ACTION ALERT!! Senate Bill to be Introduced to Shorten Redemption Period from 6 months to 60 days!

The Issue: Senator Darwin Booher, Chair of the Senate Banking Committee, has informed us that he will introduce a bill this week that would extend the existing Pre-Foreclosure Negotiation Law (90-Day Law) through Jan. 9, 2014. The same bill would then repeal that law the next day on Jan. 10, 2014 (when the new Consumer Financial Protection Bureau (CFPB) mortgage servicing rules go into effect). The law replacing it would, among other things, shorten Michigans longstanding 6-month Redemption Period to 60 days. This bill is on a very fast track. Senator Booher is pushing to have it approved by both houses of the legislature by June 13th just three and a half weeks from now! MFTFs Position: After careful consideration, the MFTF Steering Committee has reached the decision that the MFTF will oppose the entire bill because of the provision shortening the Redemption Period. While we support other provisions contained within the bill, including the extension of the existing law through Jan. 9, 2014, we believe the benefits of these provisions are far outweighed by the short-term and long-term damage that would be done by shortening the Redemption Period. Rationale: For the past several years, the combination of Michigans Pre-Foreclosure Negotiation Law and longstanding 6-month Redemption Period have effectively prevented foreclosures when possible and, when prevention is impossible, have provided homeowners the time to find safe, affordable housing. This effectiveness of these well-balanced and reasonable laws has been documented in an annual survey of HUD and MSHDA-certified foreclosure prevention counselors and legal aid attorneys working on the ground with Michigan homeowners at risk of losing their homes to foreclosure. Shortening Michigans 6-month Redemption Period to 60 days would be a major step backwards for homeowners, neighborhoods and communities, all of whom suffer when a foreclosure occurs and/or a family is displaced. In the short term, this drastic move would prevent Michigan residents from benefiting from the recent increase in short sales which currently make up 5%-10% of Michigans housing sales (Michigan Association of Realtors). Closing on a short sale, and thus avoiding the negative financial impact of a foreclosure, typically takes the better part of the 6-month Redemption Period. While a short sale doesnt save the home for the homeowner, it does have significant positive financial implications for not only that homeowner, but the neighborhood, which is spared another vacant property. It also helps raise property values. According to a recent RealtyTrac report, the average price of homes sold through a short sale is $175,000 in comparison to an average price of $147,000 when a home is repossessed by the lender (REO properties). According to a recent National Fair Housing study, REO properties also tend to remain vacant longer and are often neglected by the lender/owner, losing marketability and value. http://www.realtytrac.com/content/foreclosure-market-report/q1-2012-us-foreclosure-sales-report-7213. http://www.housingwire.com/news/short-sales-are-demand-realtytrac. http://www.nationalfairhousing.org/LinkClick.aspx?fileticket=UF6xIHF35rI%3d&tabid=3917&mid=9405

In the long term, this bill is an attempt to fix something that isnt broken. Most states in the country are searching for ways to avoid foreclosures and the negative impact they have on families, neighborhoods and communities, instead of rushing the process and turning more homes into vacant properties, often unnecessarily. Several years ago, Michigan made a trade-off when it decided to allow lenders to foreclose by advertisement rather than to require them to go through the court system (judicial foreclosure). Since foreclosure by advertisement is a much quicker process than judicial foreclosure, the trade-off was that homeowners would have a reasonable 6-month Redemption Period in which to attempt to redeem the house or to find a new place to live. Without this Redemption Period, Michigans average foreclosure timeline would be the shortest in the Great Lakes region. Prior to the foreclosure crisis, large number of at-risk homeowners were able to redeem their homes during the 6 months afforded by Michigans Redemption Period. During the foreclosure crisis of the past six years, many homeowners are using the 6-month Redemption Period to avoid foreclosure by selling their homes on short sales. Though in smaller numbers than during the pre-crisis years, many homeowners are still able to use the six months to gather the resources to redeem their homes. And, when all else fails, they use the time to find safe, affordable housing. As the crisis subsides and the economy and job market continue to improve, more and more at-risk homeowners will be in a position to once again use the 6-month Redemption Period to redeem their homes. As Michigans 6-month Redemption Period has proven for decades to be effective in both good times and bad, tampering with it can only do harm. Our Strategy: Given the unexpectedly fast timeline, our best hope is to try to slow things down by forcing legislators to separate out the extension of the current law through Jan. 9, 2014 from the other provisions of the bill designed to take effect on January 10, 2014. Our only way of doing this is to oppose the entire bill. We know that nearly all stakeholder groups interested in the issue, including those representing lenders interests, want to see the current Pre-Foreclosure Law extended through January 9, 2014 in order to avoid the chaos it would cause to let it lapse. We also know that some of these groups would also like to see the Redemption Period shortened. The question will be whether these groups desire for a shortened redemption period will outweigh their desire to avoid the chaos of letting the current Pre-Foreclosure Negotiation law lapse. For our purposes, we are willing to let the current law lapse if that is the price of preserving the 6-month Redemption Period. If, on the other hand, legislators decide to separate out the extension of the current law from the other provisions of the bill, passing the extension and delaying taking up the other provisions until the fall, that would be even better. We would consider either outcome successful. WE ARE URGING YOU TO TAKE THE FOLLOWING ACTIONS AS SOON AS THE BILL IS INTRODUCED AND WE EMAIL YOU THE BILL NUMBER . . . . 1) Call, email or meet with your local state representatives and the members of the House Financial Services Committee (roster attached here). Tell them you oppose this bill and why (see rationale above and add your own reasons). We are confident that this bill will easily move through the Senate, which means that our only chance of stopping it or slowing it down is in the House. We need to spend our precious time as strategically as possible, so we cant waste time contacting members of t he Senate Banking Committee. Chairman Booher and his committee are committed to passing this bill. We will have little or no influence on them. 2) Ask the board of your organization to pass a resolution/send a letter opposing the bill to all of the aforementioned parties. We will email you a boilerplate letter, into which you can insert the bill number when introduced, shortly. 3) MFTF staff will write an opinion piece and pitch it to major statewide papers. We will also develop a boilerplate opinion piece and ask our members to tailor it and pitch it to their local media. You will receive this in the next couple of days. 4) Help MFTF staff line up homeowners, realtors, counselors, legal aid attorneys and others to testify in opposition to the bill at upcoming hearings. The dates of the hearings are yet to be determined but the standing meeting time for the House Financial Services committee is Wednesday at noon. 5) MFTF staff will provide written and verbal testimony at the relevant hearings. WE WILL KEEP YOU INFORMED AS THINGS PROGRESS!