Ken Ross

Ken Ross, Commissioner for the state’s Office of Financial and Insurance Services (OFIS), heads the Michigan agency responsible for the regulation of Blue Cross Blue Shield, 27 HMOS, 139 banks, 169 domestic insurance companies, 233 credit unions, 1,303 foreign insurance companies, 1,750 investment advisers, 2,100 securities broker-dealers, 7,772 consumer finance lenders, 146,419 insurance agents, and 115,000 securities agents.

Monday

March 24, 2008

Foreclosures Hurting Michigan Families

One of the most important issues currently facing Michigan citizens is the problem of home foreclosures.  In 2007, Michigan ranked 3rd in the nation in foreclosures, trailing only Nevada and Florida, and there was a 68% increase in state foreclosures compared to 2006 and a 282% increase from 2005.  In the fall of 2007, 82,000 loans or more than 5% of all loans were in foreclosure or seriously delinquent.  Unfortunately, the foreclosure rate continues to escalate—January 2008 foreclosures in Michigan are 125% higher than those in January 2007.

While a substantial portion of foreclosures is caused by the current economic downturn, a death in the family, high medical bills, the loss of wages or unemployment, there are also many that are due to the resetting of subprime adjustable rate mortgages (ARM).  In Michigan, around 75% of all subprime loans were adjustable, and nearly 41,000 subprime loans are scheduled to reset at higher interest rates this year.  Some Michigan residents will have to pay nearly twice their original mortgage when their ARMs reset.  Subprime loans only make up 13% of the home loans in Michigan, but represent almost half of all mortgages in foreclosure.

In the fall of 2007, a little more than half of all homeowners with subprime loans were current in their house payments, the lowest rate in the nation.  Around 20% of subprime loans were piggyback loans, meaning a second mortgage was obtained simultaneous to the first mortgage.

Foreclosures not only hurt individual families, but they devastate the neighborhoods and communities by lowering home values and stressing local government revenues.

OFIS and the State of Michigan are working to help consumers avoid foreclosure and where possible, stay in their homes.  This week I’ll be blogging about how OFIS is working with national mortgage companies, supporting important mortgage legislative reforms, and giving assistance to Michigan consumers in the fight against foreclosure.

Check back tomorrow to hear Ken’s thoughts on helping homeowners.

Ken can be contacted at 517-335-3167

Tuesday

March 25, 2008

Working with National Mortgage Companies to Help Homeowners

In January, Governor Granholm and I met with representatives from a number of the nation’s leading mortgage servicers to discuss what mortgage services could do to help Michigan consumers avoid foreclosure.  The servicers, including Flagstar, Countrywide, GMAC, and Option One concurred in the goals set forth in the Michigan Protocol to Assist Homeowners Facing Potential Foreclosure.

The Michigan Protocol calls for servicers to:

• Provide Michigan homeowners with alternatives to foreclosure.

• Reach out proactively to borrowers many months before their loans reset to work out alternatives to foreclosure.

• Streamline the process for determining what borrowers qualify for loan modifications because they cannot reasonably be expected to make the higher reset mortgage payment.

• For people who are in their homes and making timely payments at the starter interest rate on a subprime loan, but who cannot make the reset payment, attempt to keep them at an affordable interest rate for up to five years.  These borrowers must also show that they cannot afford a loan with a higher interest rate and cannot qualify for a VA or FHA loan program.

• Work with the State and the HOPE NOW program to implement their home preservation programs and assist distressed borrowers who are behind in their payments to work out a plan going forward, if possible.

• Work with the State to conduct outreach efforts and public service announcements in all Michigan communities to inform borrowers with subprime adjustable rate mortgages (ARM) that they should contact their lenders if they believe they are at risk of losing their home because they cannot afford the higher interest rate payments on their ARM.

• Work with the State to proactively identify methods to address issues surrounding those vacant and/or abandoned properties over which the lender or servicer has assumed ownership or control.

We have been building on this positive momentum and are establishing a working group made up of representatives from national mortgage servicers, representatives from the Michigan lending community, local government, housing advocates, and others.  The working group will address many of the issues discussed at the services meeting, including identifying ways to appropriately streamline the foreclosure process, reduce urban blight and enhance financial literacy for homeowners.  OFIS has also begun monitoring reports from the HOPE NOW Alliance and the State Foreclosure Prevention Working Group.

Check back tomorrow to hear Ken’s thoughts on important legislative reforms in the mortgage industry.

Ken can be contacted at 517-335-3167

Wednesday

March 26, 2008

Important Legislative Reforms in the Mortgage Industry

OFIS is supporting a number of important pieces of mortgage legislation that if passed, will do a lot to help us uncover the bad actors in the mortgage industry.  These reforms will allow OFIS to be more effective in preventing unfair lending practices, mortgage fraud and unlicensed mortgage activity and will help Michigan families stay in their homes. 

OFIS supports State Representative Steve Tobocman’s comprehensive anti-predatory lending legislation, which would create the Michigan Home Loan Protection Act and protect consumers and homeowners from reckless and abusive lending practices that lead to foreclosures.  It would also protect consumers from being pressured into high-cost and risky loans when they would otherwise qualify for a traditional mortgage and prohibit prepayment penalties and the financing of any points and fees that hide the true costs of the loan.

