The House Banking and Financial Services committee reported bills changing the 90-day moratorium law which was created two years ago. The law as it is now allows borrowers 90 days to request a mortgage modification after receiving notice from their lender that they are in default, and allows borrowers to prevent foreclosure by advertisement and instead petition a court to require the foreclosure to go through a judicial process. This law is set to expire on January 5th after having been extended by 6 months. HB 4542 and 4543 change this law to instead give borrowers 30 days to contact the bank after going into default. If they do not, then the borrower can foreclose by advertisement. If the borrower does respond, lenders have 10 days to request information from the borrower to decide on the modification and then the borrowers have 60 days to respond. The legislation also ends the requirement that default notices be published in a newspaper. Borrowers must still receive default notice through First Class mail and certified mail. HB 4544 allows the redemption period for residential property of more than three acres to drop from one year to six months, which would bring these into line with the redemption period for all other residential property. The League is part of the Michigan Foreclosure Task Force (MFTF) which supported those bills in committee, and the bills passed unanimously.
The committee also passed HB 5176, which was controversial. This bill would shorten the redemption period from six to three months for "portfolio loans" (where the lender still holds the mortgage, often smaller banks and credit unions).If the mortgage is sold by the lender to another entity, those loans would still be subjet to the six-month redemption period. This is supported by banks and credit unions, who say the longer redemption period has proven onerous (especially with higher risk loans) and they have said that they work closely with the borrowers. The opponents, including the MFTF, argued that this is unfair to homeowners who don’t know whether or not their loan was sold and, more importantly, have no choice in the matter. They also said that this is an administrative nightmare for big lending institutions (that hold upwards of 90% of all loans in the state) and would result in less timely resolution of loan modifications because the administrative burden will be passed on to homeowners. Again, the League is a member of the MFTF, and has indicated opposition to reducing the redemption period in the past.
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.
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