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Legislation Would Strengthen CT Home Foreclosure Mediation Program

by KENNETH R. GOSSELIN

January 30, 2013

Connecticut’s home foreclosure mediation program has been a model for other states, but the governor and other state officials today announced proposed legislation that would further tighten the process.

A key provision would require that banks have a representative who is not only is familiar with the case but who also has the authority to either approve or reject a modification plan.

The legislation also calls for sanctions, fines or dismissal of the foreclosure if lenders and servicers do not negotiate in good faith. The specifics of the sanctions and fines would be determined by judges but would vary case-by-case, according to the governor’s office.

“We want to make sure mediation process is designed to get to a ‘yes’ or a ‘no’ quickly,” Gov. Dannel P. Malloy said, at a press conference this morning at the state Legislative Office Building in Hartford.

The specifics of the bill are still being drafted. The legislation will be introduced Feb. 6. The proposal would require legislative approval.

In addition, the legislation would require banks to complete foreclosures on abandoned properties quicker. It also would give the state banking department the authority to disclose information on the number of vacant or abandoned properties banks own and other data.

The bill would be the latest tinkering with the state’s foreclosure mediation program, launched in 2008. The last significant changes came in 2011, which also sought to accelerate the process.

Those included: requiring that both homeowner and lender be present at the first session; the homeowner must bring a current financial statement to the meeting; and lenders must produce, whether in person or on the phone, an employee — not a lawyer — who will be responsible for the case.

In addition, the 2011 revisions requiring the lenders give borrowers eight months to work out a deal in mediation before formal foreclosure procedures could begin. Prior to that, both could unfold at the same time, creating confusion for borrowers.

The proposal unveiled today takes that a step further: prohibiting any foreclosure litigation while a borrower is in mediation.

Homeowners speaking at the press conference today told stories of being mired in mediation for months, without getting an answer from their lender.

Debbie Sargunas and her husband Michael fell behind in paying the property taxes on their condominium in Thomaston. Their lender, Bank of America, filed for foreclosure in early 2011, and the couple is still trying to hash out an agreement.

The couple has now been through at least 15 mediation sessions.

“It’s been incredibly stressful,” Sargunas told me after the press conference. “With what the governor is proposing, we could have done it in four to six sessions.”

Banking lobbyists say lenders have made significant strides in negotiating with homeowners in foreclosure. There have been thousands of homeowners helped by Connecticut’s mediation program, they say.

Thomas Mongellow, a lobbyist and vice president at the Connecticut Bankers Association, declined to comment on the specifics of the proposal because he hadn’t yet analyzed it.

But Mongellow told me that the bankers association and its members have worked closely with the legislature and the governors office since the mortgage crisis. The association is committed to working on the issue and improving the foreclosure process in the state.

“The association firmly believes that providing a foreclosure framework that affords both borrowers and lenders a fair and expeditious process is essential to the well being of the State, it’s residents and the industry,” Mongellow said.