Hartford, CT - During the veto session in Hartford today, the state Senate took favorable action on two initiatives that the Banks Committee spearheaded this year, co-chair Senator Bob Duff (D-Norwalk) and vice chair Senator Joseph Crisco (D-Woodbridge) announced today.
First, the Senate approved a measure to exempt foreclosed properties from the state’s real estate conveyance tax—a move that originated in the Banks Committee during this year’s regular legislative session and is designed to protect vulnerable borrowers facing financial difficulty.
“What we heard from industry officials is that vulnerable ‘underwater’ borrowers are even more disadvantaged in their ability to negotiate a solution by the added expense of the conveyance tax,” said Senator Duff. “Individuals and families facing home foreclosure are often at an absolute low point and are up against the odds, so not only was this a logistical nightmare for the court, it has also been a real blow to those who are already down.”
“With enactment of this exemption we avoid adding unnecessary hardship to the difficult circumstance of these already struggling homeowners, allowing all involved parties involved to complete the transaction and move on as quickly as possible,” Senator Crisco said. “Once a homeowner accepts foreclosure as a last resort, it seems absurd to assess him or her with a conveyance tax and it would be unfair to expect any other party to be responsible for it.”
The exemption applies to short sales as well as foreclosures. The measure was approved unanimously in the Banks Committee in March.
Next, the legislature approved a bill that will restructure the state’s Homeowner’s Equity Recovery
Opportunity (HERO) program in order to enable more potential homeowners to purchase foreclosed or abandoned one-to-four-family homes.
“When there’s a foreclosed property on a street, we know that neighboring home values decrease one to two percent and that crime rates increase one to two percent,” Senator Duff said. “We need to be flexible and we need to put our money where it will have the best possible impact. It is in everyone’s best interest—banks, homeowners and communities—to take proactive steps to lessen the impact of a foreclosure, and with the funding in the HERO program, we can take those steps.”
“The value of this enhanced mortgage program—especially after these difficult economic times – will become readily apparent block by block in neighborhood after neighborhood, as communities regain stability in the wake of a particularly volatile time,” said Senator Crisco. “I’m confident the state’s investment in these qualified homeowners will help provide building blocks for the economic turnaround of individual cities and towns, which in turn will drive our economic recovery statewide.”
Created in 2008, HERO was originally designed to help homeowners by allowing the Connecticut Housing Finance Authority to purchase loans from mortgage lenders and restructure them.
However, lender participation in the program is voluntary, which has led to only one HERO loan being issued since the program’s inception. Currently, $20 million in pre-Ullman bond interest funds—which are independent from the state’s General Fund—are available for the HERO program.
Under the new guidelines, CHFA-approved lenders would be able to access loan funds through the authority to finance the purchase of foreclosed or abandoned properties using CHFA’s loan eligibility guidelines and CHFA’s low interest rates.
Both measures—included in Senate Bill 501 and Senate Bill 502—were also approved in the state House of Representatives today and now move to Governor M. Jodi Rell for consideration.
