LANSING, Mich. (1/4/12)--Michigan Gov. Rick Snyder has signed bills that reform the 90-day foreclosure-delay law championed by the Michigan Credit Union League (MCUL) & Affiliates.
The laws revise Michigan's "foreclosure by advertisement" process to develop a 90-day foreclosure-prevention workout program to provide borrowers more time to discuss with their lenders possible alternatives to home foreclosure (Michigan Monitor
Under the program, the lender holding the mortgage is required to send a written notice to borrowers before foreclosing on a principal residence. The two parties have 90 days to participate in "pre-foreclosure" meetings to discuss possible alternative solutions. The goal is to encourage greater communication between borrowers and members of the mortgage industry, MCUL said.
MCUL supported the original act because of the rise in state foreclosures and because it had a two-year expiration date, set for July 5, 2011. However, with the law in effect for more than two years, MCUL worked with lawmakers to seek reforms to the process.
The reforms include:
- Having clearer timelines concerning which actions must occur at certain 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. Borrowers will now have 30 days--instead of 14 days--to contact their lender or housing counselor if they want to try to make a modification. Under the law, within 60 days of sending the notice, if the lender has not received the requested modification documents from the borrower, the lender can proceed to foreclosure. Previously, there was no deadline established for borrowers to send the 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.
- Reducing the redemption period for properties larger than three acres to six months from one year, if the property is not deemed to be for agricultural use. To qualify for the agricultural-use exemption, borrowers must provide an Internal Revenue Service Schedule F from their prior-year tax return. This will align the redemption periods for any residential property, regardless of size, to the six-month period.
- Extending the sunset to Dec. 31. The bill originally proposed a July 2015 sunset, but the sunset was shortened to December 2012 because the legislature wanted to continue discussions on how to recognize the burdens placed on community lenders by the 90-day law. Credit unions and community banks lobbied hard for legislation that would have shortened the redemption period for portfolio loans by 90 days, which would have helped offset the additional burden of adding 90 days to the front end of the process provided by the 90-day law. A shorter sunset will ensure the discussions continue in the coming months, MCUL said.