HB-4543, As Passed Senate, December 14, 2011

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 4543

(As amended December 14, 2011)

A bill to amend 1961 PA 236, entitled

"Revised judicature act of 1961,"

by amending sections 3205a, 3205b, 3205c, 3205d, and 3205e (MCL

600.3205a, 600.3205b, 600.3205c, 600.3205d, and 600.3205e),

sections 3205a and 3205b as added by 2009 PA 30, sections 3205c and

3205d as added by 2009 PA 31, and section 3205e as amended by 2011

PA 72.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 3205a. (1) Subject to subsection <<(6)>>, before

commencing a 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,~~ to which

section 3204(4) applies, 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.

as the person to contact and that has the authority to make

agreements under sections 3205b and 3205c. However, if section

3205(1) applies to the foreclosure proceeding, the person

designated under this subsection shall be the individual,

department, or unit designated under section 3205(1) and the notice

shall give the name and address and a dedicated telephone number

and a dedicated electronic mail address of the individual,

department, or unit.

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

~~counselors prepared by the Michigan state housing development~~

~~authority and that~~ within 14 30 days after the notice is sent, the

borrower may, either by contacting the person directly or by

contacting a housing counselor from the list enclosed with the

notice, 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 enclosed with the notice is a list of housing

counselors prepared by the Michigan state housing development

authority and that the borrower may request a housing counselor

from the list to attend any meetings with a person designated under

subdivision (c).

(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.

(j) The number of days in the redemption period that will be

available to the borrower if the property is eventually sold at a

foreclosure sale under this chapter, unless the property is

abandoned and section 3241 or 3241a applies.

(k) That, under section 3278, if the property is sold at a

foreclosure sale under this chapter, the borrower will be held

responsible to the person who buys the property at the mortgage

House Bill No. 4543 as amended December 14, 2011

foreclosure sale or to the mortgage holder for damaging the

property during the redemption period.

(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~~ MAY publish a notice informing

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

person WHO ELECTS TO PUBLISH A NOTICE UNDER THIS SUBSECTION 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.

House Bill No. 4543 as amended December 14, 2011

(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 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. 3205b. (1) A If a borrower ~~who~~ wishes to participate in

negotiations to attempt to work out a modification of a mortgage

loan, within 30 days after the notice under section 3205a is mailed

to the borrower, the borrower shall either contact the person

designated under section 3205a(1)(c) directly or contact a housing

counselor from the list provided under section 3205a. ~~within 14~~

~~days after the list is mailed to the borrower. Within 10 days after~~

~~being contacted by a borrower, a~~ After being contacted by a

borrower under this subsection and within 30 days after the notice

under section 3205a is mailed to the borrower, the housing

counselor shall inform the person designated under section

3205a(1)(c) in writing of the borrower's request.

(2) ~~After~~ Within 10 days after being ~~informed of~~ contacted by

a ~~borrower's request to meet under this section,~~ borrower or

housing counselor under subsection (1), the person designated under

section 3205a(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 3205c. The borrower shall

give the person designated under section 3205a(1)(c) copies of any

documents requested under this section within 60 days after the

notice under section 3205a is mailed to the borrower. If the

borrower does not provide the documents requested as required by

this subsection, a party entitled to foreclose the mortgage may

proceed with the foreclosure.

(3) ~~A housing counselor contacted by~~ After being informed that

a borrower wishes to meet under this section, a person designated

under section 3205a(1)(c) shall schedule a meeting ~~between~~ with the

borrower ~~and the person designated under section 3205a(1)(c)~~ to

attempt to work out a modification of the mortgage loan. At the

request of the borrower, ~~the~~ a housing counselor ~~will~~ from the list

provided under section 3205a may 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. 3205c. (1) If a borrower has, either directly or through

a housing counselor, contacted a ~~housing counselor~~ person

designated under section 3205a(1)(c) 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~~ Before 90 days after the notice required under section

3205a(1) is sent or 10 days after the meeting between the borrower

and the person designated under section 3205a(1)(c), whichever is

later, 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, 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 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.

(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.

Sec. 3205d. (1) The Michigan state housing development

authority shall develop ~~the~~ a list of housing counselors approved

by the United States department of housing and urban development or

by the Michigan state housing development authority who may perform

the duties of housing counselor under sections 3205a to 3205c.

(2) Subject to subsection (5), a person who is not on the list

of housing counselors developed under this section shall not

perform the duties of housing counselor under sections 3205a to

3205c.

(3) Subject to subsection (5), a person who is not on the list

of housing counselors developed under this section shall not

represent that the person is entitled to perform the duties of

housing counselor under sections 3205a to 3205c.

(4) A person who violates subsection (2) or (3) is guilty of a

misdemeanor punishable by imprisonment for not more than 90 days or

a fine of not more than $2,000.00, or both.

(5) Subsections (2) and (3) do not apply to an attorney to

whom both of the following apply:

(a) The attorney is licensed to practice law in this state.

(b) The attorney provides mortgage assistance relief services

House Bill No. 4543 as amended December 14, 2011

as part of his or her practice of law.

Sec. 3205e. Sections 3205a to 3205d are repealed effective

~~January 5, 2012.~~DECEMBER 31, 2012.

Enacting section 1. Sections 3205a, 3205b, 3205c, and 3205d of

the revised judicature act of 1961, 1961 PA 236, MCL 600.3205a,

600.3205b, 600.3205c, and 600.3205d, as amended by this amendatory

act, apply to foreclosure proceedings in which the first notice

under section 3205a of the revised judicature act of 1961, 1961 PA

236, MCL 600.3205a, is mailed to the mortgagor on or after February

1, <<2012>>.

Enacting section 2. This amendatory act does not take effect

unless all of the following bills of the 96th Legislature are

enacted into law:

(a) House Bill No. 4542.

(b) House Bill No. 4544.