Featured on mml.org
Top 5 in the Nation
Michigan is one of five states in the nation with the highest number of home mortgage foreclosures. Lately, it is all over the news. RealtyTrac, the research firm conducting foreclosure surveys, says that 43 states experienced increases in mortgage foreclosure but just five states–California, Florida, Michigan, Ohio and Georgia–accounted for more than half the nation’s foreclosures. The number of foreclosures in Michigan jumped 147% in one year, from January 2006 to January 2007. Oakland County saw a 338% increase, and Macomb County experienced an increase of 108%.
Causes of Foreclosure
What are the causes of the triple digit increase in mortgage foreclosures? The two main reasons are the loss of a job and a serious illness. Thrown into the mix are mortgage companies with predatory lending practices. Or, an adjustable rate mortgage that did what an adjustable rate mortgage is set up to do–adjust–upwards. But the income of the homeowner did not adjust accordingly, and now the homeowner is unable to make the monthly mortgage payments which may be double what was previously paid.
Foreclosure is not just a problem of low economic status. In some areas, homes valued at $300,000 and up are being abandoned, swimming pools and all. It’s not hard to spot the empty houses in our communities. The first noticeable sign is the uncut grass. Extend that out three months or six months or a year, and it could be garage roofs caving in and boarded up windows and doors. These properties are causing unsightly, ugly, even blighted pockets in our neighborhoods. The effect is felt at the local level–on the streets in our neighborhoods that make up our communities.
Empty houses occur generally for one of two reasons: unpaid mortgages or unpaid property taxes. When mortgage payments are not made, the lender begins the foreclosure process either through a judicial process or by advertisement (resulting in a sale conducted by the county sheriff). In either case, the “aggrieved” party is the lender, i.e. the mortgage company. The mortgage company essentially wants the money owed–and if necessary, will take ownership of the property for resale.
Unpaid Property Taxes
When property taxes are not paid to the local taxing unit, the local
unit treasurer (city/village/ township) returns the notice of unpaid
taxes to the county treasurer. The county, as the foreclosing governmental
unit, begins the tax reversion process. The tax reversion process also
includes a foreclosure process which utilizes the circuit court. The “aggrieved” parties
are the local government units. Under certain circumstances, a mortgage
foreclosure can be completed in a time span of just 10 months from the
first missed payment. The tax reversion process normally takes several
years unless accelerated.
While the effect is felt at the local level, local government has little control over a mortgage foreclosure. But what does this mean to a resident at a loss for what to do when a demand for payment letter arrives from the mortgage company? The resident may ask local elected officials for help. Isn’t local government the level of government closest to the people? How can a municipality help its residents who are facing the threat of a mortgage foreclosure when it’s in the hands of the lender, not the municipality? And, once a foreclosure occurs, what can a municipality do to diminish its effects?
The approach is two-pronged. The first is to equip residents with information to head off a mortgage foreclosure before it happens, and the second is to adopt policies mitigating the appearance problems that foreclosed properties create. This paper covers the first step, and “Restoring Michigan Communities–Building by Building” is the source for the second.
Contact: Information & Publications Division