Foreclosure Bills Considered - May Cost Communities More.

The House Banking Committee took more testimony on legislation dealing with foreclosure.  They took up 4 bills:

- HB 4118 which adds MSHDA to the law to require a 90 day cooling period before foreclosures are finalized, where lenders and borrowers are supposed to try to work out the issues leading to the foreclosure.
- HB 4222 which requires that tenants must be notified when their property is in the redemption period (when they can pay to redeem their foreclosed property).
- HB 4542 which extends the 90-day cooling off period for another year, increases the notification period from 14 to 20 days, and requires that mortgage companies list the names and not just the business on the notice.
- HB 4543 which creates penalties if a person falsely represents themselves as a counselor.
- HB 4544 which shortens the redemption period in Michigan from 6 months to 3 months for all properties except agriculture (which would continue to be 6 months)

The committee took extensive testimony on these bills.  Supporters said that they want to renew the 90-day cooling off period, while also making the redemption period match other states who have three month redemption periods.

Most of the testimony, though, was in opposition to the redemption period being lessened.  Several housing counselors and the Michigan Foreclosure  Task Force raised objections, saying that reducing the redemption period from 6 months to 3 months would kick people out of their homes quicker. They said that it would result in an increase in foreclosures, lessen property values quicker, cost communities more money, and prevent homeowners from being able to rectify their situations. They also pointed out that having more homeless people will lead to more need for local communities to provide social services when they have struggling budgets.  They also pointed out that Michigan is in line with other states (and that most are not equivalent because they do judicial foreclusres instead of foreclosure by advertisement).

Republican legislators questioned these people and said that by the time everything is done (sheriff sale, pre-foreclusre, etc), people will have been in their homes for 12-18 months rent-free. Rep. Olson indicated an interest in saying that a person can have 6 months for redemption if the borrower is continuing to pay fair market value to live in the property.

The League does not have an official opinion on this legislation, but is part of the Michigan Foreclosure Task Force who is leading the charge against HB 4544.  The committee is expected to meet again and vote on the legislation in May.

Andy Schor is the Assistant Director of State Affairs for the Michigan Municipal League. Contact him at (517) 908-0300 or by email at aschor@mml.org.