WESTLAND – Stepping in where the federal government has failed to act, State
Representatives Marc Corriveau (D-Northville) and
Richard LeBlanc (D-Westland) 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
"Federal policies have utterly failed to prevent the meltdown of the subprime mortgage
market," Corriveau said. "This refinancing legislation puts
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.
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.
"Families should not have to choose between making a mortgage payment and putting food
on the table," LeBlanc said. "When families are allowed to consider options that can provide relief from volatile
adjustable-rate mortgages, they are able to save more and pay for critical expenses for their children, such as
education and health care."
Across the country, 29 percent of home loans last year were high-rate mortgages, up
from 16 percent in 2004, according to a Wall Street Journal analysis published on Oct. 11.
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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