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New State Legislation Aims to Stop Foreclosures

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By : Leticia Carvalho    99 or more times read
The state of Michigan has the third highest foreclosure rate in the country with 2 percent of total families experienced foreclosures in 2007, equivalent to 87,210 households. This figure has doubled from 2006 and has now grown to 3.6 percent during the first half of 2008, which is much higher than the national average of 2.75 percent.

One in every seven Michigan homeowners with subprime loans lost their homes to foreclosures. This is equivalent to 25,000 households who were granted high-risk mortgage loans with adjustable rates. These homeowners should not have qualified for these loans during the housing boom due to deficiencies in their credit and yet they still received these mortgages. Now, they stand to lose their homes due to foreclosures as the rates adjusted and they could not make payments for their mortgages.

Trying to have something in place against foreclosures before the holidays begin, Michigan lawmakers are working double time to pass bills that would help troubled homeowners. Some of these legislative proposals include a moratorium on foreclosures; requirements for advance notices before filing for default; and some leeway for delinquent homeowners to refinance in order to meet monthly payments.

The new bills require lenders to communicate with homeowners 45 days in advance before notices of foreclosures are filed. The lender is also required to report to the state all notices, and allow the state’s banking regulator to make assessments on whether the mortgage should be extended for another 30 days.

The new bills include an improved mediated settlement plan, which the state will oversee. This would give some breathing space for delinquent homeowners with subprime loans to work out a repayment plan with lenders and avoid the foreclosure process. However, lenders contend that their existing support to restructure loans for applicable mortgages is sufficient and will not need a state oversight.

Despite this scramble for new legislation, the existing status of the economy and the housing market makes one thing certain – that Michigan will continue to have high foreclosure rates.
Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.

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