Governor M. Jodi Rell today announced she has signed three important bills that will help more Connecticut families who are struggling to pay their mortgages keep their homes, including a bill making the state’s foreclosure mediation process mandatory – rather than optional – for all foreclosures that began after July 1. The bills also set new standards for mortgage professionals, expand eligibility for state mortgage assistance programs and create the crime of residential mortgage fraud.
“Far too many Connecticut families are staring at a stack of bills and wondering how they will make the next mortgage payment – or worse, despairing of ever catching up with the payments they have already missed,” Governor Rell said. “The majority of these are not homeowners who unwisely bought more house than they could afford. They are hard-working people who have been laid off or seen their incomes reduced as the world’s economic downturn continues to take a terrible toll on our state. Others are the victims of lax – or even unscrupulous – lending practices.
“Our goal is to help those Connecticut families – and those lenders – who are making good-faith efforts to resolve these problems,” the Governor said. “There are no victors in a completed foreclosure. Borrowers lose their home and their share of the American Dream. Lenders lose an interest-earning loan. Neighbors end up with an empty house next door and see their own property values decrease. It is the best interests of everyone to prevent this cycle and keep our state’s housing market viable.”
Under Senate Bill 948, An Act Concerning Implementation of the S.A.F.E. Mortgage Licensing Act, the voluntary foreclosure mediation program established in 2008 by Governor Rell and the co-Chairs of the Legislature’s Banking Committee – state Senator Bob Duff (D-25) and state Representative Ryan Barry (D-12) – becomes mandatory for all foreclosures starting July 1 and thereafter.
“Since the voluntary program has been in place, more than a quarter of foreclosures have gone to mediation – and about 70 percent of those have been resolved without the homeowner losing their home or the lender taking over the property,” Governor Rell said. “It’s hard to argue with that kind of success. We want to see many, many more foreclosures end in similar happy circumstances.”
The bill also implements the 2008 Secure and Fair Enforcement for Mortgage Licensing Act by establishing conditions for licensing of mortgage professionals, including education and testing requirements.
House Bill 6481, An Act Concerning the Emergency Mortgage Assistance Program, expands eligibility for two state-run assistance programs designed to help responsible homeowners facing financial hardship stay in their homes.
Under current law, “financial hardship” is generally defined as a drop in household income of 25 percent or more that cannot be offset by selling the homeowner’s assets. The definition also includes significant increases in mortgage payment amounts or other housing expenses, including the costs of heat and utilities. The legislation allows the Connecticut Housing Finance Authority (CHFA) to determine what constitutes a significant drop in the borrower’s income and to broaden the definition of circumstances that are outside the homeowner’s control.
The new law also allows homeowners to apply for the Emergency Mortgage Assistance Program even before receiving a notice of foreclosure if they are 60 days or more delinquent on their mortgage. In addition, the new law expands eligibility for Governor Rell’s CT FAMLIES mortgage assistance program from homeowners with adjustable-rate mortgages (ARMs) to homeowners with all types of mortgages.
Senate Bill 949, An Act Concerning Mortgage Practices, creates the crime of residential mortgage fraud, a Class D or Class C felony.
A single instance of mortgage fraud – the act of knowingly making a material misstatement, misrepresentation or omission during the mortgage lending process with the intention that a lender, broker, borrower or other person will rely on it – is a Class D felony, while multiple instances are Class C felonies. Class D felonies are punishable by a maximum of five years in prison and $5,000 in fines; Class C felonies are punishable by up to 10 years in prison and $10,000 in fines.
