LANSING, Mich. (12/13/11)--Michigan's House of Representatives Thursday passed three bills that would reform the state's current 90-day foreclosure delay. Many of the reforms were sought by the Michigan Credit Union League (Michigan Monitor
House Bills 4542, 4543 and 4544 included these provisions:
- Establishes clearer timelines as to which actions must occur at points in the process for both lenders and borrowers to allow lenders to proceed immediately to foreclosure if a borrower is unresponsive to requests for certain documents. Borrowers would have 30 days, instead of the current 14, to contact their lender or housing counselor for a possible modification. Lenders with unresponsive borrowers have 60 days between sending a notice and proceeding to foreclosure. Previously there was no timeframe for lenders to send in the documents.
- Holds borrowers responsible for damaging the property during the redemption period. Every notice of foreclosure by advertisement must include language stating that if the property is sold at a foreclosure sale, the borrower will be held responsible to the buyer of the property or to the mortgage holder, for the damage.
- Reduces the redemption period for properties larger than three acres from one year to six months, if the property is not deemed for agricultural use. This aligns the redemption periods for any residential property, regardless of size, to the six-month period.
- Extends the sunset of the bill to Dec. 31, 2012. Originally the bill proposed a July 2015 sunset.
The league noted that the sunset date was shortened after opposition related to shortening the redemption period for portfolio loans by 90 days to make up for 90 days added onto the front end. Although the bill, HB. 5176, was passed last week out of the House Banking Committee, groups such as the Michigan Association of Realtors argued that it would cut the number of short sales completed. The average short sale is about 179 days, and realtors often need the entire redemption period to complete the sales, the league said.
The Michigan Foreclosure Taskforce, representing housing counselors and consumers in the foreclosure process, also opposed HB 5176, saying it was unfair to homeowners because it would create two different redemption periods based on whether they have a portfolio loan or a nonportfolio loan.
Lawmakers decided to continue looking into helping credit unions and community banks in the process and shortened the sunset date to ensure dialogue on the measure. The state Senate is expected to take up the bills next week before it adjourns Dec. 22, said the league.