Home Loan Borrowers in Michigan Now Have More Negotiating Power
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Home mortgage borrowers now have negotiating power based on their income and debt.
Home mortgage borrowers now have negotiating power based on their income and debt.
An act signed by the governor last week provides that before beginning "foreclosure by advertisement" a lender must give a delinquent borrower 90 days to negotiate a revision of the loan.
The State Senate by a 36 to 0 vote on May 19 voted to adopt a compromise version of the bill reported by a House-Senate conference committee.
If the borrower's debt is more than 38 percent of his or her gross income, the lender would not be able to go ahead with the foreclosure unless the lender agreed to a "cram-down" revision of the loan bringing the debt service down to that level. (If the institution holding the loan had accepted federal "bail-out" money the loan revision would be on terms dictated by federal regulations.)
However, a lender unwilling to accept revision of the loan terms could still undertake judicial foreclosure proceedings, which are more costly and time consuming than foreclosure-by-advertisement. The bill was signed into law by Gov. Jennifer Granholm on May 20.
The legislation drew the ire of some lawmakers who felt it did not go far enough.
"The fact is that there are people on the verge of losing their homes right now, and they need help right now," said Sen. Hansen Clarke, D-Detroit.
"There are people in foreclosure right now and have the money to pay the lender, but the lender won't accept it. There are people who have had their homes sold by the sheriff right now but still have the means to make some type of mortgage payment on an interim basis and pay their taxes. They need help now, not in the future.
"These bills do not provide that type of relief from foreclosure right now. They are shams, and they should not be represented as providing relief to families because they don't."
Sen. Liz Brater, D-Ann Arbor, commented: "These bills are just a feel-good measure to say if you feel like it, you can get together with your banker and have a little chat. But that is where it is going to end unless the banker chooses to do otherwise. It is totally in the lender's discretion at this point, and that is the current law. This bill does nothing to change that.
"It is kind of a Catch-22 situation. All we are trying to do is protect the homeowner here and make sure that any lender that tries to foreclose on their home actually has the right to do so." ###
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