July 21, 2010, Introduced by Reps. Tlaib, Donigan, Corriveau, Slavens, Nathan, Durhal, Young, Geiss, Hammel, Bauer, Segal, Smith, Bennett, Leland, Ebli, Constan, Huckleberry, Kennedy, Roberts, Lipton, Gonzales, Polidori, Robert Jones, Meadows, Bettie Scott, Kandrevas, Womack and Johnson and referred to the Committee on Urban Policy.
A bill to amend 1966 PA 346, entitled
"State housing development authority act of 1966,"
by amending section 49a (MCL 125.1449a), as added by 1981 PA 173,
and by adding sections 49w, 49x, 49y, 49z, 49aa, and 49bb; and to
repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec.
49a. (1) To entitle the The
authority to give a notice as
prescribed
in sections 49b and 49c, and to make such foreclosure,
may commence proceedings to foreclose a mortgage by advertisement
if
all of the following are required circumstances exist:
(a)
That some A default in a condition of such the mortgage
shall
have has occurred, by which the power to sell became
operative.
(b)
That no suit An action or proceeding shall have has not
been
instituted, at law, to recover the debt then remaining secured
by
such the mortgage, or any part thereof of the mortgage; or if
any
suit an action or proceeding has been instituted, that the suit
the
action or proceeding has been
discontinued, or that an
execution
upon the on a judgment rendered therein in an action or
proceeding has been returned unsatisfied, in whole or in part.
(c)
That the The mortgage containing such the power
of sale
has
been duly properly recorded; and if it shall have has been
assigned,
that all the assignments thereof have been recorded.
(2)
In cases of mortgages If a
mortgage is given to secure the
payment of money by installments, each of the installments
mentioned
in such the mortgage after the first , shall be taken and
deemed
to be, treated as a separate and independent mortgage. ,
and
such
The mortgage for each of such the installments
may be
foreclosed
in the same manner and with the identical same effect as
if
such a separate mortgages mortgage were
given for each of such
subsequent
installments and a installment.
A redemption of any such
a
sale by the mortgagor shall have has the
identical same effect as
if
the sale for such the installments had been made upon an
independent prior mortgage.
(3) The authority shall not commence proceedings under this
chapter to foreclose a mortgage of property described in section
49x(1) if 1 or more of the following apply:
(a) Notice has not been mailed to the mortgagor as required by
section 49x.
(b) After a notice is mailed to the mortgagor under section
49w, the time for a housing counselor to notify the person
designated under section 49x(1)(c) of a request by the mortgagor
under section 49z(1) has not expired.
(c) Within 14 days after a notice is mailed to the mortgagor
under section 49x, the mortgagor has requested a meeting under
section 49y with the person designated under section 49x(1)(c) and
90 days have not passed after the notice was mailed.
(d) The mortgagor has requested a meeting under section 49x
with the person designated under section 49x(1)(c), the mortgagor
has provided documents if requested under section 49y(2), and the
person designated under section 49x(1)(c) has not met or negotiated
with the mortgagor under this chapter.
(e) The mortgagor and the authority have agreed to modify the
mortgage loan and the mortgagor is not in default under the
modified agreement.
(f) Calculations under section 49z(1) show that the mortgagor
is eligible for a loan modification and foreclosure under this
chapter is not allowed under section 49z(7).
(4) Subsection (3) applies only to proceedings under this
chapter in which the first notice under section 49b is published
after the effective date of the amendatory act that added this
subsection and before July 5, 2011.
Sec. 49w. As used in this section and sections 49x to 49aa:
(a) "Borrower" means the mortgagor.
(b) "Mortgage servicer" means the servicing agent of the
mortgage.
Sec. 49x. (1) Subject to subsection (6), before proceeding
with a sale under this chapter of property claimed as a principal
residence exempt from tax under section 7cc of the general property
tax act, 1893 PA 206, MCL 211.7cc, the authority shall serve a
written notice on the borrower that contains all of the following
information:
(a) The reasons that the mortgage loan is in default and the
amount that is due and owing under the mortgage loan.
