Michigan Votes Forum

Introduced in the House on February 24, 2009, to mandate that before initiating “foreclosure by advertisement” proceedings, a mortgage lender or servicer must send a notice to the borrower, and if the borrower chooses to try to renegotiate the loan, or is unsuccessful in doing so but meets the criteria for a renegotiation under an FDIC "workout" program, prohibit the lender for proceeding with the foreclosure by advertisement for 90 days. If a borrower were eligible for a for an FDIC "workout," he or she could force a lender unwilling to go that route to undertake judicial foreclosure proceedings, which are more costly and time consuming than foreclosure-by-advertisement

The vote was 73 in favor, 34 opposed and 3 not voting

(House Roll Call 38 at House Journal 0)

Click here to view bill details.

 

Senator Clarke’s first statement is as follows:

I offer this bill to help save the housing market in the state of Michigan and the U.S. economy. My substitute will provide for a moratorium on certain mortgage foreclosures for a period of up to two years. This issue is so important that I do ask for a record roll call vote. My amendment would allow a judge to have the authority to look at each mortgage foreclosure on a case-by-case basis. This does not provide a blanket moratorium on all foreclosures. It also does not relinquish the borrower from the duty to pay on that mortgage. What it does provide, though, is to those homeowners and borrowers who deserve more time, who need more time, who could actually stay in their homes, and maintain their property, to make some type of mortgage payment and to give them that time to do so.

Why should we? Why should we help someone who may not have been responsible in taking out a loan on their home? First of all, the foreclosure crisis is affecting all of us, not just the borrower’s family, but those of us who want to retire. Our 401(k) now have been decimated because of the foreclosure crisis. Those of us who want to move out of our homes can’t do so because our housing values have plummeted because of the foreclosure crisis. There are families right now who may not have the money to pay off their mortgage. They are in foreclosure but have thousands of dollars to give the lender. The lender won’t accept it. They deserve a chance to stay in their home—to protect our property values, to protect our retirement savings, and also so our families won’t have to end up in homeless shelters when they could stay in their home.

The foreclosure crisis is bigger than just the homeowner who is behind on their mortgage payments. It is affecting all of us. I am offering this amendment now, but the one regret I have as a legislator in all my time I have served in this chamber is that I wasn’t able to convince this body to take action a year ago when we could have saved homes from going into default. We could have saved 401(k) and housing values from plummeting. I wasn’t able to convince you back then that it was a state of emergency because even I didn’t see the type of crisis we would be facing in this state and worldwide because of our failure to act in this body; our failure to have the courage to resist special-interest lobbying and for a change look out for the interest of the individual, not the large corporations who are benefiting right now from loans totaling billions of dollars of our kids and grandkids—tax dollars.

This amendment would not involve a bailout using our tax dollars. Nor would it involve a mandate to reduce mortgage payments. My amendment would require a judge to get involved with the foreclosure process. It would bring the borrower and the lender together so that they can voluntarily work something out.

This is prudent, it is cost effective, and it is reasonable. Many of our homeowners right now need this time to save their homes, to save our housing value, to save our retirement savings, and to save this economy. I urge you to vote “yea.”

Senator Clarke’s second statement is as follows:

This amendment is modeled on what this Legislature enacted during the 1930s and half of the states, the majority of the states in this Union, did so to remedy the Great Depression. The one problem back in the 1930s is that the Legislature took too long to act. They adopted this moratorium after we went into a depression. I am asking you to adopt this now to avoid more damage to our economy. The question is this: How many more people have to lose their retirement savings before we take action? How many more homeowners must lose the value of their houses before we take action? How many more families need to end up in homeless shelters before we take some reasonable action to give those responsible homeowners who can afford to stay in their home a few more months to catch up on their mortgage payments?

I think that is far more reasonable than risking billions of tax dollars to bail out financial institutions that helped cause this problem. I urge your support.

 

Senator Richardville’s first statement is as follows:

Let me start by saying that I respect the previous speaker’s passion about this problem. It is a crisis in Michigan, and the committee has done a lot of things over the last couple of years with his support and with the support in a bipartisan and bicameral way. However, there is a disagreement as to how we could best solve the problem when it comes to this piece, the judicial foreclosure piece. In this case, we would be adding not only an extra step, but be punitive in nature to the industry as well as to those trying to get loans. It is expensive, it is ineffective, and it would increase costs to everyone. I do ask for the defeat of this amendment.

 

Senator Hunter’s statement is as follows:

The substitutes to House Bill Nos. 4453-4455 that were adopted under General Orders strip out the judicial foreclosure provisions in the foreclosure process. Again, the threat of a judicial foreclosure and the possibility of a judge rewriting the terms of the mortgage is the hammer that will strongly encourage the banks to actually modify the loans of borrowers where appropriate and reasonable. Again, I feel that stripping out this provision significantly weakens the bill package.