OFIS is also strongly backing a bipartisan legislative package that requires the state’s estimated 20,000+ mortgage loan officers to register with OFIS.  The legislation creates the state’s first list of loan officers and strengthens the state’s oversight of the loan industry’s practices by mandating criminal background checks and educational training for loan officers.  It also establishes a Mortgage Industry Advisory Board that would make recommendations to OFIS on educational requirements and loan officer applications. 

I also strongly support important legislation currently before the House Appropriation Committee.  The committee is considering a supplemental appropriation of $1.4 million funded by regulatory fees that would allow OFIS to hire an additional 34 mortgage industry regulators.  Additional mortgage regulators are needed to ensure that Michigan, our licensees, are following the law and that Michigan consumers are protected.

Michigan now ranks 3rd in the nation in incidence of mortgage fraud and has ranked in the top 6 since 2003.

Ken can be contacted at 517-335-3167.

Check back tomorrow to hear Ken’s thoughts on avoiding foreclosure scams.

Thursday

March 27, 2008

Avoiding Foreclosure Scams

With the foreclosure rate escalating across the state, scam artists are trying to take advantage of Michigan homeowners who may be at their most desperate time.  Our office receives about 15 complaints a week regarding a couple of different foreclosure rescue scams.

One type of scam begins with a scam artist making an unsolicited offer to pay a homeowner’s past due mortgage payments and “rescue” them from foreclosure.  The scam artist will have the homeowner sign over the deed to the house and promise that they can stay in their house as a renter with the opportunity to buy back their home when their finances improve.

Scam artists will then obtain a new mortgage on the house at a higher value than the old loan and keep the difference between the new loan and the old loan. The scam artist has now stolen the homeowner’s equity in the property. Scammers will often walk away from the situation, stop paying the new mortgage and pocket all of the equity. The home will again go into foreclosure and the former homeowner, who is now the renter, will be forced to leave the property and has now permanently lost their house.

A newer scam that our office has started to see involves a scammer again making an unsolicited offer to a homeowner facing possible foreclosure. The scammer tells the homeowner they are from a company that can deal directly with their mortgage servicer. The scam artist tells the homeowner that if they send them some money, many times over $1,000, they can prevent a foreclosure. But the scam artist never contacts the mortgage servicer and will then try to bilk the homeowner out of more money. In many instances the so called company never even existed.
If Michigan homeowners believe they may have uncovered a foreclosure rescue scam, please contact OFIS toll-free at (877) 999-6442 or online at www.michigan.gov/ofis
Do not discuss your mortgage loan situation with anyone advertising that they can rescue you from foreclosure.  These are almost always a scam. At best you will only delay the foreclosure and eviction by a few months and at worst, you could lose any equity you have in your property.

If a homeowner is facing a possible foreclosure and would like professional advice on their situation they can contact one of the U.S. Department of Housing and Urban Development’s (HUD) approved housing counselors. For a list of HUD approved housing counselors in Michigan visit: www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=MI

Ken can be contacted at 517-335-3167.

Check back tomorrow to hear Ken’s advice on facing foreclosure.

Friday

March 28, 2008

Facing Foreclosure? Here’s What to Do

For those homeowners facing a foreclosure there are options available.

First, do not ignore the seriousness of the situation—it requires you to act immediately.  Carefully read the default letter and find the telephone number to the loss mitigation department and the name of the representative assigned to your case.  The employees in the loss mitigation department typically are the only individuals with the mortgage company that have an incentive to find a solution other than foreclosure for your loan.
Thoroughly review your loan to find the terms of your loan, for example, prepayment penalty, 15-year, 30-year, fixed rate, adjustable rate, etc.  Write down the dates and amounts of your last twelve payments and evaluate your current budget situation to determine the amount of mortgage payment you can afford.

Contact the loss mitigation department and discuss your loan situation.  Be sure to understand completely why the mortgage company sent you the default letter.  Then ask if the mortgage company has begun foreclosure proceedings on your account.  If you think payments you made are not being posted to your account, explain the dates and request a history of your account to compare to your cancelled checks.

If you are late with your payments, explain the reasons, such as loss of employment or reduction in employment hours.  Then ask the mortgage company for a written explanation of the funds required to bring your account current.  Ask if company management would approve any of the following hardship programs: a repayment plan, a loan modification, a refinance, a forbearance agreement, short sale, etc.

You might want to seek legal advice.  Your attorney should explain your rights and provide you with options.  If you cannot afford an attorney you can contact Legal Aid listed in the government section of your telephone book.  You may also want to consider selling your property or declaring bankruptcy, which may be better options for your situation.  

If you think there were misrepresentations or fraud regarding your mortgage loan, or you are not satisfied by the mortgage company representatives, please contact OFIS 1-877-999-6442 or www.michigan.gov/ofis.

Ken can be contacted at 517-335-3167.

Check back on Monday to hear from Sen. Tupac A. Hunter (D-Detroit).