A Michigan lawmaker says he will soon introduce legislation aimed at reforming a controversial state foreclosure law.
There are already multiple lawsuits, including one set for a State Supreme Court hearing this fall, over a law that allows counties to foreclose on a home for unpaid taxes and keep the entire value of the home.
In one case, an Oakland county home was foreclosed on for just eight dollars in unpaid taxes.
Republican State Senator Jim Runestad, R-White Lake, said he plans to introduce four separate bills to change the law. He said counties shouldn’t be able to keep the excess equity from a foreclosed home.
“It’s a perverse incentive for the county to go after these homes where there are equity in order to foreclose on them and then drop all of that money into the coffers of the general budget,” Runestad said.
Runestad said a county should be allowed to cover any expenses incurred through the preparation and auction of a foreclosed home but any equity after those fees are paid belongs to homeowners.
Deena Bosworth is with the Michigan Association of Counties. She said the group will likely oppose the legislation.
“In what scenario should that homeowner, who didn’t follow through on their responsibility to pay their taxes, get the equity back?”
Bosworth objected to Runestad’s characterization of the current law as providing a “perverse incentive” for counties to foreclose on homes. She said counties work with homeowners to keep them in their homes. And, she said, the excess equity is used to care for blighted properties, only rarely making it into a county's general fund.
“If we’re not allowed to keep any of that excess revenue then we are going back on that local unit of government or the school district to collect on that,” Bosworth said.
Senator Runestad said he didn’t think it was “proper or fair” for counties to cover expenses using money from a person's foreclosed home.
The bills wouldn’t just address excess home equity. One bill would handle an issue where homeowners misidentified where they were supposed to pay. Townships handle collection of property taxes but counties take over when those taxes become delinquent. That can lead to homeowners not knowing where to pay and paying to the township when they should have paid to the county.
Senator Runestad said one of his bills would require county treasurers to apply payments made on current taxes to the delinquent tax if a homeowner said it was intended for the back taxes.
Another bill would update notification requirements of unpaid property taxes to include a schedule of penalties, fees, and interest that would accrue if a payment is not made. That bill would also clarify where payments should be made.
A final bill, still being negotiated with townships and counties, would give homeowners an extra year to pay delinquent taxes when the delinquency is under a certain threshold.
Although the bills are still being worked on, they appear to be directed at principal residences only.
Runestad said he expects to introduce the bills sometime in September.