State moves to ease crisis

State moves to ease crisis

Ron French / The Detroit News

LANSING -- Homeowners struggling with adjustable-rate mortgages may get help from a set of bills passed by the House Committee on Banking and Financial Services on Wednesday.

The bills would allow the state to assist homeowners refinance adjustable-rate mortgages to fixed-rate loans. The $4.2 billion program would be funded by bonds.

The bills are part of a plan unveiled by Gov. Jennifer Granholm last month aimed at slowing the foreclosure crisis.

They are among dozens of bills that would clamp down on an industry that consumer advocates blame for the loss of thousands of homes in Metro Detroit.

Some of those bills would:

• Allow the state housing authority to use bond money to help homeowners struggling with adjustable rate mortgages to refinance to 30-year fixed loans.

• License loan officers.

• Require six hours of training per year to keep a license.

• Deny licenses to anyone with prior felony or misdemeanor convictions for embezzlement, forgery, fraud or criminal violations involving financial transactions or securities in the past 10 years.

• Require license applicants to pay a fee that would offset the cost to the state of licensing and monitoring loan officers.

• Ban predatory lending practices such as pre-payment penalties that stop homeowners from refinancing, or selling a refinance to a homeowner when there is no tangible financial benefit to the borrower.

Kirt Gundry, director of the state's Office of Financial and Insurance Services, which polices the mortgage industry, said he is hopeful that bills to regulate lenders and loan officers will pass this session.

He would like to triple the number of examiners; currently, there are 12 examiners to monitor 2,800 lending entities.

Those examiners are paid through licensing fees charged to lenders and brokers.

Those fees could cover the cost of additional examiners if the Legislature doesn't again raid the fund to help with another budget crisis in future years.

David Lagstein, head organizer for the Association of Community Organizations for Reform Now (ACORN) of Michigan, said he is pleased that the state is now considering tightening controls of the mortgage industry.

But much of the problem that legislation is meant to correct doesn't happen anymore.

The type of risky loans that sent tens of thousands of families into foreclosure is seldom made in Michigan today, because those lenders have closed or raised standards.

"We do realize that this legislation is designed to help families going forward, but it doesn't help the people who are facing these adjustable rates in the coming months," Lagstein said.

"If this legislation had passed three or five years ago, it would have saved thousands and thousands of families from suffering."