However, while I have my own reservations about this bill package in its current form, I will vote in the affirmative in furtherance of the legislative process on this bill and the two that follow. I am confident that we, along with our colleagues in the House, will be able to reach an appropriate compromise that equally protects the lenders and the borrowers, as we all endeavor to provide the relief that so many citizens in our great state need during this current foreclosure crisis.

 

Senator Clarke’s third statement is as follows:

I want to address the specific provisions in this three-bill package. This package has been characterized as providing a 90-day mediation period. This characterization is just as deceptive as the subprime predatory loans that helped cause the foreclosure crisis. These bills, like predatory loans, sound good, but when you read the fine print, they are terrible. These bills, I believe, will not only not add anything to help the borrower escape foreclosure, but if we adopt these bills, they could be used by a lender to actually speed up and accelerate the foreclosure process.

Here is why I say this. These bills do require a lender to send out a letter that is drafted by the Michigan Housing Development Authority that contains a list of housing counselors, lawyer referral services, and local legal aid organizations. That is commendable, but in order for the borrower to get the benefit of this 90-day period before the foreclosure process starts, that borrower must respond within 14 days after the lender mails the letter to the borrower. You know what? The borrower may not even get the letter in time. On top of that, the housing counselor has 10 days to send a notice in writing to the lender that the borrower wants to negotiate. Now, you know, by that time, you really have 60 days left, if the borrower and housing counselor can even meet that timetable. Even if they meet it, if the lender asks the borrower for all the documents needed to modify the loan, and if the borrower can’t come up with the documents, guess what? There is no 90-day period.

This is a sham. What these bills provide is they provide a lender with a timetable that will be unattainable for many borrowers, thereby, giving the lender a reason to start the foreclosure process earlier than they typically do now because the lender can say, if these bills are enacted into law, “We gave the borrower 14 days and we never heard from him. We were waiting for the housing counselor to send us a letter, but they didn’t. We asked the borrower to send us all of the documentation, but they couldn’t. Therefore, we followed the letter of the law. Let’s put the ad in the legal news and start foreclosure right now.” They can do that.

Let’s assume that the lender does have this time, which I say is about 60 days at the most. What is it time for? Is it time to mediate? There is no requirement in here that the parties must mediate. There is no requirement that the lender must even negotiate. There is nothing in the bills that even says that the lender must offer good faith effort to negotiate. The only thing that these bills provide is that the lender must meet with the borrower. What does that do? That provides nothing.

Do you see what these bill are? It is typical Lansing legislation. We introduce it because it sounds good to the public. It appears like we are offering people relief from foreclosure, but actually we are not doing anything. As a matter of fact, we are creating false hope when there is no relief that exists under these bills.

The provisions that I criticized are the provisions in the House version. The Senate banking committee further weakened those provisions down by eliminating the judicial foreclosure requirement, which could have provided some type of incentive for a lender to agree to modify a loan when a borrower fully complies with the FDIC loan modification workout requirements. The Senate version that is before us weakens down a bill that provides very little and could actually undermine borrowers’ rights in the foreclosure process.

I appreciate you giving me time to speak on this. I do want to say, again, the foreclosure crisis is the heart of our economic problems in this country. We must address these problems effectively. I’ve gone through these bills, and on the record I showed you and explained to you that these bills don’t do what they say that they do. They don’t provide any real help. They put so many requirements in here and timetables that many borrowers won’t be able to comply with this. Even if they do, all they get is a meeting. You see, right now borrowers typically wait 120 days before they start the foreclosure process. This bill effectively only provides maybe 60 days and provides a good reason for a lender to start the foreclosure process a lot earlier, maybe many months earlier. These bills are damaging to the rights that borrowers have. I urge you not to adopt them. They are shams. They create a false hope of relief from foreclosure when none exists in these bills.

 

Senator Richardville’s second statement is as follows:

I would first like to thank the minority vice chair for his recent comments just a few minutes ago and the fact that we do have some disagreement, but in general, these bills are moving along in a process and which we think are going to be very good and very helpful to the public, especially those who are going through a very difficult situation with the potential of foreclosure in front of them.

I do have to take issue with, although there was a lot said by the most recent previous speaker, I would have to take exception to the fact that it was mentioned that these bills were introduced so that it could just sound good to the public. It’s been a bipartisan effort so far, and all three of these bills were introduced by members of the Democrat Party in the House who, I believe, have a good heart toward trying to really solve this problem. It doesn’t have anything to do with sounding good. We’ve got solid testimony that people are in support of this, and we think it’s going to help people to stay in their homes who can afford to stay in their homes.

The main goal of this legislation is to require lending institutions to send a written notice to borrowers before foreclosing and provide 90 days for the two parties to develop an agreeable solution for the mortgage. We will continue to seek solutions which help families, but we must also maintain an efficient and effective mortgage foreclosure process so that costs do not increase for everyone else, including the very people, Mr. President, whom we’re trying to help.

