House Bill to Shorten Time Homeowners Have to Avoid Foreclosure
LANSING, MI -- On November 30, the House Banking & Financial Services Committee voted along party lines to pass HB 5176, shortening Michigan’s longstanding six-month Post-Foreclosure Redemption Period to three months for homeowners whose mortgages are what are commonly referred to as “portfolio loans”.
If the bill becomes law, it will make Michigan the first state in the country whose response to the foreclosure crisis is to force people to move out of their homes sooner.
Among those speaking in opposition to the bill was Neeta Delaney, Co-Director of the Michigan Foreclosure Task Force. Delaney testified that the bill was fundamentally unfair to homeowners “who don’t know if they have a portfolio loan or not and more importantly, have no say in the decision. If this bill becomes law, it will mean that by sheer luck of the draw, a homeowner with a non-portfolio loan would have six months to redeem his home, sell it on a short sale or find a new place to live,” explained Delaney, “while the neighbor next door with a portfolio loan will have only three months or half as long to do the same.”
Other opponents of the bill included consumer groups, community coalitions, realtors and some lenders and lender advocacy organizations. Among the reasons for the opposition are the negative impacts the bill will have on:
Michigan’s struggling homeowners still reeling from high rates of unemployment. Neighborhoods already pock-marked by large numbers of vacant properties. The flow of mortgage capital into the state and range of loan options available to our homeowners as a result of putting investors on the secondary market at a disadvantage in Michigan.
The ability of realtors and homeowners to successfully complete short sales (that typically take the full six months) as a way to avoid a foreclosure.
Backers of the bill include credit unions and community banks who have long argued that the six-month redemption period unduly prolongs the foreclosure process. According to MFTF Co-Director Steve Tobocman, however, “When comparing Michigan to other similar non-judicial foreclosure states, we have the second shortest redemption period in the country with some of these states giving their homeowners as long as 24 months to redeem their homes.” Tobocman continued, “Such a critical piece of legislation that will permanently change a longstanding reasonable and effective 50-year old law and negatively impact literally tens of thousands of Michigan homeowners deserves time and thoughtful attention. That can’t happen on the fast track of just a couple weeks that this bill seems to be on.”
The Michigan Foreclosure Task Force was formed in 2007 and has championed legislative causes, such as Michigan’s 90-day mandatory mediation law, as well as pioneered the Michigan Foreclosure Prevention Corps, which has provided 60 AmeriCorps members to local foreclosure counseling and prevention programs. The Task Force has a diverse membership including counseling agencies, legal services attorneys, financial institutions, state and local officials and others working together to expand foreclosure counseling efforts in Michigan and mitigate the neighborhood impacts of concentrated foreclosures. The Michigan Foreclosure Task Force is supported by the Michigan State Housing Development Authority, Bank of America, the Kresge Foundation, CEDAM and others. For additional information, please visit www.cedam.info/foreclosure.