Governor Dannel P. Malloy today joined the state legislature's Banks Committee co-chairmen State Senator Carlo Leone (D-Stamford) and State Representative William Tong (D-Stamford) and a group of housing advocates at a ceremonial bill signing in Stamford to highlight the passage of a new state law that increases protections for homeowners facing foreclosure while streamlining the foreclosure mediation process at the same time.
"Access to a stable housing market is a major driver of economic growth and helps neighborhoods thrive and flourish," Governor Malloy said. "We need to do everything we can to ensure that homeowners facing foreclosure get fair and honest treatment -- this new law holds banks accountable for their actions throughout the process. Everyone involved benefits when people who can afford to stay in their house are allowed to do so."
Connecticut's five-year-old foreclosure mediation program brings homeowners and lenders together with an impartial judicial branch mediator to try and work out a mutually beneficial agreement to address outstanding mortgage payments and avoid foreclosure. The new law, Public Act 13-136, requires all parties participating in the Foreclosure Mediation Program to mediate in good faith and without delay; mediators have an objective reporting requirement to track the actions and behavior of all parties in mediation and make for smarter refinements of the program in future years. Public Act 13-136 brings to the state for the first time, a fast-track foreclosure process to deal with blight caused by abandoned homes by letting the banks take ownership and sell these properties faster.
"The collapse of the housing market pushed countless families to the brink of foreclosure, and many are still fighting to keep their homes. Connecticut's foreclosure mediation program has helped thousands to keep their homes, but we have also seen some mediations held up due to unnecessary delays," State Senator Leone said. "This legislation will streamline the mediation process to make it work better for struggling homeowners, and I thank Governor Malloy for his leadership in bringing it forward."
"One of my top priorities as the House chairman of the Banks Committee has been to help homeowners facing foreclosure -- people suffering through no fault of their own because of the hard times brought about by the recession," State Representative Tong said. "I am thrilled that Governor Malloy pushed for this legislation. The economy is improving but many homeowners are still trying to cope with difficult financial situations and need help. We must keeping looking for new ways to help them and make sure they are treated fairly."
The law lays out specific requirements for both lenders and borrowers participating in mediation:
- Lenders must provide the borrower with a complete account history of their mortgage, along with other related information.
- Borrowers must assemble and provide a complete financial package to the lender at the beginning of the mediation period and in connection with requests for a foreclosure alternatives.
- The newly-defined "Objectives of the Mediation Program" are to determine whether parties can reach an agreement to avoid foreclosure, or, failing that, to expedite the foreclosure in a manner acceptable to the parties. The "ability to mediate" means that the parties must be willing and able to participate in the mediation process in good faith without unreasonable delay.
- Lenders and their counsel must be familiar with the borrower's loan file, available options for alternatives, and the history of prior mediation sessions, as reflected in the mediator's reports.
The role of the court-appointed judicial branch mediator is also expanded to require objective reporting on the parties' conduct following each mediation session. The court may impose sanctions for anyone who acts contrary to the program's objectives or is unable to mediate. This includes fines, awarding attorney's fees, and termination of the mediation.
A new, five-week pre-mediation process has also been created, which will take place before participating borrowers and lenders first meet. During this time, the judicial branch mediator and the homeowner will meet to discuss the homeowner's options, and ensure their required paperwork is in order. The mediation period now ends after three mediation sessions or seven months, whichever is earlier. At the request of the mediator or any party to the mediation, one additional session may be allowed by the court per request.
In addition to today's bill signing, Governor Malloy also encouraged residents seeking assistance to attend the state's next mortgage assistance event on Tuesday, October 22, 2013, from 10 a.m. to 7 p.m. at the Connecticut Convention Center in Hartford. The event, sponsored by Attorney General George Jepsen and the State Department of Banking, will be the sixth in a series of recent events held in locations throughout the state that have assisted more than 4,000 borrowers.