Michigan’s new Mortgage Foreclosure Law can be a great help
Michigan’s new foreclosure law becomes effective on July 5, 2009. I think it will be a great help to home owners who are facing foreclosure. While there are other programs at the federal level, the items contained in the new law should be very helpful. Until this law was passed, foreclosures in Michigan were streamlined. A foreclosure by advertisement, for example, was designed to quickly and as cheaply as possible, return the property to the lender. In light of our current economic mess, the new statute appears to reconsider Michigan’s long standing policy of returning the property to lenders. The policy is poised to make both lenders and borrowers think about new alternatives to foreclosure such as loan modification.
The new law has some very good features such as:
1. Lenders must send a new notice to borrowers. In this notice, the lender must cite the reason for the foreclosure, the identifying information for the mortgage holder as well as the contact information of the person who, on behalf of the lender, has the authority to enter into any loan modification. This feature, alone, is totally awesome. I have worked on a some loan modifications and I can tell you that trying to reach some lenders is just impossible. I had received automated answers to their telephones such as “All of our agents are busy, please call back later.” Hell, if I ran my business like that, I would run it directly into the ground. Nevertheless, these days are now over (or should be). In any event, if you receive such a notice, you should keep a log of every time you have tried to contact the lender’s contact person.
2. The notice referred to above also will include a list of housing counselors. This list is prepared by the Michigan State Housing Development Authority. Within 14 days after the notice is sent, a homeowner may request a meeting with the bank’s contact person to discuss a loan modification. If the homeowner requests such a meeting, then foreclosure may not be started until after 90 days from the date of the original notice.
3. The homeowner can contact a housing counselor within 14 days of the letter, and the housing counsel will contact the lender’s representative to set up a meeting. If the homeowner requests a meeting, then foreclosure may not start for a period of 90 days from the date of the letter. The meeting has to take place in the county where the property is located.
4. Beware, however, that after the borrower has requested a meeting, the lender has the right (and most likely will) ask the homeowner to produce certain financial information. The borrower must provide the requested docs. Most likely, this document request, at a minimum, will include tax returns, pay check stubs and bank account statement statements for the past three years.
5. If no agreement is reached between the lender and homeowner on the loan, then a separate analysis must be prepared to show whether the homeowner may have otherwise qualified for loan modification under a modified version of President Obama’s Home Affordable Modification Plan (HAMP). Under this analysis, a homeowner may qualify for a loan modification if one’s housing related debt (“HRD”) is 38% or less of one’s gross income, on an aggregate basis. HRD is determined by:
a. The interest rate may be reduced to a floor of 3% for a period of 5 years;
b. The loan may be amortized over a period of up to 40 years from the date of the loan modification;
c. Part of the unpaid balance of the loan may be deferred, up to 20%, until maturity, refinancing of the loan or sale of the property;
d. Late fees may be reduced or eliminated.
This new legislation will undoubtedly slow down the foreclosure beast that has beset, if not blind sided the residents of our fine state.
If you are a homeowner that is facing foreclosure and you receive a notice under this new statute, you must take action if you are going to avail yourself of the benefits of this law. Contact a housing counsel. Have that housing counsel make an appointment to discuss loan modification with a lender’s representative. DO NOT GIVE UP HOME AND HOPE FOR A MIRACLE. I say this because in times of crisis, I am sometimes guilty of doing this. Don’t do it. It usually does not end well. Take the bull by the horns, and make that phone call.
Get your financial documents such as your tax returns, pay stubs and bank statements so that you are prepared to meet with the lender’s rep and your housing counsel and make some good things happen.