‘Very fragile’ home foreclosure relief deal clears Mich. House, poised for OK in Senate

LANSING — Leaders in the Democratic-controlled state House carefully ushered through “very fragile” compromise legislation aimed at helping Michigan homeowners struggling with foreclosure on Wednesday, a two-bill package that reconciles differences in bills passed by both houses of the legislature earlier this year. But questions remain whether the bill that’s emerged will actually be effective to address the state’s foreclosure crisis.

“It is no longer worth asking how we got here,” said Rep. Andy Coulouris, the Saginaw Democrat who chairs the House Banking and Financial Services Committee. Foreclosure “is a contagion. The most important thing is to keep foreclosure in check.”

The bill package, which passed the house on a 94-14 vote, now heads to the Republican-controlled Senate, where lawmakers there could vote on it as early as Thursday.

The Senate’s original version of the foreclosure relief legislation removed references allowing homeowners to plead with a court in a foreclosure, called judicial foreclosure. The House version had included that provision.

The compromise legislation returns the language on judicial foreclosure. It also sets out specific timelines and rules for borrowers and lenders alike.

But to some lawmakers, the negotiated deal, which Coulouris described on Wednesday as “very fragile,” isn’t something to celebrate.

“It’s too little, too late,” said State Sen. Hansen Clarke, a Detroit Democrat. “I feel it gives false hope to people already in foreclosure.”

Clarke blasted the provisions of the legislation, noting that some of the technicalities, like mailing deadlines, could easily be missed — and not by any fault of homeowners. In addition, he said the judicial foreclosure process does not give a judge enough room to operate.

Carrie Guzman, financial justice director of ACORN in Lansing, echoed Clarke’s concerns.

“Housing counselors are already overloaded,” Guzman said. “Where is the funding going to come from? … I firmly believe we need a moratorium until we can catch up” with the foreclosure crisis, Guzman said.

To Clarke, homeowners who are on the brink of losing their home but are close to saving it are waging a battle against time.

“We need to get people more time, give a judge the ability to freeze the foreclosure,” Clarke said, advocating for his two-year foreclosure moratorium bill which has languished in the Senate.

State Sen. Randy Richardville, the Monroe Republican who chairs the the Senate Banking Committee, has told Michigan Messenger that the moratorium bill would “destroy the economy and housing market.”

“It’s already being destroyed,” Clarke bit back.

Richardville was not available for comment following the House’s approval of the compromise legislation.

Clarke, whose district has been hit hard by foreclosures, said he had little hope that the bill poised to pass the Senate is going to be very effective. “This is not going to slow the foreclosure rate down.”

In fact, Clarke argues, the new legislation may speed up the foreclosure process. He argues the timelines could be triggered more easily under the compromise legislation, forcing homeowners into a foreclosure crisis sooner than they currently face.

So who wins with this legislation?

“It gives political cover to certain politicians so they can say they did something about the foreclosure rate,” Clarke charged.

“We always try for a win-win situation,” ACORN’s Guzman said. “Consumers have a small win.”

Coulouris said the clear winner with this legislation are consumers. “I think people facing foreclosure got a 90-day lifeline,” he said.
Among the timelines and rules set out by the compromise legislation:

» Within seven days of sending a notice of foreclosure, the lender must send information to the borrower indicating they have a right to meet with the lender, or their representative; the name and telephone number of the person they can contact from the lender or representative; and the right to contact a Michigan State Housing Development Authority counselor either by phone or through the MSDHA website.

» If a borrower requests a meeting with the lender within 14 days of when the notice and information explained above is mailed, the lender cannot proceed with foreclosure proceedings for 90 days. If during that meeting, the lender and borrower reach an agreement regarding the loan, the property will not be foreclosed upon.

» The borrower and lender will meet with a housing counselor, and that meeting will occur only if the borrower requests it. The housing counselor will notify the lender of the request within 10 days of receiving the meeting request from the borrower.

» If a borrower meets the qualifications for a loan modification, but the lender refuses to modify or reach an agreement, the borrower can move to have the foreclosure done by a judge.

“Today, we are standing up for those families who are hurting in this economy,” House Speaker Andy Dillon, a Democrat from Redford Township, said in a statement following the House vote. “Too many already have seen their dream of homeownership slip away. With this plan, we can give homeowners the time they need to work out a solution that will keep our hard-working families in their homes, our neighborhoods strong and our communities vibrant.”

According to RealtyTrac, Michigan ranked sixth in the nation in foreclosures in the first quarter of 2009, with more than 33,000 properties in foreclosure. In 2008, more than 145,000 Michigan properties statewide were in foreclosure — a 21 percent increase from 2007 and a 108 percent increase from 2006.