State foreclosure bills diluted; Senate nixes role for judges

Stripping out the "stick" of judicial intervention from a bill the Michigan House approved last week, the Michigan Senate Banking and Financial Institutions Committee on Wednesday passed a watered-down foreclosure prevention package.

The four Republican senators on the committee voted in favor of the measure but the three Democrats opposed it.

The three-bill package — a subject of last week's MT cover story — requires lenders and homeowners in danger of foreclosure to try to negotiate loan modifications with a housing counselor for 90-days, during which time no foreclosure proceedings would be filed. The lender would also be required to notify homeowners of housing counselor options. Under the House version, if no agreement were reached, a judge would oversee discussions; the Senate committee removed that provision.

Committee Chair Sen. Randy Richardville (R-Monroe) says the judicial provision was too punitive.

"There are some bad lenders out there but it's possible we will be stretching out the process and punish some of the good lenders," he says.

Committee member Hansen Clarke (D-Detroit) was livid, blaming the changes on the banking lobby.

"I'm doing everything I can to suppress my anger and try to stay rational about this issue," he says. "Our political priorities are skewed overall. Politicians are more apt to help out the large financial institutions, the billionaire investors, than they are to help out the average citizen who's struggling."

Clarke has proposed a two-year moratorium on all foreclosures, calling them the reason for the economic crisis in the country and in Michigan.

"These bills don't give meaningful relief for people who are in foreclosure," Clarke says. "It's too little help."

The Senate could vote as early as Thursday, which would send the bills back to the House. Because the House approved a different version of the package that included the judicial oversight, it's likely the lower chamber will vote not to concur and the package will go to conference committee, says Andy Coulouris (D-Saginaw).

"I had understood all along that the Senate was going to want to weaken some of the provision of the bill," says Coulouris, who heads the House Banking and Financial Services Committee and authored part of the package.

The Senate version also exempts lenders who participate in President Obama's foreclosure prevention plan. "That functionally removes about 75 percent of the mortgages from applicability," Coulouris says. "We are weighing how to respond."