LANSING – Stepping in where the federal government has failed to act, House Democrats today testified in front
of the House Banking Committee on behalf of 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 foreclosure epidemic affects everyone – not just the homeowners at risk of losing their most valuable
possession," said State Representative Mike
Simpson (D-Jackson). "Every time we can prevent a foreclosure notice from being issued, we are helping to
build stronger neighborhoods."
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 introduced House Bill 5445, which creates a Recapture Tax Fund within MSHDA. In certain situations, the
Authority's refinancing of single-family mortgages may result in tax liability for the borrower. The fund is designed to
help address and compensate the borrower for this tax liability.
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.