State program assists struggling homeowners

IRON MOUNTAIN – Homeowners who have gotten behind on their mortgage payments or county property tax payments and are at risk of losing their homes have new hope, thanks to a program funded by the Michigan State Housing Development Authority.

Michigan’s Hardest Hit Funds have $548 million available through four programs to address challenges facing homeowners because of “involuntary hardship,” explained Beth Waitrovich, a MSHDA certified housing counselor at Michigan State University Extension in Dickinson County.

A qualifying involuntary hardship is caused by an unexpected event beyond the homeowner’s control that impacts their ability to make payments. Acceptable hardships are losing a job, income reduction, a medical condition, death, divorce and disability.

Unacceptable hardships are not eligible, Waitrovich noted. Unacceptable hardships are when you are not being responsible with your budget.

Helping with property taxes is a new aspect of the program, said Lorna Carey, Dickinson County treasurer. The program can cover past due taxes up to three years ago, and can help homeowners catch up in order to stay out of foreclosure.

“Tax foreclosures have become quite an issue,” Carey said. “They are more and more prominent. Even homeowners who own their homes outright can lose their home because they have fallen behind on property taxes.”

When homeowners are able to catch up on their property taxes, they can avoid sizable fees and interest, including forfeiture fees, which are, at a minimum, $240, plus interest, which increases monthly and is retroactive, Carey said.

“This program saves them so much money by avoiding forfeiture or, in the case of 2011 taxes, avoiding foreclosure,” she added.

The Michigan’s Hardest-Hit Funds program includes:

– Unemployment Mortgage Subsidy Program, which will provide half of the monthly mortgage payment for one year – up to $30,000 – while the homeowner is receiving unemployment benefits.

– Loan Rescue Program, which helps homeowners catch up when they have fallen behind on mortgage and/or property tax payments, up to $30,000.

– Modification Plan Program, which will help homeowners catch up on their mortgage, up to $30,000, if their lender agrees to modify their existing mortgage terms.

– Principal Curtailment Program, which helps homeowners with a combined loan balance higher than the value of their home, up to $10,000, if the lender provides a one-to-one match and agrees to modify the existing mortgage terms.

“Life happens, and people get caught in these situations. Now there’s help,” said Waitrovich, a family and consumer now,” said Scorsone, lead author of the report.

Unlike pension benefits, retiree health care is often not pre-funded, where money is put aside so it can generate investment income used to help pay future costs. About half of the municipalities that offer health insurance to retirees pay as they go, relying mostly on tax revenue to foot the bill each year despite longer lifespans and rapidly rising health care costs, according to the report.

The study reviewed 2011 annual audit reports that local governments filed with the state. It is the first attempt to comprehensively collect and analyze the cost of Michigan municipal workers’ retirement benefits since local governments had to start calculating non-pension legacy costs in 2007, according to the report. A 2011 study by the Citizens Research Council showed $4 billion in health care liabilities for 83 counties.

Detroit’s $5 billion tab accounts for nearly 40 percent of the $12.7 billion liability. But Scorsone said larger cities such as Grand Rapids, Flint – which has an emergency manager – Lansing and Saginaw also face large health care bills for retirees.

Nearly $11 billion is attributable to municipalities in a 10-county region in southeast Michigan.

“Many Michigan municipalities have taken incremental steps to reduce the (non-pension) liability, but the local governments with the greatest amount of fiscal stress will need more drastic measures,” the report said.

Scorsone stopped short of recommending specific actions, but said other cities and states have considered pooling resources, cutting retirees’ benefits or making them pay more – depending on what union contracts allow – and moving retirees under 65 into the new health insurance exchanges required under the federal health care overhaul. He also mentioned that new laws make current public employees and teachers pay more of their health costs but said there could be barriers to trying the same thing with unionized retirees, depending on how past labor contracts were written.

He urged municipal and union leaders to work together to avoid Michigan having to install more emergency managers at the local level.

Rep. Earl Poleski, R-Jackson, chairman of the House Financial Liability Reform Committee, said the question is how to fix the problem.

“Frankly, we’ve made promises to people that it appears are going to be very difficult to fulfill. It’s the job of our committee to try and mitigate those exposures on the behalf of taxpayers while respecting the obligations that have been made to employees and others,” he said.

Poleski said lawmakers may give local governments some tools to make appropriate changes, but ultimately “they have to summon the political ability to deal with their unfunded obligations.”

Scorsone said cities and townships historically offered retiree benefits to compete with the Detroit Three automakers and other private employers. Health benefits in particular help workers such as police and firefighters who retire in their 50s before Medicare kicks in at age 65.