New Legislation Affecting Foreclosure Redemption Period

Despite a significant decline in foreclosures, some homeowners are still struggling to keep their homes today. RealtyTrac data suggests that Michigan currently has 50,759 mortgages in foreclosure. Our housing market is recovering, but it is still fragile in some areas.

Under the present system, Michigan homeowners facing foreclosure have a ninety day pre-foreclosure workout period prior to receiving a foreclosure notice from the lender.

During this time, the homeowner can pursue a mortgage modification with their lending institution. Beyond that, there is a six month redemption period during which the homeowner can redeem the property by paying off the debt or selling the property via a short sale.

But this week, state lawmakers are reviewing changes to our foreclosure laws.

There have already been several hearings for the four-bill package known as Senate Bills #380-384 and House Bills #4764-4767.

Part of the package (SB 383 specifically) contains legislation concerning shortening the length of the redemption period from six months to sixty days.

Just this morning the Senate passed SB 383, with an amendment.

Senate Bill 383 will keep the six month foreclosure redemption period intact; however, an amendment to the bill now provides lending institutions the right to perform an inspection on the property after it goes to Sheriff Sale. This ensures that the property is being kept up and is not being stripped of valuables. If the bank finds that the home has been stripped or vandalized, it may take the homeowner to court to accelerate the redemption period.

However, if the property is being properly maintained, the homeowner can utilize the entire six month redemption period to pursue a short sale or other options.

Opposing Viewpoints:

Those who supported shortening the redemption period, including Michigan banks and financial institutions, maintained that a homeowner’s best chance at saving his home is at the beginning of the foreclosure process. They note that new federal regulations set to start January 2014 would require lenders to wait 120 days before sending the first notice or filing the foreclosure, thus helping many avoid foreclosure altogether.

They also claim that the current length of the redemption period leads to more abandoned homes and community decay.

And finally, many delinquent homeowners continue to live in their homes for extended periods of time without making payments, much to the dismay of their lenders.

Among those who voiced concerns over shortening the redemption period was the Michigan Association of Realtors® (MAR). MAR believed that shortening the redemption period would have a negative effect on those trying to avoid foreclosure, especially those considering a short sale.

The short sale process of marketing the home, negotiating an agreement of sale and then acquiring bank approval normally takes longer than sixty days. MAR feared that shortening the redemption period could eliminate this option for many.

Maintaining the short sale option for those in foreclosure is important because they sell at a much smaller discount to the market than foreclosures (roughly 10% compared to 40%). Passing this legislation could further destabilize the market and reduce home values.

Keep watching:

The House committee is expected to vote on this issue later today.

I will keep you posted on developments.

Holly Hurd is a REALTOR with Coldwell Banker Weir Manuel in Northville, Michigan 48167
hollyhurd@hotmail.com
 www.Northvillehomes4sale.net
Holly Hurd ~Living in the Northville, Michigan area for 40+ years , Holly Hurd is graduate of Northville High School, Schoolcraft College, Michigan State then raising her own family here Holly Hurd has first hand knowledge and knows the area quite well Please feel free to contact her for all your real estate needs