Stop Michigan Foreclosure

Here’s the headline announcing it from last week.

It’s about time!  But most experts believe it will have little impact.  According to this article, even Detroit Democrat Senator Hansen Clarke says “It’s too little, too late. I feel it gives false hope to people already in foreclosure.” And according to that same article, Clarke says the new legislation may speed up the foreclosure process because the timelines could be triggered more easily under the new legislation, forcing homeowners into a foreclosure crisis sooner than they currently face.

Here are some of the highlights and what it means to you:

1) The law takes affect 45 days after she signed it (signed 5/21/09 so it takes affect 7/5/09).  Prior to July 5th, you don’t get the law’s benefits.  If your lender forecloses prior to 7/5/09, it’s too late for this help.

Even after 7/5/09, if your lender forecloses (and you are in the “redemption period”), just as always, your only work out option is a short sale (if you owe more than the house is worth).  Why is this? During redemption period (that time after the foreclosure and before your lender kicks you out of the house), your mortgage is gone; there are no modifications available because there is nothing to modify.

2) Must go to financial counseling within 14 days of getting the new required notice from your lender.  This new notice will be sent to you within 7 days of the foreclosure notice being sent.  Jeez, counseling? How embarrassing is that?  Will you be able to get the counseling even if you want it? Carrie Guzman, financial justice director of ACORN says “Housing counselors are already overloaded”.  I know counselors near me are typically booked 7-14 days out.  But if you miss that 14-day deadline, you’re out of luck and the foreclosure will be taking place within 4-5 weeks after that.  Wow!

3) If you qualify and your bank doesn’t work on a loan modification (they have 90 days to consider a modification), your bank must do judicial foreclosure.  This means they will take you to court (more public embarrassment),  How many will qualify for a loan modification?  20%, 10%, most experts believe less than 3% as that is the current rate.

4) To make matters worse, according to this article, the new law requires your property address to be published in a local paper – increasing the chances of getting harassing letters and phone calls from potential scam artists.

Overall, you can tell I’m not thrilled with this new legislation as it indeed seem too little too late, will likely help few families, and will make the entire foreclosure process even more public and embarrassing.

Joel