State and Federal Plans will Help Stressed Homeowners Facing Foreclosure

Home foreclosures are stressful for homeowners, communities, and neighborhoods. Foreclosures are everyone’s problem because they affect property values and can lead to population losses which affect job availability. To help solve this problem, several Democratic Senators have sponsored a three bill package to prevent foreclosures and offer incentives to lenders. At the federal level, President Barack Obama announced on March 4 that his Homeowner Affordability and Stability Plan to prevent foreclosures is now open for business.

In Michigan, Senate Bills 29 and 30 would give people extra time to straighten out their finances while they stay in their homes. Once a home is in foreclosure there is still a redemption period during which it can be reclaimed by paying what is owed. These bills would extend that redemption period to two years. Letting people stay in their home gives them an incentive to sort out their finances.

Senate Bill 31 gives lenders incentives to work with people trying to redeem their homes. The bill gives the lender loan guarantees through the Michigan State Housing Development Authority (MSHDA) for the homeowners that qualify for the extended time period under Senate Bill 29. Foreclosure is a two-pronged issue and we have to work with both the homeowner and the lender to solve the problem. I will work closely with my Senate colleagues to help pass these bills which, along with President Obama’s plan, will help many Michigan citizens.

President Obama’s plan to assist families facing home foreclosure will help millions of homeowners across Michigan and throughout the country that are doing their best to meet their payments. The comprehensive $75 billion plan works with homeowners, lenders and their mortgage servicers, and investors to lower interest rates to help citizens reach affordable monthly payments.

This plan would offer incentives to lenders and servicers to modify interest rates on mortgages so that the monthly mortgage payment is no more than 31 percent of the person’s monthly gross income. The lender would modify the loan so that it stood at 38 percent. The government would then step in with subsidies that would lower the mortgage payment to 31 percent of the person’s income. This will help the millions of people who could avoid foreclosure and afford their mortgage payments if they were just smaller. This will help preserve neighborhoods by keeping homes occupied instead of having them sit empty for months and years with For Sale signs in their front yards.

Homeowners suffering from falling property values also get a helping hand from this plan. Many of these people have not met the 20 percent equity requirement necessary to refinance their loan. Under the President’s plan they would qualify for refinancing into a lower monthly payment. This provision will help stabilize neighborhoods by taking preventive action against foreclosure.

Lenders and investors also win. For every loan that is modified, lenders will receive $1,000. Investors will receive a $1,500 one-time incentive payment for restructuring loans which are not yet delinquent. With the subsidies for lowering interest rates, these provisions will help the industry as well as the homeowner.

No one wins in a foreclosure-not homeowners, lenders, investors, and certainly not communities. These plans offer a helping hand to people trying hard to do their best. By working together with these state and federal programs, we can help hardworking families stay in their homes, which will help stabilize our communities and cities.