Foreclosure aid awaits Granholm's OK

Mich. homeowners would get 90 days to work with their lender

Associated Press

Lansing -- Legislation that would give Michigan homeowners facing foreclosure a 90-day window to stay in their house and potentially work out a resolution with their lender is headed to Gov. Jennifer Granholm.

The state Senate unanimously approved the bills Tuesday. The House passed the legislation last week.

The legislation lets homeowners delay foreclosure proceedings for 90 days after getting a notice of foreclosure if they meet with a housing counselor and the bank. Lenders refusing to rework loans for those qualified homeowners would have to go to court to finish the foreclosure.

Only homeowners meeting certain financial standards could qualify for modified mortgage payments.

The legislation will take effect 45 days after it becomes law.

According to RealtyTrac, Michigan ranked sixth in the nation in foreclosures in the first quarter of 2009, with more than 33,000 properties in foreclosure. In 2008, more than 145,000 Michigan properties statewide were in foreclosure -- a 21 percent increase from 2007 and a 108 percent increase from 2006.

"Protecting the dream of homeownership is essential to keeping our economy going and our neighborhoods occupied," said Senate Democratic Floor Leader Buzz Thomas, D-Detroit.

"We've been fighting for foreclosure protection for several years and this bill package is a great first step towards helping keep our citizens in their homes."

Meanwhile, in Washington Tuesday, Congress sent the president legislation that encourages banks to spare homeowners from foreclosure, after the industry helped scuttle a tougher measure that would have forced lenders to reduce monthly payments of owners in bankruptcy.

The bill would expand an existing $300 billion program that encourages lenders to write down an individual's mortgage if the homeowner agrees to pay an insurance premium.

The program, set to expire in 2011, would swap out a homeowner's high-interest rate for a 30-year fixed loan backed by the Federal Housing Administration.

Because of strict eligibility requirements, only 50-some homeowners are refinancing through the program compared with the 400,000 people it was estimated to help. The legislation would expand eligibility. For example, the program currently bans participants who intentionally defaulted on the mortgage or other substantial debt. The Senate bill would narrow that prohibition to defaults within the last five years.

Not included in the final bill is a measure by Sen. Dick Durbin, D-Ill., that would have allowed bankruptcy judges to reduce a person's mortgage payment. President Barack Obama included the proposal as a key piece of his housing plan.