Revamped foreclosure policies looming

The Michigan State Senate has not lived up to Governor Snyder’s expectations in recent weeks, opting for vacation instead of voting on vital bills.

However, one bill, comprised of 4 pieces of legislation tie-barred together, did make it through before recess and now it’s sitting on Snyder’s desk waiting for a verdict.

ABC 10’s Rick Tarsitano has more on the possibility of new regulations in the foreclosure process.

For decades, Michigan has been lauded as state with reasonable and balanced foreclosure policies.

Legislators lived up to that billing in December of 2008 when the housing bubble burst, acting quickly to pass new foreclosure laws.

Five months later they had new mandates in place, which required banks to inform families in writing that they were going into foreclosure and that the bank had an obligation to meet with the family to work out a loan modification or mortgage extension.

It was dubbed the 90-day law due to the fact that it set up an unprecedented 3-month pre-foreclosure period where banks, homeowners, and a Michigan Housing Development Authority Counselor could work together to reconcile the situation and avoid foreclosure; a near death sentence for someone’s credit rating.

“Foreclosure is going to show up on a person’s credit report for a long time. A short sale doesn’t. A short sale shows their was a mortgage that was paid off,” explained Terry Huffman, a Realtor and Certified Distressed Property Expert at RE/MAX.

But short sales take time.

In the past year, REMAX closed 631 properties in Marquette County, 52 of which were foreclosures with six going into a short sale.

Of those 6, the average time on the market was 258 days compared to 155 for a traditional sale.

“So it’s about three months longer to a short sale and often times a buyer’s not willing to wait that out. Often times a buyer has moved into town, they’re here to buy a house, and they want to get into it in 30 to 45 days. It kind of exempts a lot of people who are in the buying pool from even considering a short sale,” Huffman noted.

And the buyer isn’t the only party that needs time to mull things over.

Lenders sift through hundreds of pages of tax forms, financial reports and other personal information.

“It all boils down to someone making a decision as to whether or not that’s the best case scenario for the lender. Sometimes foreclosure is the best case scenario for the lender.

In the past, that might not be the end of the world for the homeowner. They would still have a 6 month redemption period to challenge the foreclosure for being fraudulent or at least make the necessary arrangements to come up with enough money to save the home or make the transition to a new location.

But starting June 30th, the redemption period can shrink from 6 months to less than two weeks.

With the new legislation, banks and lenders can come to the foreclosed property unannounced as many times as they want and check for a laundry list of items including debris in the front yard. If anything fits the bill they can have the homeowners evicted in ten days time – a power that no other state allows. Organizations like the Michigan Foreclosure Task Force believe this will lead to more foreclosures that turn into vacant homes thereby decreasing property values and tax revenues in the neighborhood.

The bill made it through the house strictly on party lines and narrowly passed through the Senate with the support of Tom Casperson and Howard Walker

Now, it hangs in the balance on Governor Snyder’s desk. His decision will be enacted on July 1st. If you’d like to voice your opinion call the governor’s office and recommend which way he should vote on Senate Bill 383.