LANSING – Stepping in where the federal government has failed to act, State Representative Bob Constan (D-Dearborn Heights) and his colleagues in the House today 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 a comprehensive approach to help jumpstart the state's economy.
"Families all throughout Dearborn Heights and Michigan have been devastated by the home foreclosure epidemic," Constan said. "Unfortunately, there have been no federal policies enacted to prevent the meltdown of the subprime mortgage market. Our refinancing legislation will help the hard-working men and women from losing their piece of the American Dream, their home."
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.
The MSHDA program allows borrowers who meet income and credit score requirements to avoid dramatic increases in their housing expenses by securing a fixed-rated loan. It would allow homeowners who have missed payments on their adjustable-rate mortgages, and who are unable to work out an agreement with their lender to avoid a foreclosure, to apply for a fixed-rated loan.
Michigan ranks fourth in the nation in foreclosures, with 13,415 foreclosure filings in October, according to the latest figures from RealtyTrac, an Irvine, Calif.-based online foreclosure firm. That represents a 63 percent increase from October 2006.
"Foreclosures affect entire neighborhoods," Constan said. "When homes are abandoned, property values are lowered and crime goes up. By preventing foreclosures, we are making our communities stronger and healthier."