Tweak of foreclosure mediation law carries 8-month stay
State lawmakers hope changes to a successful foreclosure mediation program will grant homeowners struggling to hold on to their property more time and greater piece of mind.
Under the new proposal, which needs to by signed by the governor, lenders cannot proceed with any legal action for eight months.
"A lot of people were able to work things out within three months," said state Sen. Bob Duff, D-Norwalk, who helped enact the original mediation effort in 2008. "However, there were some very difficult cases out there and those took longer to work out. So this will help the really difficult cases."
In 2008, the Democratic-controlled legislature and former Republican Gov. M. Jodi Rell passed a package of proposals intended to address the subprime mortgage crisis. Proponents argued the state had to step in because increases in foreclosures were hurting the economy and lowering neighborhoods' property values.
A key part of that effort was establishment of a first-in-the-nation foreclosure mediation program under the auspices of the state Judicial Branch.
Initially, homeowners had to request mediation and lenders had to then participate. But the General Assembly eventually made the program mandatory, and it has been extended over the last few years because of financial hardships faced by those who have lost jobs during the economic downturn.
The problem, according to Duff and state Rep. William Tong, D-Stamford, co-chairs of the legislature's Banks Committee, is lenders could still move ahead on a parallel track with some foreclosure proceedings. Although the matter could not go to judgement, Duff and Tong said it proved to be a confusing system requiring the eight-month stay.
"People who are in foreclosure and in probably the worst financial condition of their lives, have to go through both a mediation and litigation process," Tong said. "They're subject to the demands of a lawsuit they know nothing about and do not know how to defend themselves. This is an effort to let the mediation process play itself out and give them space."
"We tried in this session, like we have in others, to make the mediation process happen faster," Conway said. "But we understand for a lot of folks who go through mediation ... there's some confusion and maybe angst when you have what appears to be a legal foreclosure proceeding happening at the same time."
The mediation program has also been expanded to properties owned by religious organizations.
According to the most recent data from the Judicial Branch, as of Jan. 31, 9,472 foreclosures had been mediated and 64 percent of those resulted in homeowners remaining in their homes.
Fifteen percent had to move while 21 percent at the time remained unsettled.
The legislation -- funded through various fees paid to the state's Banking Department -- is scheduled to end in 2014.
The General Assembly during the just-concluded 2011 session also tweaked another Duff-sponsored 2009 bill that was to make it easier for municipalities to keep track of foreclosed homes and ensure the properties are maintained while vacant. That proposal arose from complaints by neighborhood groups that it was impossible to track down the owners of foreclosed houses to enforce local health and safety codes.
The legislation, when passed, required any entity that foreclosed on a Connecticut property to register with the national on-line Mortgage Electronic Registration System, accessible by cities and towns. Now they must register that property directly with town clerks or face fines.
"We were finding that MERS wasn't working for us and also finding that not everybody was registering," Duff said.
Staff Writer Brian Lockhart can be reached at email@example.com