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Michigan Lawmakers Extend Pre-Foreclosure Negotiation Law

In May 2009 Michigan’s then-governor Jennifer M. Granholm signed an amendment to Michigan’s foreclosure by notification statute requiring a 90-day pre-foreclosure negotiation period. The law was initially set to expire July 5, 2011 but Gov. Snyder signed a bill extending the law until January 5, 2012. Homeowners facing foreclosure should understand the details of the law and how they can take advantage of the protections the law offers.

Details of the 90-Day Pre-Foreclosure Negotiation Law

The Pre-Foreclosure Negotiation Law offers homeowners facing foreclosure an opportunity to work with the lender to avoid foreclosure. The law requires that lenders give 90 days’ notice to borrowers before beginning foreclosure proceedings. The lender must serve written notice on the borrower informing the borrower of his or her rights under the law.

The notice must provide the borrower the mortgage officer’s contact information and the names of housing counselors approved by the U.S. Department of Housing and Urban Development (HUD) or the Michigan State Housing Development Authority (MSHDA). The notice should also inform the borrower that he or she should contact the mortgage officer within 14 days of receiving the notice in order to set a meeting to attempt to negotiate a loan modification to avoid foreclosure. In addition, foreclosure proceedings will not begin until 90 days after the meeting date if the borrower requests a meeting with the mortgage officer

Steps for the Borrower to Take

Upon receiving notice from the mortgage lender, the borrower needs to contact the mortgage officer to request a meeting. The borrower also must supply the officer with any information requested by the officer to determine if the homeowner qualifies for a modification.

If the borrower does request a meeting and the officer determines that the borrower is eligible for a modification but the lender begins foreclosure by advertisement proceedings anyway, the borrower may file an action in court to turn the process into a judicial foreclosure action.

Benefits for Homeowner

The 90-Day Pre-Foreclosure Negotiation Law offers struggling homeowners two distinct benefits. First, it requires mortgage lenders to attempt to negotiate with homeowners in an effort to avoid foreclosure, rather than rushing to foreclose under Michigan’s foreclosure by advertisement law. Second, the law connects homeowners with no-cost certified credit counselors. Research from the Federal Reserve showed that the counseling and the opportunity to negotiate with lenders increased the likelihood that a homeowner would get a modification by 200 percent.

Additionally, when struggling homeowners receive credit counseling, they are more likely to catch up with their mortgage payments. A national study showed those homeowners who received foreclosure counseling were 45 to 50 percent more likely to become current on their mortgage payments. Homeowners are also less likely to be taken in by modification scams when they have credit counseling.

Attempts at Expanding the Law

Supporters of the law are calling for lawmakers to act so that the law extends past January 5, 2012. State House and Senate groups are expected to begin working on a more long-term law, soliciting input from various interest groups.

Facing the possibility of home foreclosure can be daunting. If you are struggling with your mortgage and worried about foreclosure, do to hesitate to contact an experienced attorney who can advise you of your options.