(b) The names, addresses, and telephone numbers of the
authority, the mortgage servicer, or any agent designated by the
authority or mortgage servicer.
(c) A designation of 1 of the persons named in subdivision (b)
as the person to contact and that has the authority to make
agreements under sections 49y and 49z.
(d) That enclosed with the notice is a list of housing
counselors prepared by the authority and that within 14 days after
the notice is sent, the borrower may request a meeting with the
person designated under subdivision (c) to attempt to work out a
modification of the mortgage loan to avoid foreclosure and that the
borrower may also request a housing counselor to attend the
meeting.
(e) That if the borrower requests a meeting with the person
designated under subdivision (c), foreclosure proceedings will not
be commenced until 90 days after the date the notice is mailed to
the borrower.
(f) That if the borrower and the person designated under
subdivision (c) reach an agreement to modify the mortgage loan, the
mortgage will not be foreclosed if the borrower abides by the terms
of the agreement.
(g) That if the borrower and the person designated under
subdivision (c) do not agree to modify the mortgage loan but it is
determined that the borrower meets criteria for a modification
under section 49z(1) and foreclosure under this chapter is not
allowed under section 49z(7), the foreclosure of the mortgage will
proceed before a judge instead of by advertisement.
(h) That the borrower has the right to contact an attorney,
and the telephone numbers of the state bar of Michigan's lawyer
referral service and of a local legal aid office serving the area
in which the property is situated.
(2) The authority shall enclose with a notice under subsection
(1) a list prepared by the authority under section 49aa of the
names, addresses, and telephone numbers of housing counselors
approved by the United States department of housing and urban
development or the authority.
(3) The authority shall serve a notice under subsection (1) by
mailing the notice by regular first-class mail and by certified
mail, return receipt requested, with delivery restricted to the
borrower, both sent to the borrower's last known address.
(4) Within 7 days after mailing a notice under subsection (3),
the authority shall publish a notice informing the borrower of the
borrower's rights under this section. The authority shall publish
the information 1 time in the same manner as is required for
publishing a notice of foreclosure sale under section 49b. The
notice under this subsection shall contain all of the following
information:
(a) The borrower's name and the property address.
(b) A statement that informs the borrower of all of the
following:
(i) That the borrower has the right to request a meeting with
the authority or mortgage servicer.
(ii) The name of the person designated under subsection (1)(c)
as the person to contact and that has the authority to make
agreements under sections 49y and 49z.
(iii) That the borrower may contact a housing counselor by
visiting the authority's website or by calling the authority.
(iv) The website address and telephone number of the authority.
(v) That if the borrower requests a meeting with the person
designated under subsection (1)(c), foreclosure proceedings will
not be commenced until 90 days after the date notice is mailed to
the borrower.
(vi) That if the borrower and the person designated under
subsection (1)(c) reach an agreement to modify the mortgage loan,
the mortgage will not be foreclosed if the borrower abides by the
terms of the agreement.
(vii) That the borrower has the right to contact an attorney,
and the telephone number of the state bar of Michigan's lawyer
referral service.
(5) A borrower on whom notice is required to be served under
this section who is not served and against whom foreclosure
proceedings are commenced under this chapter may bring an action in
the circuit court for the county in which the mortgaged property is
situated to enjoin the foreclosure.
(6) If the borrower and the person designated under subsection
(1)(c) have previously agreed to modify the mortgage loan under
section 49y, this section and sections 49y and 49z do not apply
unless the borrower has complied with the terms of the mortgage
loan, as modified, for 1 year after the date of the modification.
Sec. 49y. (1) A borrower who wishes to participate in
negotiations to attempt to work out a modification of a mortgage
loan shall contact a housing counselor from the list provided under
section 49x within 14 days after the list is mailed to the
borrower. Within 10 days after being contacted by a borrower, a
housing counselor shall inform the person designated under section
49x(1)(c) in writing of the borrower's request.
(2) After being informed of a borrower's request to meet under
this section, the person designated under section 49x(1)(c) may
request the borrower to provide any documents that are necessary to
determine whether the borrower is eligible for a modification under
section 49z. The borrower shall give the person designated under
section 49x(1)(c) copies of any documents requested under this
section.
