LANSING – As millions of Americans face home foreclosure and the number is likely to skyrocket over the next several years, the National Consumer Law Center has released a report urging states to strengthen their foreclosure laws in order to keep more people in their homes.

The report Foreclosing a Dream: State Laws Deprive Homeowners of Basic Protections found that antiquated state laws at times can afford more protections to renters than they can to homeowners.

“Now, as families, communities and states face an onslaught of financial and social problems caused by the rising tide of foreclosures, states need to craft laws that can maximize the number of their residents who will be able to keep their homes,” the report stated.

Michigan’s laws were ranked weak or nonexistent in several categories the Center reviewed, giving only moderate marks for the state’s housing assistance fund and laws regarding right to redeem, deficiency judgments and accounting of sale proceeds.

The report comes at the same time legislators are working on a package dealing with mediation of home foreclosure, which is expected to come out of the House Banking and Financial Services Committee later this week.

One of the recommendations out of the Center includes a mandate for judicial supervision of all residential mortgage foreclosures. Michigan currently doesn’t require judicial supervision, but under the legislation being debated, a foreclosure would have to go through the judicial process if the borrower is eligible for a loan modification after mediation but is not offered one.

During testimony before the committee last week, bank officials told lawmakers that the judicial process would drag out a foreclosure when the state already has a long redemption period.

Other recommendations from the Center include giving homeowners at least 60 days to catch up on delinquent mortgage payments without penalty, guarantee homeowners the right to pay arrearages before a foreclosure sale, require personal service notifying a homeowner about a foreclosure, providing programs that give homeowners emergency financial assistance, allowing homeowners to get their home back after a certain period once a foreclosure sale has gone through, prohibiting lenders from pursuing deficiency judgments after foreclosure sale and requiring any surplus money from the sale be given to the borrower.

Under current state law, a trustee refers the disbursement of surplus money from the foreclosure sale to the court if a junior lien holder makes a claim. The state doesn’t require the surplus be released to the borrower.

And Michigan was also noted for its redemption period, with the state giving a homeowner more time to get the home back based on how much of the mortgage debt had been paid before delinquency.

“Many state foreclosure laws were enacted in the 19th and 20th centuries and have gone largely unchanged since that time. These laws came into effect at a time when the residential mortgage industry, to the extent it existed at all, bore no relation to what exists today. Significantly, these laws pre-date the enormous changes in the mortgage market that began in the 1980s,” said John Rao, co-author of the report and a staff attorney for the Center.

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