LANSING – Stepping in where the federal government has failed to act, House Democrats and Gov.
Jennifer M. Granholm today unveiled their aggressive plan to fight the epidemic of foreclosures by
establishing programs to allow homeowners saddled with risky adjustable-rate mortgages (ARMs), and those who have missed
mortgage payments, to refinance and secure a fixed-rate loan. The plan, which will allow more
The plan allows at-risk low- and moderate-income borrowers – homeowners facing a spike in housing expenses
due to their adjustable-rate mortgage, or residents who have already missed payments due to financial constraints
– to secure a fixed-rated loan through the Michigan State Housing Development Authority (MSHDA). The agency
provides loans financed through the sale of tax-exempt and taxable bonds and notes to private investors – not from
state tax revenues.
Simpson pointed to an article in Thursday's Lansing State Journal that noted
"Day after day, we hear on the news about skyrocketing adjustable-rate mortgages and their negative impact on
The MSHDA program allows borrowers who meet income and credit score requirements to avoid dramatic increases in
their housing expenses by securing a fixed-rated loan. It would allow homeowners who have missed payments on their
adjustable-rate mortgages, and who are unable to work out an agreement with their lender to avoid a foreclosure, to
apply for a fixed-rated loan.
The analysis, in which the Journal examined more than 250 million mortgage records, finds that the
subprime crisis cuts across income, race and community, and affects a far broader range of Americans than typically
assumed. More and more borrowers are likely to fall behind, because as much as $600 billion of adjustable-rate subprime
loans are slated to ramp up to higher rates by the end of next year.
According to federal data, subprime borrowers who are steered by brokers into signing adjustable-rate mortgages
are often not informed of the inherent risks nor given the option of fixed-rate loans. Some lenders and brokers write
loans they know borrowers cannot afford for the sole purpose of pocketing the fees. Federal home-loan agencies Fannie
Mae and Freddie Mac estimate that 30 to 50 percent of all borrowers with subprime loans could have qualified for more
affordable mortgages.
This plan builds on the Michigan Home Loan Protection Act, a Democratic House legislative package announced this
summer. The Michigan Home Loan Protection Act will:
· Ban predatory lending practices, such as encouraging borrowers to
default.
· Protect consumers from being steered toward high-cost loans when
they would otherwise qualify for a traditional loan.
· Give aggrieved homeowners legal recourse so they can independently
enforce these consumer protections against unscrupulous lenders.
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