On July 2nd, Michigan joined a growing number of states that grant struggling homeowners a 90-day window to try and avoid mortgage foreclosure (we wrote about Illinois’s plan several months ago). Today, it’s clear that Michigan’s Democratic-sponsored program has been wildly successful in reducing the state’s foreclosure rate:

Michigan's foreclosure rate plummeted by 39 percent in July as compared to June, helped by a new state law that freezes foreclosure proceedings for 90 days.

Michigan ranked 19th for its foreclosure rate in July with one filing for every 548 households, according to RealtyTrac Inc. data released today. Michigan has ranked in the top 10 for foreclosures for more than three years except for dropping to 11 in April.

Michigan did hit the top 10 for the number of filings with 8,257 last month including 5,561 bank repossessions, said RealtyTrac, an Irvine, Calif.-based foreclosure Web site.

The big drop came in a 66% fall in scheduled property auctions as the moratorium requires lenders to offer delinquent homeowners 90 days to work on a loan modification. There were 2,695 in July compared with 7,965 in June.

The numbers are even more impressive compared to nationwide statistics, in which the national foreclosure rate actually rose 7% this month. While the true test of the 90-day grace period comes in a few months, Michigan Democrats are optimistic that their plan is already saving families’ homes:

"The numbers prove that our new program to protect homeowners is working," said State Representative Andy Coulouris (D-Saginaw), who sponsored the original plan. "By giving families this extra time to work out a solution with their lender and a housing counselor, we are helping people hold on to their piece of the American Dream in these tough economic times. Over and over again, what we've heard from homeowners is that they'd have been able to keep their homes, if they'd only had a bit more time to work things out. With our economy continuing to struggle, we need to make sure that our working families are getting the helping hand they need while they get back on their feet."