(3) A housing counselor contacted by a borrower under this
section shall schedule a meeting between the borrower and the
person designated under section 49x(1)(c) to attempt to work out a
modification of the mortgage loan. At the request of the borrower,
the housing counselor will attend the meeting. The meeting and any
later meetings shall be held at a time and place that is convenient
to all parties, or in the county where the property is situated.
Sec. 49z. (1) If a borrower has contacted a housing counselor
under section 49y but the process has not resulted in an agreement
to modify the mortgage loan, the person designated under section
49x(1)(c) shall work with the borrower to determine whether the
borrower qualifies for a loan modification. Unless the loan is
described in subsection (2) or (3), in making the determination
under this subsection, the person designated under section
49x(1)(c) shall use a loan modification program or process that
includes all of the following features:
(a) The loan modification program or process targets a ratio
of the borrower's housing-related debt to the borrower's gross
income of 38% or less, on an aggregate basis. Housing-related debt
under this subdivision includes mortgage principal and interest,
property taxes, insurance, and homeowner's fees.
(b) To reach the 38% target specified in subdivision (a), 1 or
more of the following features:
(i) An interest rate reduction, as needed, subject to a floor
of 3%, for a fixed term of at least 5 years.
(ii) An extension of the amortization period for the loan term,
to 40 years or less from the date of the loan modification.
(iii) Deferral of some portion of the amount of the unpaid
principal balance of 20% or less, until maturity, refinancing of
the loan, or sale of the property.
(iv) Reduction or elimination of late fees.
(2) In making the determination under subsection (1), if the
mortgage loan is pooled for sale to an investor that is a
governmental entity, the person designated under section 49x(1)(c)
shall follow the modification guidelines dictated by the
governmental entity.
(3) In making the determination under subsection (1), if the
mortgage loan has been sold to a government-sponsored enterprise,
the person designated under section 49x(1)(c) shall follow the
modification guidelines dictated by the government-sponsored
enterprise.
(4) This section does not prohibit a loan modification on
other terms or another loss mitigation strategy instead of
modification if the other modification or strategy is agreed to by
the borrower and the person designated under section 49x(1)(c).
(5) The person designated under section 49x(1)(c) shall
provide the borrower with both of the following:
(a) A copy of any calculations made by the person under this
section.
(b) If requested by the borrower, a copy of the program,
process, or guidelines under which the determination under
subsection (1) was made.
(6) Subject to subsection (7), if the results of the
calculation under subsection (1) are that the borrower is eligible
for a modification, the authority or mortgage servicer shall not
foreclose the mortgage by advertisement but may proceed to
foreclose the mortgage judicially. If the results of the
calculation under subsection (1) are that the borrower is not
eligible for a modification or if subsection (7) applies, the
authority or mortgage servicer may foreclose the mortgage by
advertisement.
(7) If the determination under subsection (1) is that the
borrower is eligible for a modification, the authority or mortgage
servicer may proceed to foreclose the mortgage by advertisement if
both of the following apply:
(a) The person designated under section 49x(1)(c) has in good
faith offered the borrower a modification agreement prepared in
accordance with the modification determination.
(b) For reasons not related to any action or inaction of the
authority or mortgage servicer, the borrower has not executed and
returned the modification agreement within 14 days after the
borrower received the agreement.
(8) If the authority or mortgage servicer begins foreclosure
proceedings under this chapter in violation of this section, the
borrower may file an action in the circuit court for the county
where the mortgaged property is situated to convert the foreclosure
proceeding to a judicial foreclosure. If a borrower files an action
under this section and the court determines that the borrower
participated in the process under section 49y, a modification
agreement was not reached, and the borrower is eligible for
modification under subsection (1), and subsection (7) does not
apply, the court shall enjoin foreclosure of the mortgage by
advertisement and order that the foreclosure proceed judicially.
Sec. 49aa. The authority shall develop the list of housing
counselors approved by the United States department of housing and
urban development or by the authority who may perform the duties of
housing counselor under sections 49x to 49z.
Sec. 49bb. Sections 49w to 49aa are repealed effective July 5,
2011.