From the Archives: March 2013

MCUL-Supported Amendment Adopted to Blight Package; Homestead Tax Exemption Legislation; Lawmakers Compare 90-Day Foreclosure Law to CFPB Mortgage Rule 

MCUL-Supported Amendment Adopted to Blight Package
MCUL & Affiliates successfully gained support in the Senate Judiciary Committee for an amendment to exempt credit unions and CUSOs from several proposed “urban blight” sanctions, fees and penalties. Blight continues to be a growing issue in certain urban areas throughout Michigan. Chairman Rick Jones, R-Grand Ledge, recently took testimony on Senate Bills 35-39. Sen. Virgil Smith, D-Detroit, is once again the lead proponent of the measures (sponsoring SB 35 and 36).

The bills amend the Home Rule City Act to establish additional civil and criminal penalties that could be imposed on a party who committed a blight violation and failed to pay associated costs. The legislation also aims to lower the minimum population requirements for municipalities to set up a blight administration system, and would allow the city’s administrative hearings bureau to foreclose a lien against property involved in a blight violation. The remaining bills in the package deal specifically with sanctions related to permits, zoning ordinances, delinquencies in paying civil fines and the appeals process for such.

The MCUL worked closely with Smith and other members of the Senate Judiciary Committee on the financial institution carve-out, for which MCUL provided final language for consideration during the Senate’s recent hearing. As amended, the legislation now focuses on the “bad actors” that the legislation was originally intended to impact without exposing regulated financial institutions to additional liability and costs. Further amendments are expected on the Senate floor this week. The MCUL will continue to track the package as it approaches a vote by the full Senate. The MCUL-supported amendment was adopted to the package in the Senate Judiciary Committee last week, advancing to the full Senate for floor consideration.

Additional issues regarding blight are expected to surface in the coming weeks, and the MCUL appreciates the bill’s sponsor recognizing that regulated financial institutions are not a primary cause of blighted property.

MCUL Members Testify in Support of Homestead Tax Exemption Legislation
Sara Dolan of MSUFCU and Dave Brandt of E&A CU testified last week in the House Tax Policy Committee in support of H.B. 4135, legislation to allow financial institutions to retain the homestead tax exemption during Michigan’s foreclosure process. During testimony, the committee had several questions of the Department of Treasury, specifically how they arrived to an estimated value of $30 million to $50 million for the additional collected from financial institutions due to them paying the commercial rate on homestead property.

Rep. Frank Foster, R-Pellston, introduced H.B 4135 in mid-February to allow financial institutions the ability to maintain and benefit from the principal residence tax exemption on residential properties that are reverted back to the financial institution through foreclosure. Under current law, residential property that qualifies for the homestead exemption automatically defaults to the higher “non-homestead” rate when financial institutions take possession of the property during foreclosure, even though the exemption may technically be retained.

Credit union leaders discussed how the legislation would help lower costs to borrowers (would lower escrow payment calculation) and also help lower costs incurred by financial institutions during the lengthy and costly foreclosure process. The Michigan Realtors Association also testified in support of the legislation. The House Tax Policy Committee has scheduled the legislation for further discussion and a possible vote later this week. Click here to access the MCUL’s state issue brief on the Homestead Tax Exemption legislation.

Lawmakers Compare 90-Day Foreclosure Law to CFPB Mortgage Servicing Rule
Following the CFPB’s new federal regulation on mortgage servicing, members of the House and Senate Banking & Financial Institutions Committees have started discussions on whether an extension of Michigan’s 90-day pre-foreclosure communication law is necessary. The CFPB mortgage servicing requirements are similar in nature to the state law, and in some cases even more burdensome.

Michigan’s law is currently scheduled to sunset on June 30, but the CFPB rule does not officially take effect until January 2014. The MCUL recently communicated its support for a sunset of the state law and also communicated its opposition to any proposed “early compliance dates” for the CFPB’s regulation. Discussions with Chairman Darwin Booher, R-Evart, have continued following MCUL’s recent Capitol Area Chapter Foreclosure Roundtable Discussion hosted at MSUFCU in early February.

MCUL continues to communicate its opposition to the increasing length of the foreclosure process, specifically the additional 120 days (as opposed to 90) the new CFPB servicing rule adds to the front end of the foreclosure process. While the new CFPB regulation provides a “small servicer” carve-out, all institutions are subject to the additional 120 days. The MCUL continues to strongly advocate for a possible reduction in the redemption period. Discussions on the current law, the new CFPB rule, and other possible reforms continue as the MCUL works with Sen. Booher on possible reform legislation.

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