HOUSE BILL No. 6423

 

September 8, 2010, Introduced by Reps. Johnson and Melton and referred to the Committee on Banking and Financial Services.

 

     A bill to amend 1961 PA 236, entitled

 

"Revised judicature act of 1961,"

 

by amending sections 3204, 3205, 3205a, and 3205c (MCL 600.3204,

 

600.3205, 600.3205a, and 600.3205c), section 3204 as amended and

 

section 3205 as added by 2009 PA 29, section 3205a as added by 2009

 

PA 30, and section 3205c as added by 2009 PA 31.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 3204. (1) Subject to subsection (4), a party may

 

foreclose a mortgage by advertisement if all of the following

 

circumstances exist:

 

     (a) A default in a condition of the mortgage has occurred, by

 

which the power to sell became operative.

 


     (b) An action or proceeding has not been instituted, at law,

 

to recover the debt secured by the mortgage or any part of the

 

mortgage; or, if an action or proceeding has been instituted, the

 

action or proceeding has been discontinued; or an execution on a

 

judgment rendered in an action or proceeding has been returned

 

unsatisfied, in whole or in part.

 

     (c) The mortgage containing the power of sale has been

 

properly recorded.

 

     (d) The party foreclosing the mortgage is either the owner of

 

the indebtedness or of an interest in the indebtedness secured by

 

the mortgage or the servicing agent of the mortgage.

 

     (2) If a mortgage is given to secure the payment of money by

 

installments, each of the installments mentioned in the mortgage

 

after the first shall be treated as a separate and independent

 

mortgage. The mortgage for each of the installments may be

 

foreclosed in the same manner and with the same effect as if a

 

separate mortgage were given for each subsequent installment. A

 

redemption of a sale by the mortgagor has the same effect as if the

 

sale for the installment had been made upon an independent prior

 

mortgage.

 

     (3) If the party foreclosing a mortgage by advertisement is

 

not the original mortgagee, a record chain of title shall exist

 

prior to the date of sale under section 3216 evidencing the

 

assignment of the mortgage to the party foreclosing the mortgage.

 

     (4) A party shall not commence proceedings under this chapter

 

to foreclose a mortgage of property described in section 3205a(1)

 

if 1 or more of the following apply:

 


     (a) Notice has not been mailed to the mortgagor as required by

 

section 3205a.

 

     (b) After a notice is mailed to the mortgagor under section

 

3205a, the time for a housing counselor to notify the person

 

designated under section 3205a(1)(c) of a request by the mortgagor

 

under section 3205b(1) has not expired.

 

     (c) Within 14 days after a notice is mailed to the mortgagor

 

under section 3205a, the mortgagor has requested a meeting under

 

section 3205b with the person designated under section 3205a(1)(c)

 

and 90 days have not passed after the notice was mailed.

 

     (d) The mortgagor has requested a meeting under section 3205b

 

with the person designated under section 3205a(1)(c), the mortgagor

 

has provided documents if requested under section 3205b(2), and the

 

person designated under section 3205a(1)(c) has not met or

 

negotiated with the mortgagor under this chapter.

 

     (e) The mortgagor and mortgagee have agreed to modify the

 

mortgage loan and the mortgagor is not in default under the

 

modified agreement.

 

     (f) Calculations under section 3205c(1) show that the

 

mortgagor is eligible for a loan modification and foreclosure under

 

this chapter is not allowed under section 3205c(7).

 

     (g) The foreclosing party has not executed an agreement to

 

participate as a servicer in the help for hardest hit program

 

administered by or through the Michigan state housing development

 

authority and the Michigan state housing development authority has

 

not certified that the foreclosing party is eligible to participate

 

in the program.

 


     (5) Subsection (4) applies only to proceedings under this

 

chapter in which the first notice under section 3208 is published

 

after the effective date of the amendatory act that added this

 

subsection July 5, 2009 and before 2 years after the effective date

 

of the amendatory act that added this subsection July 5, 2011.

 

     Sec. 3205. As used in this section and sections 3205a to

 

3205d:

 

     (a) "Borrower" means the mortgagor.

 

     (b) "Help for hardest hit program" means the help for hardest

 

hit program administered by or through the Michigan state housing

 

development authority and approved by the United States department

 

of treasury.

 

     (c) (b) "Mortgage holder" means the owner of the indebtedness

 

or of an interest in the indebtedness that is secured by the

 

mortgage.

 

     (d) (c) "Mortgage servicer" means the servicing agent of the

 

mortgage.

 

     Sec. 3205a. (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 foreclosing party 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

 

mortgage holder, the mortgage servicer, or any agent designated by

 


the mortgage holder 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 3205b and 3205c.

 

     (d) That enclosed with the notice is a list of housing

 

counselors prepared by the Michigan state housing development

 

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 3205c(1) and foreclosure under this chapter is not

 

allowed under section 3205c(7), the foreclosure of the mortgage

 

will proceed before a judge instead of by advertisement.

 

     (h) That the foreclosure may not proceed if the foreclosing

 

party has not executed an agreement to participate as a servicer in

 


the help for hardest hit program.

 

     (i) (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) A person who serves a notice under subsection (1) shall

 

enclose with the notice a list prepared by the Michigan state

 

housing development authority under section 3205d of the names,

 

addresses, and telephone numbers of housing counselors approved by

 

the United States department of housing and urban development or

 

the Michigan state housing development authority.

 

     (3) A person 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 person who mails the notice shall publish a notice informing

 

the borrower of the borrower's rights under this section. The

 

person shall publish the information 1 time in the same manner as

 

is required for publishing a notice of foreclosure sale under

 

section 3208. 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 mortgage holder 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 3205b and 3205c.

 

     (iii) That the borrower may contact a housing counselor by

 

visiting the Michigan state housing development authority's website

 

or by calling the Michigan state housing development authority.

 

     (iv) The website address and telephone number of the Michigan

 

state housing development 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 foreclosure may not proceed if the foreclosing

 

party has not executed an agreement to participate as a servicer in

 

the help for hardest hit program.

 

     (viii) (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 3205b, this section and sections 3205b and 3205c 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. 3205c. (1) If a borrower has contacted a housing

 

counselor under section 3205b but the process has not resulted in

 

an agreement to modify the mortgage loan, the person designated

 

under section 3205a(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 3205a(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

 

3205a(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 3205a(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 3205a(1)(c).

 

     (5) The person designated under section 3205a(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 mortgage holder or mortgage servicer shall

 


not foreclose the mortgage under this chapter but may proceed under

 

chapter 31. If the results of the calculation under subsection (1)

 

are that the borrower is not eligible for a modification or if

 

subsection (7) applies, and if the mortgage holder or mortgage

 

lender is not prohibited from foreclosing the mortgage under

 

section 3204(4)(g), the mortgage holder or mortgage lender may

 

foreclose the mortgage under this chapter.

 

     (7) If the determination under subsection (1) is that the

 

borrower is eligible for a modification, the mortgage holder or

 

mortgage servicer may proceed to foreclose the mortgage under this

 

chapter if both all of the following apply:

 

     (a) The person designated under section 3205a(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

 

mortgage holder or mortgage servicer, the borrower has not executed

 

and returned the modification agreement within 14 days after the

 

borrower received the agreement.

 

     (c) The mortgage holder or mortgage lender is not prohibited

 

from foreclosing the mortgage under section 3204(4)(g).

 

     (8) If a mortgage holder 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 3205b, 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 under

 

chapter 31.