State House Approves Legislation Reforming 90-day Foreclosure Delay (Misc News: December 11, 2011)
On Thursday, the Michigan House of Representatives passed House Bills 4542, 4543, and 4544 which would provide reforms to the current 90-day foreclosure delay. Many of those reforms were sought by the MCUL & Affiliates and include the following:
- More clear timelines as to which actions must occur at various points during the process for both lenders and borrowers, thereby allowing a lender to proceed immediately to foreclosure if a borrower is unresponsive to requests for certain documents. This takes the process to a more clear 30/60/90 day timeline. Borrowers will now have 30 days to contact their lender (or housing counselor) if they want to try and meet to make a possible modification (under current law they have 14 days). Now under the bill, within 60 days of the lender sending the notice, if the lender has not received the requested documents from the borrower in order to do a modification, the lender can proceed to foreclosure. Previously, there was no timeframe in the law for borrowers to send those documents.
- Holding borrowers responsible for damaging the property during the redemption period. Every notice of foreclosure by advertisement must now include language stating that if the property is sold at a foreclosure sale, the borrower will be held responsible to the person who buys the property or to the mortgage holder, for damaging the property during the redemption period.
- Reducing the redemption period for properties larger than three acres from one year to six months, if the property is not deemed to be for agricultural use. This will now align the redemption periods for any residential property, regardless of size, to the 6-month period.
- Extending the sunset to Dec. 31, 2012. The bill originally proposed a July 2015 sunset.
Part of the reason the sunset was pushed back to 2012 instead of 2015 is because of the bill credit unions and community banks were lobbying for which would shorten the redemption period for portfolio loans by 90 days, in order to make up for the 90 days added on the front end. While that bill, House Bill 5176, was passed out of the House Banking Committee last week, it continued to receive opposition from a number of groups including the Michigan Association of Realtors who argued it could cut down the number of short sales completed. The Realtors stated the average short sale is around 179 days, and they often need the entire redemption period to complete these sales. The Michigan Foreclosure Taskforce, representing housing counselors and consumers during the foreclosure process, also opposed HB 5176, stating the bill is unfair to homeowners because it will create two different redemption periods for homeowners based on if they have a portfolio or nonportfolio loan.
Lawmakers recognized they would like to continue to look into helping the credit unions and community banks in this process, and therefore are only extending the sunset until December of 2012, in order to ensure that those conversations will take place.
The bills are now in the state Senate, which is expected to take them up next week and with the intent to finish them up before they adjourn for the year on Thursday.