On May 21, 2009, Governor Granholm signed into law an act amending Michigan’s foreclosure process. Under the old act, if a homeowner were behind in their mortgage, the mortgage company would initiate the foreclosure process by sending the homeowner a notice, usually taped to their door advising them of the sale date of your home. Then they would publish that notice in a local paper for four continuous weeks. The sale of thehome would commence on the day set forth in the notice of foreclosure. After the sale date, the homeowner would have six months to redeem their house, that is to come up with the entire balance of the mortgage, plus fees and costs to save their home. At the end of the six month redemption period, they would be required to vacate the home if they have not redeemed.
With the high rise in foreclosures in Michigan, the legislature passed public acts 29-31, amending the foreclosure process. The act became effective on July 4, 2009 and the purpose was to facilitate a meeting between the homeowner and the borrower to avoid a foreclosure.
Now, in order to foreclose, the lender must send the homeowner a written notice by first class mail and certified mail. This notice has to advise the homeowner the reason of the default and the amount due and owning on the mortgage. It must also contain the name, address, and telephone number of the mortgage holder, the mortgage service, or any person designated to be a contact with the authority to make agreements or modify the mortgage. Included in this notice, will be a list of housing counselors developed by the Michigan State Housing Development Authority and within 14 days of the notice, the homeowner can request a meeting with a housing counselor in order to modify the mortgage.
If the homeowner requests a meeting with the housing counselor, then the foreclosure process cannot be commenced for 90 days. If the homeowner and the mortgage company agrees to a modification, the mortgage will not be foreclosed if the homeowner abides by the agreement.
If the homeowner and the lender do not come to an agreement to modify the mortgage, and it is determined that the homeowner meets the criteria for a modification, then the foreclosure must proceed judicially, and not by notice as was done in the past. This is much more costly and will have a much more uncertain outcome for the mortgage company. In essence, they will have to go to court and ask a judge to foreclosure on the mortgage.
The criteria that the homeowner must meet is a simple target ratio, where the homeowners housing related debt must be 38% or lower than the homeowners gross income. In order to meet this ratio, the homeowner and the lender may negotiate a reduction in the interest rate, and extension of the mortgage to 40 years, and/or a reduction in late fees.
Only time will tell if this will save homes for Michigan families, but it is a start in the ending of foreclosures in Michigan.