Starting in July, Michigan is pressing distressed homeowners and banks to work together to renegotiate mortgage terms and try to stem the glut of bank-owned homes on the market.

Gov. Jennifer Granholm last week signed a compromise bill that gives mortgage payers in default a 90-day reprieve before legal action starts.

The new law also is making banks change their ways and give borrowers in default the contact information of representatives authorized to negotiate on the bank's behalf.

In the past, trying to find a bank representative that has the power to change the loan terms has been an exercise in futility for homeowners.

“The basic idea behind the bill is to make time for everyone to catch their breath with the influx of home foreclosures,” State Rep. Brian Calley, R-Portland, said in a statement. He was on the conference committee that negotiated the differences between the state House and Senate bills.

While many people applauded the short term benefits, real estate agents who specialize in the sale of bank-owned properties say the reprieve will only postpone the inevitable. They point to what happened when Freddie Mac and Fannie Mae lifted their moratoriums on foreclosure activity. A glut of foreclosures now is working its way through the process.

The face of foreclosure is changing. The first two waves of foreclosures were primarily investors or low-income families who received sub-prime loans. When the mortgage rates adjusted upward, the monthly payments became too costly, and the owners lost their homes. Now, with a rising unemployment rate, the distressed homeowners facing foreclosure are middle and high-income workers who had stellar credit until they lost their jobs or had their hours reduced.

This pattern is particularly dramatic in Michigan with layoffs by the troubled auto industry. The state leads the nation with 12.9 percent unemployment. The most troubled county is Mackinac County, with a 28 percent jobless rate, the Michigan Department of Energy, Labor and Economic Growth reports. In fact Oscoda, Montmorency, Presque Isle and Baraga counties all have unemployment rates in the range of 23-25 percent.

In Metro Detroit, Macomb had the highest unemployment rate with 15 percent. Wayne was close behind with 14.9 percent and Oakland’s jobless rate was 11.7 percent.

Economists expect that in light of the increasing jobless rate, the foreclosure crisis will only worsen. They say that job creation is the only way out of the recession.

Calley acknowledged that the new law is only a patch and not a solution.

“This a bill to treat a symptom of a bad economy,” he said. (The legislation) will help but it can't be a primary focus. That needs to be the economy.”

Ohio is among the other states considering similar measures.

Addressing the national problem,  President Obama last week signed off on a compromise loan modification bill aimed at helping distressed homeowners. However, critics doubt its impact. The measure’s key element – allowing bankruptcy judges to rework the mortgage terms – was dropped due to pressure from the banking sector. It remains solely up to the bank whether to change the terms of the loan.