Stepping in where the federal government has failed to act, House Democrats have passed an aggressive plan to fight the epidemic of foreclosures by establishing programs to allow homeowners saddled with risky adjustable-rate mortgages (ARMs), and those who have missed mortgage payments, to refinance and secure a fixed-rate loan. The plan, which will allow more Michigan residents to avoid losing their homes, is part of the Democrats' comprehensive approach to help jumpstart the state's economy.
"Federal policies have utterly failed to prevent the meltdown of the subprime mortgage market," said State Representative Marc Corriveau (D-Northville). "This refinancing legislation puts Michigan at the forefront of states' efforts to protect hard-working men and women from losing their piece of the American Dream."
The plan allows at-risk low- and moderate-income borrowers – homeowners facing a spike in housing expenses due to their adjustable-rate mortgage, or residents who have already missed payments due to financial constraints – to secure a fixed-rated loan through the Michigan State Housing Development Authority (MSHDA). The agency provides loans financed through the sale of tax-exempt and taxable bonds and notes to private investors – not from state tax revenues.
Recently, the House also passed a package of bills establishing a registration process for mortgage loan officers working in Michigan.
"Increasing the accountability of mortgage loan officers strengthens Michigan's mortgage loan industry, which will help protect our working families from unscrupulous practices," said State Representative Andy Coulouris (D-Saginaw), chair of the House Banking and Financial Services Committee.
To crack down on the predatory lending that contributed to the mortgage meltdown crisis, House Democrats passed the Michigan Home Loan Protection Act, a comprehensive legislative package that strengthens consumer protections in the face of the collapsing subprime mortgage market.
"These protections from the deceptive and fraudulent practices of predatory lenders are long overdue," said Majority Floor Leader Steve Tobocman (D-Detroit). "It is time that Michigan joins the more than two dozen other states that have adopted basic consumer protections to ensure that homeowners are not taken advantage of by unscrupulous lenders."
The Michigan Home Loan Protection Act will:
- Ban predatory lending practices, such as making loans without requiring a borrower to prove their ability to repay the loan, encouraging a borrower to default, charging excessive late fees and charging fees for a payoff statement.
- Protect homeowners' equity by prohibiting home refinancing to generate fees for the lender unless there is a tangible net benefit to the borrower.
- Protect consumers from being steered toward high-cost loans when they would otherwise qualify for a traditional loan.
- Require vulnerable borrowers to receive independent counseling from a certified third-party, non-profit counselor.
- Give injured and aggrieved homeowners legal recourse so they can independently enforce these consumer protections against unscrupulous lenders.
House Democrats will continue to fight for working families to ensure that Michigan remains a great place to live, work and raise a family.