Michigan Law to Prevent Foreclosed Homes Foreclosure

Michigan Governor Jennifer M. Granholm praised the bipartisan legislative agreement between the Michigan House of Representatives and the Senate which aims to protect distressed homeowners from foreclosed homes foreclosure.

The law gives a 90-day foreclosure moratorium to troubled homeowners who want to negotiate with their lenders to modify their loans to make payments affordable.

In Granholm’s weekly radio address, she explained that the bipartisan legislative agreement would provide relief to homeowners who are facing foreclosures. She commended the efforts of Michigan Representative Andy Couloris who helped create the agreement. She reiterated her government’s commitment to protect Michigan families from foreclosure and help them remain in their homes.

During the 90-day foreclosure moratorium, qualified homeowners would be allowed to seek help in modifying their mortgage loans from housing counselors available through the Michigan State Housing Development Authority. Homeowners would then be required to discuss with their lenders possible loan modification plans.

If homeowners and their lenders come to an agreement on a loan modification plan, repossession is avoided provided that homeowners abide by the bipartisan legislative agreement.

Granholm pointed out that avoiding foreclosures would benefit not only Michigan families, especially those who are in danger of losing their properties, but also neighborhoods.

Distressed foreclosure properties cause neighborhoods to deteriorate and home prices to decline, affecting the whole community and the state’s economy, she added.

The law requires lenders to notify in writing troubled homeowners about their mortgage default and to provide them with contact information.

Granholm explained that it is important that lenders, homeowners and housing counselors coordinate to stop foreclosure. She said that less than 20 percent of delinquent homeowners communicate with their lenders or housing counselors as soon as they start missing payments. She claimed that the law creates a procedure in which lenders and homeowners communicate and negotiate.

Under the law, a lender would develop a loan workout scheme in which the borrower’s monthly mortgage payments would not be more than 38 percent of his income. A loan modification plan may include reducing interest rates or extending the loan term.

Michigan’s foreclosed homes foreclosure filings reached a total of 33,184 in the first quarter of this year, representing a 2 percent decline from the last quarter of 2008 and 12 percent increase from the first quarter of the previous year.

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