LANSING – Stepping in where the federal government has failed to act, State Representative Bettie Cook Scott (D-Detroit) and House Democrats today passed an aggressive plan to fight the epidemic of foreclosures by establishing programs to allow homeowners saddled with risky adjustable-rate mortgages (ARMs), and those who have missed mortgage payments, to refinance and secure a fixed-rate loan. The plan, which will allow more Michigan residents to avoid losing their homes, is part of the Democrats' comprehensive approach to help jumpstart the state's economy.
"This plan will help more Michigan families avoid the threat of losing one of their most valuable possessions – their home," said Scott, a lead sponsor of the package. "The meltdown of the subprime mortgage market has had devastating effects around the country. Since the federal government refused to step in, we decided to take action."
The plan allows at-risk low- and moderate-income borrowers – homeowners facing a spike in housing expenses due to their adjustable-rate mortgage, or residents who have already missed payments due to financial constraints – to secure a fixed-rated loan through the Michigan State Housing Development Authority (MSHDA). The agency provides loans financed through the sale of tax-exempt and taxable bonds and notes to private investors – not from state tax revenues.
"A foreclosure notice doesn't just affect that one resident -- it affects the entire neighborhood," Scott said. "When homes are abandoned, property values tend to go down and crime tends to go up. By keeping Michigan residents in their homes, we are making our communities stronger."
This plan builds on the Michigan Home Loan Protection Act, a Democratic House legislative package announced this summer. The Michigan Home Loan Protection Act will:
- Ban predatory lending practices, such as encouraging borrowers to default.
- Protect consumers from being steered toward high-cost loans when they would otherwise qualify for a traditional loan.
- Give aggrieved homeowners legal recourse so they can independently enforce these consumer protections against unscrupulous lenders.
The House today also passed a concurrent resolution calling for changes in state tax and housing policy to deal with urban areas that are subject to high rates of home mortgage foreclosure and tax delinquency. The resolution requests that the Department of Treasury designate up to two local protected tax zones in an eligible community each year. The department would select these zones based on demonstrated need, evidence of a residential property value stabilization plan, identification of a local nonprofit plan manager, and the submission of any applicable administration fees.