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Bill Gives Foreclosure Homeowners A Break

Mediation Extension

Kenneth R. Gosselin

June 10, 2011

Borrowers behind on their mortgage payments will now have eight months to work out a deal in mediation before formal foreclosure proceedings can begin, under legislation approved by the General Assembly.

Lenders now can push forward with foreclosure proceedings in court even as homeowners are enrolled in the state's foreclosure mediation program. The "dual track" system has created confusion among borrowers because they have to deal with two legal proceedings at the same time that appear to contradict each other.

The bill, approved by both houses of the legislature, is expected to be signed by Gov. Dannel P. Malloy.

The bill is the latest tinkering with the state's mediation program, which was launched in 2008 and is considered a success, as well as a model for other states. Lawmakers also extended the mediation program through July 2014.

Housing advocates have argued that the change would eliminate confusion for homeowners, the majority of whom represent themselves because they cannot afford to hire a lawyer. Bank lobbyists opposed the change because it would further delay an already lengthy foreclosure process, sometimes lasting up to two years.

Sen. Bob Duff, D-Norwalk, co-chairman of legislature's banks committee, said setting eight months as a firm time frame will force both banks and borrowers to make a good-faith effort to work out a resolution.

"There have been lenders that have dragged the process out and asked for the same information over and over," Duff said. "We don't want borrowers dragging out the process and costing banks an unfair amount."

In addition to the eight-month requirement, the legislation rewrites a host of procedures in order to make mediation run more smoothly and result in decisions sooner, Duff said. The legislation requires that both the homeowner and lender be present at the first mediation session to accelerate the process; that the homeowner must bring a current financial statement to the meeting; and that lenders must produce, whether in person or on the phone, an employee - not a lawyer - who will be responsible for the case.

"I'm really hoping this makes each mediation session more productive, allowing people to reach an agreement sooner," said Jeff Gentes, at the Connecticut Fair Housing Center in Hartford. "They won't have to be fighting a motion for summary judgment while they are in mediation."

Gentes said the legislation was a matter of compromise: Eight months was chosen because the typical mediation case runs six to eight months.

"Of course, we would prefer something longer than eight months," Gentes said, "but I'm not going to let perfect be the enemy of good, and this is really good."

Thomas S. Mongellow, a lobbyist and vice president at the Connecticut Bankers Association, said the association would have preferred the 90 days that is now written into the mediation legislation but that is routinely extended by judges presiding over foreclosure cases.

"What this does is draw a line in the sand," Mongellow said. "Eight months is the absolute maximum."

The legislation also allows lenders and mortgage servicers to make accelerated filings once the mediation is complete, he said.

Bankers still remain concerned about stretching out the foreclosure process. He said that in Connecticut, some foreclosures can take up to two years.

"The longer a property is in foreclosure, the less likely it is to be maintained," Mongellow said. "People in foreclosure are not making payments and they don't have money to maintain the property."