
those homes," he said. "They destroy it, or somebody does. Whether or
not they've left the home, those buildings are being destroyed and
causing the value of my property to go down. So that additional 120
days, I've got to be convinced is worth having on the end of this during
the foreclosure process."
But shortening the redemption period
would do little to deter outgoing homeowners intent on defacing their
property, according to Brown, who said other states have taken a more
direct approach by allowing banks to take possession of a home, with a
court order, if it is significantly damaged during the foreclosure
process.
"If someone's inclined to destroy the property, they'll
do as much as they can in two months," she said. "So we have to look at
what is the most effective policy to address that issue. That's not done
with a blanket reduction of the redemption period."
Underwater
homeowners are increasingly using the redemption period to negotiate a
short sale, which requires lender approval to sell their home for less
than they owe on the mortgage. Banks lose money in the process, while
the homeowners avoid significant damage to their credit and a
neighborhood can be spared a vacant home.
Short sales can often
take six months to complete, according to Kathy Persha, a real-estate
agent in Metro Detroit who specializes in helping homeowners facing
foreclosures. She said that reducing the redemption period to only two
months would prohibit some residents from being able to find a buyer and
get lender approval to sell their home once it enters foreclosure.
"It's
a joke," she said. "With some of the new rules that came out last
October, we thought the process would happen a lot quicker. Instead,
everyone I've talked to in this business have all said the same thing:
the time frame has gotten much longer for short sales. And some banks
would rather not approve short sales and just take the property back."
Michigan
Senate Bills 380-383 now head to the full Senate for consideration.
Booher said he plans to meet with interested and concerned parties in
hopes of fine-tuning the legislation in coming weeks.
Jonathan Oosting is a Capitol reporter for MLive Media Group. Email him, find him on Google+ or follow him on Twitter.
No comments:
Post a Comment