HOUSE BILL No. 4118

 

January 20, 2011, Introduced by Reps. Tlaib, Barnett, Liss, Bauer, Segal, Santana, Geiss, Smiley, Hovey-Wright, Irwin, Howze, Townsend, Brown, Cavanagh, Stapleton, Lane and Slavens and referred to the Committee on Government Operations.

 

     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

 

49x, the time for a housing counselor to notify the person

 

designated under section 49x(1)(c) of a request by the mortgagor

 

under section 49y(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.