As the chair of the Banking and Financial Institutions Committee, we have been working on this issue and others to address the crisis which faces the people from Michigan. This is another step in a series of Senate reforms which were approved in the last session to help address the challenges within the housing market. We established registration requirements for loan officers, passed legislation prohibiting appraiser coercion, and passed the Save the Dream package which helps more homeowners to qualify for affordable loans.

Mr. President and colleagues, I ask for your support for all three bills.

 

Senator Gleason’s statement is as follows:

I rise in objection to this legislation as well, and as the chairman of the committee had mentioned that this was a bipartisan effort. It might have intended to be that way, but I don’t think it ended up that way.

Nearly 70 years ago, John F. Kennedy wrote one of his books about Why England Slept. That was the title of it, Why England Slept, leading up to World War II. There were those who just said they would turn their head the other way regardless of the atrocities that were happening to certain ethnic groups and the dividing up, and actually, the taking over of certain countries and lands.

My remarks are intended to inform the Senate that the questions today is why this chamber sleeps when record numbers of Michiganians are losing their homes. I have a particular concern about the component when we notify by mail those who have lost their homes or those who are in the stage of losing their homes. Here’s the trouble with that. I believe we’re leaving the most needful of the support behind. When we say that we are going to send a letter, we give them two weeks to mail and receive a letter. Consider this: the most needy will have weeks or months prior to the letter even being sent like maybe some of our older citizens and probably to a more frequent level, the younger families in the state; maybe because of the economic crisis and maybe because they can’t afford the mortgage payment; maybe they left their home where the letter is directed to because they couldn’t pay their water bill, or they couldn’t pay their heating bill, so they moved in with another family member. That is not a very serious attempt to send a letter through the mail to somebody who maybe had moved out of the residence because their water or heat was shut off. Every single one of us have received inquiries about how they can get their water and their heat turned back on this past winter. So many family members have moved in with others or with friends. How do they get that letter of notification to meet their obligations to get through this process and save their homes?

Once again, the question is why England slept or why this chamber slept when numbers of foreclosures are on the books today.

 

Senator Clarke’s fourth statement, in which Senator Scott concurred, is as follows:

I do realize that many lawmakers who supported this package of bills had good intentions. I also acknowledge the fact that this Legislature has taken action to penalize financial institutions and financial officers who may not have acted appropriately. I also recognize the fact that the Legislature has taken action with the intent of preventing these problems from occurring in the future.

The fact is that there are people on the verge of losing their homes right now, and they need help right now. There are people in foreclosure right now and have the money to pay the lender, but the lender won’t accept it. There are people who have had their homes sold by the sheriff right now but still have the means to make some type of mortgage payment on an interim basis and pay their taxes. They need help now, not in the future.

These bills do not provide that type of relief from foreclosure right now. They are shams, and they should not be represented as providing relief to families because they don’t.

 

Senator Brater’s first statement is as follows:

I offer an amendment which will greatly enhance the effectiveness of this bill. What it does is establish a fund so that homeowners who are in foreclosure can have access to legal assistance and representation. I am acquainted with some attorneys who either on a pro-bono or greatly-reduced-fee basis are reaching out to homeowners in foreclosure or are in threat of foreclosure to represent them in the foreclosure proceedings process. Unfortunately, people who are in that situation don’t generally have funds to pay an attorney for fees that are incurred in this process.

What I am proposing here is that we establish a fund if there is a sale of a foreclosed property that the lender who benefited from that sale would take 1 percent of the proceeds from the winning bid and place it in a fund which would then create a legal fund for funding legal representation for borrowers who are in need of representation to protect them in the foreclosure process. I ask for your support of this amendment.

Senator Brater’s second statement is as follows:

I regret the terminology that was used to describe these amendments. They are based on consultation with experts in the field. Since the bills don’t get to the point of preventing foreclosure, but they only ask people to come together for mediation. It is kind of a Catch-22 situation. All we are trying to do is protect the homeowner here and make sure that any lender that tries to foreclose on their home actually has the right to do so.

Senator Brater’s third statement is as follows:

I rise to correct the record. In his remarks earlier in this debate, the Senator from the 17th District stated that this is a bipartisan package because it is the same package of bills that came over from the House. These are not the bills that came over from the House. The bills that came over from the House, had real teeth that would get bankers to the table to negotiate in good faith, including the threat of judicial foreclosure based on a filter laid out by the FDIC requirements of whether a loan should be eligible for that procedure.

These bills that we are voting on today are just a feel-good measure to say if you feel like it, you can get together with your banker and have a little chat. But that is where it is going to end unless the banker chooses to do otherwise. It is totally in the lender’s discretion at this point, and that is the current law. This bill does nothing to change that.