Last summer, Ingham County Register of Deeds Curtis Hertel Jr. threw his support behind a proposal to reform Michigan’s foreclosure practices. The measure is an effort to join 23 other states by enacting “judicial” foreclosure in Michigan.
Under the approach, a judge is assigned to personally review the details of all home foreclosures. Advocates say that exposes an often bewildering process to more scrutiny and reduces cases of wrongful foreclosure.
A year later--with dozens of dubious foreclosures fresh in his mind-- Hertel and others are frustrated that the bill sits in committee, apparently going nowhere.
Four years after the housing crisis, Ingham County still records about 1500 home foreclosures a year. A Meridian Township woman we’ll just call Patty--at her request--says it’s a jarring experience.
“When a sheriff comes to your door and tells you you have 48 hours to move and you have three children and you have no resources and you’ve done everything, you’ve done everything you were supposed to do, followed the law, did it by the (book) and they still...that’s pretty scary,” she says.
What makes Patty’s ordeal unforgettable is that she’s been on the brink of losing her Haslett home twice in only 18 months.
In 2010, a cash crunch led her to a successful mortgage modification.
What followed is complicated. But in the end, the courts reversed a sheriff’s sale and then stopped an auction at the last minute. Patty kept her home. Judicial foreclosure supporters say the case illustrates a glaring need of closer legal scrutiny on the process.
Still, Patty says her credit and finances are a wreck. She’s racked up a mountain of legal fees to a Farmington Hills foreclosure law firm. Patty says the firm was exploiting her as she explored adjustment plans.
“They tried to put me in another one and then another one,” she recounts. “And I knew all along what they were doing--they were just tacking on fees. We had almost $80,000 worth of legal fees attached to my foreclosure.”
The firm, Schneiderman and Sherman, doesn’t comment on its cases.
Ingham County Register of Deeds Curtis Hertel Jr. points out that thousands of foreclosed people in Michigan don’t have access to the kind of legal assistance Patty got from the county. He says the existing process, known as “foreclosure by advertisement," makes a huge, reckless assumption.
“That banks are always right,” he says.
And he accuses the attorneys that represent lenders and mortgage servicers of too often exploiting a system seriously lacking due process.
“In Patty’s case, they filed this affidavit saying that there was a modification,” he explains. “And then they try to foreclose on her again. And when they go into court and the judge says ‘Wait a second. You said there was a modification,’ they say ‘Oh, that was just a mistake.’ No one is being prosecuted out there for these crimes.”
The judicial foreclosure proposal went to Michigan’s House banking committee a year ago. Republican chair Marty Knollenberg concedes cash-stressed homeowners deserve a better shot at mortgage adjustments. But he has doubts about judicial foreclosure. He cites the costs of a greater workload for judges. He also voices a complaint he hears.
“If you look at some of the states that have it, the foreclosure process is actually twice as long,” he says.
Michigan Bankers Association spokeswoman Gail Madziar says bankers don’t want people losing their homes illegally. But she claims the advantages of judicial foreclosure are exaggerated.
“It’s more expensive,” she says. “It takes about the same amount of time over all. And the only person that helps, in my opinion, is the attorney.”
If judges are more involved, she reasons, attorneys will be more involved. Madziar adds there is no reason foreclosure by advertisement shouldn’t work and that the best remedy for foreclosure is full employment.
Curtis Hertel counters that most of Patty’s trauma would have been avoided with judicial foreclosure, and that its costs are far outweighed by the tens of billions of dollars lost in the state’s ongoing foreclosure crisis. Still, judicial foreclosure has little momentum in the legislature. For now, backers suggest they’ll focus on more attainable aspects of the foreclosure problem like blight and scrap metal theft.