Connecticut Foreclosure Prevention Efforts

For 2009, Connecticut ranked 21st among all states in foreclosure rate, a drop of 10.24% from the year before. Nationally, 2009 was the worse year for foreclosures in US history, with 2.8 million property owners receiving a foreclosure notice.

Connecticut has two types of foreclosure procedures, strict foreclosure and foreclosure by sale. A judge decides which process is used. The typical foreclosure process takes about 2-5 months, depending on the type of foreclosure.

The lender begins a foreclosure by filing against the borrower in court. The borrower has to be notified at least 12 days before the return date, the day set for the borrower and lien holders to appear before a judge. On that day the court will determine the amount of the debt, the market value of the home, the costs to the foreclosure, and the type of procedure to be followed, strict foreclosure or foreclosure by sale. A strict foreclosure occurs when there is no equity in the property. If the lender proves that the borrower is in default, it gets title to the property from the borrower. No sale is necessary.  The court can set an additional amount of time for the borrower to cur, up to five months.

If there is equity above the amount of debt, foreclosure by sale occurs. This takes the form of a public auction to pay off the debt scheduled 60-90 days out. The court assigns an attorney to both publish the sale notice and conduct the auction, typically on the property during a Saturday. A borrower can stop a sale by foreclosure by paying off the debt before the auction takes place. Within two weeks after the sale, the court decides whether or not to approve it. Until approved, the borrower can redeem the property by paying the amount owed plus the costs that have accrued since.

Connecticut law allows unemployed and homeowners and those suffering from a drop in income, to apply for a court-ordered six-month moratorium from foreclosure to restructure their home loan payments.

In response to the mortgage crisis, Connecticut established a foreclosure mediation program in effect from July 1, 2008 – July 1, 2010. It is designed to assist homeowners and lenders to reach terms to forestall foreclosure. The lender must give notice to the borrower that such a program exists. To trigger the mediation, the borrower has to respond by filing an appearance form. The mediation process puts the foreclosure on hold. It must conclude not more than 60 days after the return date for the foreclosure, unless the court either extends the mediation period by not more than 30 days, or shortens the mediation period. Here are additional details, including links to the forms required.

A change in the law effective July 10, 2009 has expanded two Connecticut programs to assist distressed homeowners facing foreclosure.

The first is the Connecticut Fair Alternative Mortgage Lending Initiative and Education Services (CT FAMLIES) Program that provides refinancing into a fixed 30 year home loan for delinquent homeowners with a burdensome fixed or adjustable rate mortgage. Here are the details.

The second is the Emergency Mortgage Assistance Program (EMAP) a short term loan. It’s for  income qualifying homeowners who have fallen behind on their mortgage payments due to a temporary financial setback beyond their control. Assistance is available for up to 60 months. It has a monthly ceiling depending on the location of the property. A borrower already in foreclosure may be able to qualify for EMAP.

For more information on either plan, contact the Connecticut Housing Finance Authority (CHFA) at 1 (860) 571-3500, or toll free 1 (877) 571-CHFA (2432)

New England’s Mortgage Relief Fund is for eligible homeowners in the six state region who have home loans from Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank or Bank of America. These financial institutions have committed $125 million in assistance for home loan borrowers in good standing who expect to have difficulty in making their payments if their adjustable rate mortgages reset. The Mortgage Relief Fund is not available for any delinquent borrowers. For help, contact:
Citizens Bank – 1-888-411-1145
Sovereign Bank – 1-800-288-6225
TD Banknorth – 1-800-281-0025, extension 2315
Webster – 1-888-681-7788
Bank of America – 1-800-344-9403

Homeowner’s Equity Recovery Opportunity (HERO) Loan Program allows the Connecticut Housing Finance Authority to purchase eligible mortgages directly from lenders and place the borrowers on an affordable repayment plan. Under this program, a borrower must have failed to qualify for CT FAMLIES or EMAP.  CHFA would determine if the borrower is eligible for HERO. CHFA must successfully negotiate with the borrower’s lender to buy the mortgage. CHFA would then modify the repayment terms to make the loan affordable to the homeowner. Contact the CHFA Special Programs Call Center at 1 (860) 571-3500 toll free at 1 (877) 571-CHFA (2432) or via email at HEROinfo@chfa.org

The State of Connecticut Department of Banking offers this advice:

• Contact your lender as soon as you realize that you’re about to have trouble making your mortgage payment.
• Don’t ignore letters or phone calls from your servicer, especially if you’re late with a payment.
• Call the Connecticut Department of Banking Mortgage Foreclosure Assistance Hotline at 1-877-472-8313.
• Avoid foreclosure rescue scams like these:
  1. The phony counselor who charges exorbitant fees up front to make a few phone calls or fill in some paperwork a homeowner could easily complete;
  2. The lease/buy back, where a borrower signs over the deed to a home, in exchange for renting the home with the prospect of buying it back. Usually the rent and buy back terms are so onerous, that the homeowner gets evicted and the scam artist walks away with any equity in the home.
  3. The bait-and-switch where borrowers think they are signing paperwork to make their mortgages current, but transfer their deeds instead; Most don’t learn of their mistake until they are evicted.

Instead contact any of these local agencies:

• The United Way of Connecticut provides resources to help homeowners avoid foreclosure: To reach a counselor, dial 211 Infoline.
• Connecticut Association for Community Action (CAFCA) is an organization of 12 community-based agencies that can act as third party facilitators to help you with your lender regarding delinquent mortgage payments. Call 1 (860) 832-9438
• Connecticut Department of Social Services (DSS) is a state agency that administers the Eviction and Foreclosure Prevention Program (EFPP) to prevent evictions and foreclosures through mediation. It can be reached by dialing 211.

Legal Services:

• Statewide Legal Services is a legal aid telephone hot line program that can assist low-income homeowners with foreclosure. Contact the organization to see if you qualify 1 (860) 344-0380 (central Connecticut & Middletown area) 1 (800) 453-3320 (all other regions)
• Consumer Law Project for Elders (CLPE) is a public service of Statewide Legal Services, providing free legal assistance to Connecticut seniors 60 and over. Call 1-800-296-1467
• Connecticut Fair Housing Center refers homeowners facing foreclosure to the Foreclosure Prevention Pro Bono Panel, a network of attorneys providing free legal representation to low-income homeowners who are in danger of foreclosure or who may be victims of predatory lending. Call 1 (860) 247-4400 (Hartford area) 1 (203) 772-3247 (New Haven area).
• Foreclosure Prevention Pro Bono Panel, Phone 1-800-453-3320
• The Lawyer Referral Service of the Connecticut Bar Association is a way to get the name of a qualified attorney for those who don’t qualify for free legal services. There is a flat fee for a half-hour consultation. Additional services will be at the attorney’s normal rate. 1 (860) 223-4400

Here’s a look at the U.S. Department of Housing and Urban Development (HUD) list of approved housing counseling agency in Connecticut or call 2-1-1 Infoline (24 hours a day, 7 days a week) or 1-800-569-4287.