On Wednesday, the state House Committee on Tax Policy took testimony on HB 4135, sponsored by Rep. Frank Foster, R-Petoskey, which would allow financial institutions to realize the full benefit of the principal residence exemption, or “homestead exemption,” on foreclosed properties.
Current law as enacted last year, allows financial institutions to file the appropriate paperwork to technically retain the exemption so that future buyers will not have any disruption or additional cost, but still requires payment by the institution of the additional non-homestead amounts through a different statutory route. Rep. Foster’s legislation would eliminate the requirement to pay the additional non-homestead mills.
MCUL & Affiliates testified in support of the legislation, joined by officials from MSUFCU and E&A CU. The legislation was also supported by the Michigan Association of Realtors and the Michigan Bankers Association, but saw opposition from the state Department of Treasury.
“This legislation would provide actual relief to credit unions that are forced to foreclose, despite their best efforts to keep the borrower in their home.” MCUL CEO David Adams said. “The additional mills from the non-homestead rate represent conditional revenue, based on our members’ decision whether or not to foreclose, and eliminating this requirement doesn’t reduce the amount that would normally be due to the state under the homestead rate.
“This bill will reduce the costs associated with an unfortunate circumstance for borrower and lender alike, and will benefit surrounding communities by providing more flexibility to restore homes and get them back to productive use quickly.”