Following testimony earlier this month by MCUL and representatives of MSUFCU and E&A CU, the House Tax Policy Committee unanimously approved and reported out H.B. 4135 on Wednesday, April 10. The legislation would allow financial institutions to retain the homestead tax exemption during the foreclosure process. Rep. Frank Foster, R-Pellston, introduced H.B 4135 in mid-February at the request of the MCUL. During testimony last month, the committee asked several questions of the Department of Treasury, focusing in particular on how they arrived at an estimated fiscal impact of $30-50 million for the additional money collected from financial institutions due to payment of the non-homestead rate on foreclosed residential property. Under current law, residential property that qualifies for the homestead exemption defaults to the higher rate when financial institutions take possession of the property during foreclosure, even though the exemption may technically be retained by filing the proper paperwork.
Credit union leaders and MCUL government affairs staff continue to discuss how the legislation would help lower costs to borrowers (lower escrow payment calculation) and lower costs for financial institutions during the lengthy and costly foreclosure process. MCUL will continue working with House leadership to move the legislation toward a vote by the full chamber this spring.