SENATE BILL No. 690

 

 

September 20, 2011, Introduced by Senator HUNTER and referred to the Committee on Banking and Financial Institutions.

 

 

 

     A bill to amend 1961 PA 236, entitled

 

"Revised judicature act of 1961,"

 

by amending section 3205c (MCL 600.3205c), as added by 2009 PA 31.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     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 make

 

the determination under subsection (1) before the expiration of the

 

period within which foreclosure proceedings are prohibited under

 

section 3205a(1)(e) and 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. The mortgage holder or mortgage servicer shall

 

prepare a written modification agreement that contains the terms as

 

calculated under subsection (1). A mortgage servicer shall obtain

 

the appropriate signatures on the modification agreement from the

 

mortgage holder, and a mortgage holder shall sign the modification

 

agreement. The mortgage holder or mortgage servicer shall send the

 

modification agreement to the borrower for the borrower's approval.

 

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.and order the preparation of a written modification

 

agreement under subsection (6).