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Wednesday, September 7,2011

Reviewing foreclosure

Ingham County register of deeds wants foreclosure laws changed

by Nyssa Rabinowitz

Bill Donahue nearly lost his home to
foreclosure a month ago. His family home of 25 years had been sold at a
sheriff’s auction and he had an eviction notice on his door. It may have
been just another foreclosure except Donahue had been making payments
under a loan modification agreement with his lender, according to Curtis
Hertel Jr., Ingham County register of deeds.


Hertel, who worked with Donahue to regain his home, says Donahue’s case is not unusual in Michigan.


“I would say we have over 1,000 fraudulent foreclosures in Ingham County over the last three years,” Hertel said. 


Hertel has been holding town hall meetings throughout the
county about fraudulent foreclosures and what citizens can do to protect
themselves. He is also trying to convince the Michigan Legislature to
change the state’s foreclosure laws so what happened to Donahue can’t
happen again.


The next meeting is scheduled for 7 p.m. today  at the Foster Community Center, 200 N. Foster in Lansing, room 213. 


“There’s no point in the (foreclosure) process where a
private citizen gets to go to an elected official and say I am being
wrongly foreclosed,” Hertel said at a town hall meeting in Leslie last
month. “The only way to do that is to wait until the eviction, which is
too late because their credit has already been destroyed. My point to
the Michigan Legislature is if that can happen to a Michigan citizen,
then the laws aren’t working and they need to be changed.”


Almost all of Michigan’s foreclosures are done through a
system called foreclosure-by-advertisement, Hertel explained. Under this
system, the mortgage holder advertises the intention to foreclose in a
weekly ad for four weeks in  a local newspaper. The home then goes up for auction. The property owner then has six months before eviction to buy it back.


The only option for stopping the foreclosure process once
it has begun is by going to court, said Elliot Spoon, a mortgage law
professor at Michigan State University.


“The effect would be to delay the completion of the
foreclosure, and that’s good if the borrower is able to begin making
their mortgage payments,” Spoon said. “If they’re not, it’s simply
delaying the time that the mortgage will be foreclosed upon.”


Foreclosure severely damages a borrower’s credit score,
Hertel said. It also affects surrounding properties by lowering property
values. This lowers tax revenue for both the county and state,
affecting services such as public safety, road repairs and education.


In good years, Ingham County had between 400 and 500
foreclosures, Hertel said. That number has increased to over 1,500
foreclosures a year for the last three years, causing the taxable value
of Ingham County properties to drop by over $1 billion since 2009.


 Michigan’s
foreclosure-by-advertisement system does not allow for any review to
determine if the foreclosure is valid, which can cause problems, Hertel
said.


"Under the current system there is an assumption that the
bank is always right,” he said. “The banks do not have to provide
information to the sheriff’s office that shows that the foreclosure is
valid. You can literally, in Ingham County and across the state, come up
to my office and say ‘Hey Curtis I’m committing a fraud,’ and by
Michigan law I have to accept the documents even if I know they’re
fraudulent. We need some third-party person involved.” 


Spoon agreed that the number of foreclosure abuses has
been rising, but he wasn’t sure if changing the law would help since
borrowers already have the option of court. Current law also requires
the borrower and lender to meet before foreclosure starts to discuss
refinancing or modifying the loan, and problems can be discussed then as
well.


“The question is do we permanently change
the statute for a temporary problem,” Spoon said. “My sense is that the
(banks) were simply unable to handle the volume of people in default
and the volume of foreclosures and so looked for shortcuts.”


One of those shortcuts uses “robo,” or automated, signing
to replace documents that a mortgage company or bank needs to foreclose
on a home, Spoon said. Foreclosures require documents such as affidavits
stating files have been reviewed before the foreclosure starts. If the
affidavit is signed without review, then the affidavit is incorrect and
the foreclosure process is flawed.


Hertel said robo-signed documents have been used on over
400 documents in county foreclosures in the past three years making
those foreclosures illegal. However, the current system makes it hard
for citizens to fight back and receive loan modifications.


“If we can make it harder for (banks to take a home) and
make them have to file the documents correctly, make them have to do
everything legally, they’re less likely to go through foreclosure (and)
they’re more likely to give reasonable modifications,” Hertel said.


State Rep. Jim Ananich, D-Flint, introduced legislation in
May requiring that Michigan uses judicial foreclosures in order to
build in a third party review process. The bill is  in committee.


The bill would “put some judicial review in it so we know
these people, before their house is sold at auction, legally should be
foreclosed,” Hertel said. “I don’t think that’s too much to ask.”



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