LANSING, Mich. (3/20/13)--The Michigan Credit Union League last week testified before the state House Committee on Tax Policy in support of legislation that would allow financial institutions to realize the full benefit of the principal residence exemption, or "homestead exemption," on foreclosed properties.
"This legislation would provide actual relief to credit unions that are forced to foreclose, despite their best efforts to keep the borrower in their home," MCUL CEO David Adams said.
MCUL officials were joined in their testimony by representatives from Michigan State University FCU, East Lansing, Mich. and E&A CU, Port Huron. (Michigan Monitor March 18). The legislation was also supported by the Michigan Association of Realtors and the Michigan Bankers Association, but was opposed by the state Department of Treasury.
Law enacted in 2012 allows financial institutions to file paperwork to technically retain the exemption so future buyers don't have disruptions or additional cost. However, the financial institution is still required to pay additional non-homestead amounts through a different statutory route.
The proposed legislation, sponsored by state Rep. Frank Foster (R-Petoskey), would eliminate the non-homestead requirement.
"The additional mills from the non-homestead rate represent conditional revenue, based on our members' decision whether or not to foreclose, and eliminating this requirement doesn't reduce the amount that would normally be due to the state under the homestead rate," Adams said.
The bill also would reduce the costs associated with unfortunate circumstances for borrowers and lenders, and would benefit communities by providing more flexibility to repopulate homes, Adams said.