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Governor M. Jodi Rell today announced she is developing a three-point legislative plan to safeguard both homeowners and renters amid one of the biggest housing crises in recent history. The bill is complemented by the state’s plan to distribute $25 million in federal funds to help communities around the state deal with the foreclosure crisis.
Governor Rell’s proposal includes a six-month moratorium on all foreclosures – during which homeowners would be required to continue paying interest and taxes – and a mandatory, 60-day mediation period on all contested foreclosures. (Under current law, mediation is optional.)
As a safeguard for renters, owners of properties with five or fewer rental units will be required to notify tenants within seven days of receiving a notice of foreclosure or filing for protection from creditors under bankruptcy laws. An increasing number of renters are coming home to find a foreclosure sign in front of their duplex or small apartment building – the first indication any of them have had that the place where they live is in any kind of jeopardy.
“These are common-sense protections and precautions that will help Connecticut residents hang on to the single greatest asset most of us will ever have – our homes,” Governor Rell said. “They will also ensure that renters are not inadvertently caught up in a financial whirlwind over which they have no control at all.
“Banks and other mortgage lenders do not ‘win’ in situations like this by foreclosing on property,” the Governor said. “Both they and the homeowner have much more to gain by working together to find a mutually acceptable payment program. So, too, do other residents of Connecticut neighborhoods, who would only see the values of their own homes decline if we allow a wave of foreclosures to wash through the state.
“Connecticut has so far been relatively fortunate – we have not seen the disastrous decline in real estate prices the communities in places like New York and California have faced,” Governor Rell said. “But we will take no chances. By taking smart, targeted state action and combining these steps with the federal funds approved under the Housing and Economic Recovery Act of 2008 we can protect all of Connecticut’s residents.”
The state has already drafted a plan to use the HERA funds and opened its proposal to public comment. Under the current proposal, much of the federal money will go to the state’s largest municipalities – Hartford, New Haven, Waterbury, Bridgeport, Meriden and New Britain – while about $2.1 million is being made available to assist smaller communities, including many hard-hit towns in eastern Connecticut.
Governor Rell has also asked that rules for the federal Small Cities Community Development Block Grant Program be modified for the next two federal fiscal years so that additional funding can be diverted to smaller communities needing to cope with foreclosures.
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